Clarida Sums Up Yellen's News Conference: 'Trust Me'

Bloomberg dot Com, and of course on the Bloomberg. Joining us now is James Sweeney, Chief Economistic Credits with head of Global Fixed Income there as well. Great to see you here in our Bloomberg eleven three oh students in tips. Let me just start by by asking you a bit about the FED meeting yesterday. Agree with your expectations that were met. Let's talk about the balance sheet in a few moments. But first when it came to the to the outlook and what they had to say, how did

it drive with what you were expecting? Yeah? Well, I I think the Fed was stoical in the sense that they were not uh, they were not moved by the recent weakness and inflation and the decline in some of the inflation expectation indicators. They did acknowledge it, but they went ahead and pulled the trigger on their hike, of course,

and and laid out that balance sheet policy. Um. They still expect inflation to drift up towards their their targets over the medium term, but they did reduce the path of that increase somewhat, so it it looked it looked safe and reasonable. UM. But you know, I wrote a couple of weeks before the meeting, UM that the Fed was ignoring the recent weakness and inflation. And I think the market is really ignoring any any sorry, the recent

decrease in inflation. I hope, I said decrease, UM, And the market seems to be ignoring any possibility of an increase in inflation, um, you know, a meaningful increase above that that recent average over over the next couple of years. It's it seems like the market and the Fed are jointly agreeing that inflation is a horizontal line UM right now.

And and as a result, UM, the kind of expectations that that exists for where short term rates will be a couple of years out, are are you know, very low rates, very narrow um, very narrow path, and everyone sort of agreed that too. Or three years from now, we're going to have short term rates in the mid two's UM and not much risk of being a lot higher or a lot lower um. The options market actually confirms that narrow path, which is expected, and I think

that's I think that's a little risky. How do we get to to this point? Whereas, as you point out, I think in a recent note progress toward full employment, Trump's inflation and the global industrial production growth at the FED is regarding that side of its mandate more than the other. Yeah. Well, um, as I said, I think the inflation news is being interpreted as a wobble against

a kind of more or less horizontal trend um. And what's happening in the labor market is labor income has slowed a little bit recently, but it continues to grow. And the unemployment rate is not falling at eight five basis points a year anymore as it did from two thousand nine to two thousand fifteen, but it but it does appear to still be falling. So you know, we we could have a three handle on the unemployment rate

with within a year. Uh. And in those conditions, UM, it's it's appropriate to uh to get short rates up to you know, positive in real terms. But before long, the fact that risky asset prices across a broad spectrum of them are are looking somewhat expensive from a historical perspective, UH is another reason that, UM, you know that that that policy should be tightening, and so now that the

question really becomes the mode of that tightening. UH. The sequencing of balance sheet verse is versus rate et cetera. But you know they've they've now pulled the trigger and they've gotten They've gotten all the way up from zero to twenty five to one to one and a quarter. That's that's a pretty big move, especially given the other developed central banks are really not moving rates at all.

James Sweet with us from Chris Swiss. Let me ask you about the balance sheet and the detail that we got yesterday, the way in which they intend to do this compositionally and in terms of of process itself. UH, was that in line with your expectations as well? And what is that? What does that tell you? What should that tell investor? Is about the path forward here? Um? The some of the numbers they gave here a little more aggressive than we thought, and I think the amount

of detail was sooner than we thought. And and actually we did slightly tweak our view in response to the news where we now expect the balance sheet normalization to commence in September and the next rate hike and not to happen until December UM in two thousand and eighteen, we expect two more hikes, so so we're only expecting three hikes over the next eighteen months, but the balance

sheet normalization to occur at the same time. So specifically, you know, they said that they would start out I think it was six billion and four billion on on treasury and mortgages where they would have a cap on how much runof they're going to allow, you know, runoff, meaning they're not reinvesting coupons in principle for maturing um securities, and as a result, their balance she's gonna start shrinking, and then they're gonna up it um basically doubling that

those numbers after three months, and then they're gonna do it again three months after that. And so if you go a year out and if they're if they do manage to kind of be on a glide path of of of of balance sheet change. You know, within kind of a year, year and a half, they're gonna be at que two levels of reverse quee um and and the market will have to cope with that. James Sweeney with this was Curt Sweets. Good morning everyone, Bloomberg Surveillance,

David Gurr and I David. We gotta thank all of our teammates today for a marathon day. Have to say the listen, good day. Have you hear James this morning? On too many themes? One of the themes that we have is what the financial markets, in the bond market is telling James Sweeney, I believe I'm seeing a flattening yield curve. Do you link that to slower g d P or is it just a separate thing you're not

worried about. Well, you know, I think I think yields are pretty sensitive to to what's happening in global growth, the news flow, the surprises, the p M I is all that. Um. We had an unusual period last year where global growth was very weak at the beginning of the year. It recovered throughout the year. Yields didn't go

up until the election. It was as if you know, seven months of move was concentrated into three or four weeks after the election, and we actually think global growth hit a local peak early this year January February and has been coming off. So you know, given some downside surprises in the US inflation and falling global growth, it's not so surprising that yields came back down again. Um, but I think actually, you know, we've got a two eight target on the ten year at the end of

the year. My colleague Privine Core Party are our rate strategist. So I think global growth is gonna is gonna pick up. I think the Fed is going to continue to implement its tightening um, and I think we may be around a temporary low in the tenure. Was it an ultra accommodative press conference yesterday? Are we beyond ultra accommodative? As you mentioned, they've done a set of rate increases in the world. I believe the world has not come to an end. The the stance of policy is a combinative.

The incremental news from yesterday was somewhat more hawkish than the market expected, but not sufficiently hawkish to to necessarily interrupt the party. I may see the futures are down

a little bit this morning on on stocks. UH. The market will take a little while to digest, but basically stocks and bonds across the board have been seeing price gains together for months and months as this low UH, this easy monetary policy and low real rates have have met with the growing US economy and no wobbly but fine in global economy. UM. The question now is could tighter monetary policy, you know, could that trigger higher yields UM and could it even trigger some some weakness in

equity markets and risky assets. This has been a very technical market. There's there's a lot of frustrated traders out there, equity traders in particular. It's been a tough market to trade with with really these tech stocks leading aggressively and and the rest of the equity market behaving in some odd ways. Just got about thirty seconds here. We'll come back with you, But let me ask you how indelible

this plan for the balance sheet is? In other words, so with the potential for so much changeover at the Fed, how much gredience do you give what we heard yesterday? Yeah, I think there's a good chance that if we get a candidate, you know, outside of Gary Cone outside of Janet Yelling. Um that you know, I would expect a FED chair to to obviously UM influence the implementation of the policy. There's there's nothing to say that that this

this path um can't be paused, can't be stopped. Um. You know, I think there are other candidates from Yelling and Cone. UM. I think Kevin Wars for example, is leading candidate. And UM, yeah, we will we will see, UM, we will see. It should be it should be interesting. UM. I think the market is gonna end up being very focused on on this search for new leadership. And if it's yelling, um, then then we expect this path to continue.

Of course, let's come back with James Sweeney of Credit Sweet James, I got about eight ways to go here, and I think you're gonna go Why quill C plus cyplus G plus n X And something I didn't talk about it yesterday, which is investment and the dearth of investment here there and everywhere. Do you care the commercial and industrial loans have rolled over or any other investment parameter that shows a tepidness or weakness. We care, In fact, we did a thorough piece on that recently. And why

do you know, I thank you, Tom. But what we found is that is it C and I loan really do very consistently lag what happened to investment last year, and so they're really not telling us about anything new. Last year, we had a couple of things going on. We had a mining and energy investment slump, which was global um that was definitely weighing in the US. We

also had dollar strength weighing on manufacturing investment. So I'm not so worried about C n I loans, but I think on the investment side, there was a brief overshooting expectations about what Capex was gonna do after the after the election and when the when the p m I spiked. Now that the p m I s have come off, I think people are calming down. Um. So we have kind of mid single digit expectations for business investment in the US going forward, which is okay, it's not great.

It's not a boom. If you get an infrastructure stimulus, if you get tax reform, you know, maybe those numbers go higher. But um, but I think the you know, the reality of this whole recovery, which is the absence of an investment boom despite very low interest rates. I think that's likely to persist for a while until we find some kind of trigger. I think it's possible, but we haven't had it yet. Investments okay, it's not a disaster, um and the specific shocks from the dollar and from

energy are really falling out of the data. Now. I'm watching the reaction here to the b O E rate decision on on Top Live on the Bloombergose life block of what's happening, and so they're keeping the interest rate A quarter percent vote was five to three. How big a deal is that divide among policymakers at the at the b O And what does it tell you about the Bank of England's engagement with the UK economy, with economic policy and with this still ongoing Brexit process in

the UK. Well, you're you're always gonna have You're always gonna have some central bankers who are outside the consensus view. So, um you know. I actually I recently read Sebastian Malaby's new book on on Alan Greenspan and it was very interesting on the committee dynamics. I think during the Greenspan era, a um, you know, it became thought pretty widely that the leaders of central banks just make the decisions and

the committees go along. And what Malaby detailed was how much effort Greenspan used to put into bringing his whole committee along. It takes a lot of work to to herd these cats and and you know, maybe carneys and work to do if he's got three dissenters at the moment. But most of the time, um, the governors, the chairs get get their way, so um, I mean definitely in the UK the outlook is a little confusing right now. High inflation growth rolling over, but unemployment actually pretty low

um and a lot of currency moves. So you know, you would forgive a group of central bankers or economists for having different views on where monetary policy ought to be. Well, let's come full circle. Then we were talking about Kevin warsh and uh Garry Conan, and who might be leading this FED going forward given what you're just saying, given the what we we've read in this Smashion Maloby's book,

how much determinism does the new FED chair have? In other ways, we're talking about the potential for a personnel turn over and all that might bring. Are we are we overplaying that? Given what the committee is able to do No, I don't think so. I think, UM, I think it's very important who gets the leadership job, and I think whoever accepts the leadership job has to recognize that, UM, the president is going to be filling the seats around them.

So some people are surprised that Janet Yellen is emerging as a as a pretty strong candidate. UM. But even if it's yelling, it's gonna be yelling with a very different group of governors UM around her. UM. Some people would say that why would Yellen take such a job, But people close to Yellen say that, well, because she's very civic minded and if she thinks that, uh, if she thinks that she's the best person for the job and it's good for the country, she may go ahead

and do it. But I think we should definitely respect a wider range of possible outcomes, given not just the potential change in the chair, but the potential change in those around FED. FED governors have been outvoted before that that happened to vulcer, it can happen, and in the Trump era, it's definitely something that should be on the list of possibility. Interesting that's worth having you back on

along James Sweeney, Thank you so much. Here's with credit sweet story on the Bloomberg right now that Bob Mueller is examining whether President Trump sat to slow the probe into net form. National Security Advisor Michael Flynn. Good to talk about this here with one Richard Painter, former Associate Council to the President, Chief ethics lawyer to George W. Bush, who joins us now the Richard Professor of Corporate Law at the University of Minnesota Law School. Mr Painter, great

to have you with us here. Help me understand what's changed as a result of this turn this next chapter in this investigation. It appears the investigation widens. What's changed. Well, I think it was inevitable that the Special Council would investigate strikes out justice by the President. Huh the President in his statements to the Russian ambassador news media, Uh, you know, adding it all out it it's very uh clear that he um certainly was very very concerned about

the Russian investigation when he fired James Comy. And uh it appears to me that he did fire James Commy because of the Russia investigation, that because of the pretense set forth in the Department of Justice memorandum, And you know, so that is a strong case for obstruction of justice. Whether it's the case that the special that the special comfort want to prosecute or not remains to be seen.

But I think it's inevitable that there certainly would be an investigation of whether or not the President uh committed obstruction of justice of the sort that could be prosecuted. How important do you think it's going to be the the interview that you mentioned, the interview during which the President Trump sat down with Sterhold of NBC News, the tweets that he's made about the circumstances surrounding this this investigation. What role is all of that going to play here

going forward. Well, that's the information that we know of. That's what's public, uh, And I think that when it's public, what again, I think const is a quite strong case of starting of justice. But what the special prosecutor will do is talk to others in the administration and kind of what the President said privately. Did he talk to other people other than James comy Um about trying to stop the Russian investigation? Did he talk to other people

about what he said to James comey Um? And those are the questions that it didn't need to be answered. I think if people start to claim the executive privilege of the there's starts to that the special prosecutor is going to ask a court. And I think it's quite clear. Out of the United States, there is the nexting case that when involves a criminal investigation, uh, they claim executive privileges is really quite weak. Professor, Let me ask a

dumb question. Is there a chief White House ethics lawyer in the White House right now? I believe so. But they, uh, they they have a very different approach to the ethnics issues that we did the push administration is this lawyer administration is Mr cass It was just because of time, Professor, Is Mr cassu Wits competent to advise the president in Washington? Um? Well, first of all, Mr Cassawits is not the chief White

House ethics lawyer. He is not a government employer, he's not on the White House capital's death So his job is only to advise the President in his personal capacity

with the respective investigation and defending himself against potential criminal charges. Um. The White House people are hiring their own criminal defense attorneys, and uh, you know, there's a very very important role for criminal defense lawyers in this situation, but it certainly isn't to try to advise people going forward as to what to do with their offessional capacity. This was too short,

Richard Painter, thank you so much. With Minnesota and the University of Minnesota, uh Law, we'll hope to get him back on soon. That was great with David. That was really quite good. Runch you by Bank of America Mary Lynch. With virtual reality, virtually everything will change. Discover opportunities in a transforming world VI of a mL dot Com slash VR, Mary Lynch, Pierced Fenner and Smith Incorporated. This is gonna be fun, and I don't mean working with data. It's

always fun. Which is the Journal of Economic Literature. I was reading it last night, David, because the Yankees were un late Volume x x x v I I December. The Science of Monetary Policy, a new Keynsian perspective Clarta Gali Girdler. If you read it, you gotta read this paper, folks.

In fact, you probably reread it. They lead with a quote from Alan Blinder, having looked at monetary policy from both sides now quoting Jody Mitchell, I can testify that central banking and practice is as much an art as science. I would suggest Richard Clata that art was on display yesterday. It is amazing how complex the rationalization has got. Yeah, well, I think what you're referring to is the fact that we got a rate hike from the FED even though

the data has been soft. There's a FED that says that their data dependent and I've said on this show, but four data dependence itself is not a monetary policy. So we saw that in full display. So the data would have suggested pausing, but they hiked. Why did they hike? I think two big reasons. The first, uh is they clearly want to get the balance sheet reduction underway, and they set a standard for themselves, which is we can't really think about the balance sheet normalization until hikes are

well underway. So yesterday was the fourth So I think that I think that was definitely a factor. I think the other factor as well is the fact of the matter is is that their models are telling them policy still accommodative. There are raising rates, but they don't think they're tightening policy. Um financial conditions are very easy, so they saw an open door. They took advantage of it, but I must admit it created sort of an interesting

press conference. Well, I'll say the least on page four or five of CLARAA Gallant Gurtler, you walked through the mathematics of the economy, the I S curve knocked up against what Chare Yellin talked about yesterday, the strength thing called the Phillips curve. Does the math in that paper still work well? The Phillips curve obviously is a very important part of that analysis, and Cherry yelling herself as an expert on it and made mention of it several times.

So far, we're not seeing the traditional Phillips relationship between unemployment and inflation. Interestingly enough, we are seeing some evidence of the Phillips curve effect in wages once you adjust for the fact that productivity is low. But I think the big thing that the Fed's probably noticing, although they didn't dwell on it yesterday, is in January, year over year core inflation was at one eight, very close to two percent, and now it's about one five. So it's

going in the wrong direction. I think that's probably more of a concern. It's moving in the wrong direction. They hope it's temporary, but so far can't tell David if the kids can't sleep tonight. You can just read in the footnotes from Clara to Gilly and Girdler. You know, footnote that's my favorite right there, fot you much loved copy of clari. Let me ask you about what we learned about the balance sheet yesterday and how that changes your perspective on what things are going to be like

going forward. Here we we've got some numbers, have a better sense perhaps of the timetable for it from an investor's perspective, What does that mean? You know? I think I think David, it's a good question because I think underreported fact of the Fed's plan is with these caps, they announced their FED is still going to be buying treasuries and mortgage backed securities. So you tell your listeners they want to shrink the balance sheet. Oh and by

the way, every month they're still buying. You think, well, what you know, that's sort of like I'm going on a diet, but I'm gonna I'm gonna have a double two desserts um and and interestingly enough, one reason why the bond markets, I think David have taken this so well, is that essentially, as a treasury matures, they're going to replace it with a five or a tenure treasury. If you adjust their perform folio for the duration that is

the maturity, it may not be shrinking at all. So one reason the BAB market has been pretty relaxed is, you know, this is not a very austere or dramatic UH reduction in the balance sheet. Once you adjust for UH, they're going to continue to buy. What was Cherry Yellen's message to those who are skeptical about where inflation is right now visa v the willingness or eagerness to to keep hiking. The word transitory came up. I I know,

But how forcefully is she defended that? Well? She basically yesterday David I'd summarized the one hour press conference in two words. She was saying, trust me. You know it's that clar ger trusting. You know, implicitly, I'm an expert. I've been doing this for thirty years. You know, inflation goes up, it goes down. Trust me. She gave the little analogy about, you know, the arithmetic of the CPI with cell phone prices. Uh so I think that, but

I do think that. I don't think that third rate hike that the blue dots indicated yesterday is a slam dunk. I think they will commence the bounty process in the fall, But if the fall is under underwhelming, as so far the first half of the year has been, they may not get that third rate hike in. Uh. Do we get any better sense of what full employ him in is? Two policy makers on the FEN. Well, you know, they keep revising down the unemployment rate, which is consistent with

full employment. So three years ago it was five point three, now it's at four point six. I think the actual unemployment rate is lower. And I think, David, the pattern has been as unemployment continues to fall and inflation doesn't pick up, they keep revising down. Uh. And that's not I'm not critical for that. You know, as the data evolves, they do need to factor that in within trust me and within the wonderful work that you are acclaimed for. I did a word search. Joe Stiglett's name is not

in there. He has acclaimed was Sandy Grossman. About what's the information we have in the market? What's the information Chair Yelling or vice chairman Fisher or Lyle Brainard what's the the information the signals that they're getting right now or all a Grossman stiglets? Are they flying blind? Well? That is a classic paper. It's called the Impossibility of informationally Efficient Markets. You you can tell I've read it, but I think there isn't enough. I think there is

an analogy time and it's the end. It's the following are the FED? The FED is trying to to actually navigate and work through a pretty complicated signal extraction problem, and in particular there's mixed messages. So for example, bond yields have fallen. Now bond yields can fall for a couple of reasons, uh, And they're trying to distinguish whether or not that's a signal the economy's weakening, or if it's just telling you something that their negative rates and

in the rest of the world. The other signal extraction problem that they have, of course, is this inflation problem. Is that transitory or permanent? And then financial conditions. Financial conditions are easier, stocks are higher, credit spreads are lower. Does that tell them they should hight more aggressively or does that tell them basically just to take it easy.

So it is a pretty complicated problem, right, can we've gone graduate school PhD on everybody out there, and this is really special with Richard clairet Columbia University and of course with PIMCO. So with what you just said, head, I'm gonna go to the Greek letter theta, which is belief in the time function. Trust me on the time function? Do you have a belief in transitory out to a permanent effect on in this case inflation? I mean, do you do you have a knowledge of how to parse

between transitory or permanent? Where we just flying blind? Again? Well, the reality and I've actually done empirical work in this and I know the literature. The reality is that the econometrics, the econometrics of signal extraction in the real world are actually quite complicated. So even though the FAT has two PhD economists and does brilliant econometric work, there's a pretty

big element of judgment involved as as as well. And so the sense that's a combination of statistical models and and sort of gut gut in the time that we've got left, then should we go to a more rules based fed away from that gut field that you just spoke If we get Marvin good Friend as chairman, because Claire, it is too much discretion based. Do we need a more rules based fed Well, of course on my mind, busts chuck that paper. Clara Galli Girler actually proposed what

we called a forward looking Taylor rules. So I'm very much in the camp that a rules based approach makes sense. I wouldn't be handcuffed to it, but it's an essential input to doing sound policy, can I, David? I I gotta say this, folks. We invented Bloomberg on the Economy and Bloomberg Surveillance. Al Mayer said to me, you can't do that every show, but every every everyone in a while, Everyone in a while, John Tucker, we go off the rails,

Professor Claire, this will be out for your re listening pleasure. John, This will be this will be on iTunes podcast in the Global Wall Street where you just heard there from Richard Clarida was just special. I can't say day to thurstund like that. Very good. We'll go with that, Richard, Claire, appreciate you being Richard Claid and Bloomberg eleven three studios of course of pimp in Columbia University as well we'll be talking more about the FED coming up here with

the Craig, Bishop of URBC as well. I promise I will tweet out some of what Professor Clarida and I were talking about, because it is really important work and the foundations for what is being debated. As in the press conference yesterday that was special Richard Clarida at PIMCO is a really interesting what I'm gonna call political scientist

and economists. Diana Fritz goot Roth joins us now with the Manhattan Institute UM for years in support of UM a certain kind of political science, and that's something that many Republicans are are very comfortable with, and maybe the President as a Republican is comfortable with. And you will

join us. Now, how is the president doing, Diana, Just to begin with the idea of Trump fiscal economics is a cogent The President wants to lower spending and reduce taxes, which is a very cogent policy, absolutely, and it's worked in other countries, it's worked in the United States. And almost everybody agrees that our deficit is too large, our debt is too large. We're passing this on to our grandchildren who have not agree. I agree. Everyone agrees with this,

but did he? And I mean this was great respect for the debate folks, and we get tons of mail and Dr Fricht ros On with us when when he affected his first budget proposal? Was that a political document or was that a Diana Frisch goot Rough document with with some real meat to it? This was President Trump's view of what the budget should look like, of what

the draw government, but it should look like. And it had cuts in many places, and it had increases in national defense, and that goes along with what President Trump proposed during his campaign. So it was it was a document aligned with his policy promises during the campaign. And I should just say, I am not doctor. I'm just Diana virtual. I have an m fill in economics from ox Very good. Excuse me. That's what you get from someone like Oxford. Everybody else is walking around all day.

I'm a doctor. I'm a doctor. We try to make note of that. I do agree with with Diana's attention. Well, it's just I don't want to be on your show on the false pretender. Very good, Diana, excuse me. I'm on this show on David saved me. I let me ask you just about the degree are There are those who complained that the President drafted this document in a vacuum. He wasn't thinking about what what Congress would think of it, what Republicans and Congress in particular would think about it.

I look at the reception that it got on Capitol Hill and a good quantity of Republicans fellow publicans who weren't happy with it. How problematic is that? In other words, he's laying out the strictures for what he wants. Should have had more political awareness about what was more possible or all presidents lay out their wish list for a budget. Uh, and then it's up to Congress and the president to

negotiate over what finally comes out. I don't think you could think of any congressional budget over the past half century that's come out exactly the way the president asked for. So President Trump's budget is not at all unusual. It's his wish list, it's his vision as to where the economy should go and where the budget should go. Does he does he have enough awareness of the funding deadline

that's coming up. We haven't heard a lot of clarity from this White House about the dead ceilings, say it's approached to the to the dead ceiling, or indeed it's approached to this September deadline. Does he do his colleagues need to come out more forcefully here to say what the White House's position on all of that is. President Trump has an excellent set of economic advisors. Gary Cone,

head of the National Economic Council. My friend Kevin Hassett will be the starting off as Chairman of the Council of Economic Advisors. I'm sure they have fully made him aware of all the deadlines. Does he need to be more incremental? I mean, so much of the liberal critique of the of the Trump budgets and discussion so far. Is it just too much, too hard, too soon, too abrupt? Is there something to be said for gradation? I think that this this proposed budget has This budget has been maligned.

First of all, people say it cuts spending. It doesn't. It raises federal spending by about one point seven trillion over the next uh ten years. It says it cuts medicaid, and uh no, it raises the amount of money spent

on medicaid over the next ten years. Uh. Some functions of government that were personally it's perfectly reasonable thirty or forty or fifty years ago, such as the Corporation for Public Broadcasting are no longer reasonable in light of all the multitude of radio and TV stations that we have right now, Why should it be the government's role to fund television and radio when there's shows like yours that

do find without government money. So I think that a budget should always be a time of looking over what the government roles should be in light of changes in the economy, and have people jump up and down and say we need a government radio and TV station. Yes, well we might have needed one fifty years ago. We certainly do not need one now. That's not something that tax pays should have to fund. Dana, I am going to ruin your morning and come back and talk about care.

And Diana first got rots with us with the Manhattan Institute. Dana, let me give you an open question to get the conversation going. David Guray is poised to pounce, how close are we to socialized medicine? Oh, we're not. We're not close to socialized medicine, I would say, I would say it. We can see that the Obamacay exchanges are crumbling. We have United Healthcare pulling out Etna and some pulling out. But I don't think that single payer is going to

be replacing uh, the Obamacare exchanges. We're probably going to have more competition, more choice for consumers. That's what people want. That's what the Senate is working on right now. That was in the House bill. Where is your your optimism for that happening? We look at the congressional calendar, how compressed it is, how full it is, uh, and we see the Senate's on willingness to take up the House bill as the starting point for for what it's going

to to ultimately draft. Where does your optimism when it comes to healthcare come from? Well, Senator Mitch McConnell is crafting his own bill, which is going to be ready around July the fourth, he says, or perhaps later. Senator McConnell is an extraordinarily smart man who knows parliamentary procedure. And I'm sure that between Health Speaker Ryan and Majority Leader McConnell, uh, they can get it done. Because this is what voters elected them to do. They were elected

on a platform of repealing Obamacare. Premiums arising twenty five to every year. It's unsustainable. Insurance companies are dropping out United Healthcare and some ethnic Okay, so give me the I want to. I'm really fascinating by this, folks. If it's sixteen or sevent of g d P and every single guest from Reinhard to Diana Frisco Roth says, we gotta fix it. What's your prescription given the realities of

two thousand eighteen society. Well, the the prescription is that insurance companies should be allowed to offer the plans that people want to buy, which is not the case right now. Right now, each insurance company has to offer the same plan with the same offerings, so there isn't any company tisie between them. If I want to buy a plan that just covers major expenses such as falling off my bike in traffic when I bike to work, or getting cancer or a heart attack, I'm not allowed to do that.

I have to buy a plan with maternity care, mental health coverage, drug abuse coverage, all these bells and whistles that I don't necessarily want. Well, of course, this is raising the price of health insurance and we need a different system. Just like with auto insurance. We can do auto insurance because people think about auto insurance. No one ever says I'm losing my job, I'm going to lose my auto insurance. No, because you buy outside the system. You have a choice of plans, you have a choice

of deductibles, you can have collision UH. You know you do you and we can do the same kind of To be fair, though, I have to buy it in order to get a license, I have to prove that I have auto insurance. Yes, but you don't have to buy a very expensive plan that UH that has UM changes your oil that the pays, but changing your oil pays for routine maintenance. That's what you have to buy for healthcare. And I do agree that in the new health care bills there should be a penalty for not

having coverage. Otherwise you're going to have people gain the system and just pick up the insurance when they have UH when they have a problem. And there are protections against that in other markets, like you can't just buy home insurance when your house is on fire, you can't just buy car insurance when you engage when when you have a major crash. Should be the same with health insurance. We have been talking about monetary policy all morning and

light of the Fed meeting yesterday. Let me ask you about a fiscal policy. Last week the White House christ and last week as infrastructure a week. How optimistic are you that we're going to see some sort of fiscal

package you within within the year. Do you think that the White House is prioritizing that enough you mean you mean an infrastructure Indeed, indeed, the trillion dollar Plan that the President discussed in that speech before a joint session of well, the trillion dollar plan also means reducing barriers to private sector companies building infrastructure. That's a large part of the plan. The President is very serious about reducing

all the duplication that there is in the permitting. He came out with a huge pile of environmental impact statements that were used for a connected road between and to seventy and said it was too big. He's absolutely right. That raised the price of doing that road, of building that road, So now the tolls on that road have to be higher than they would be otherwise, reducing the ridership.

These regulations are really getting in the way of private companies building infrastructure, and a large part of the President's plan, as he said, is going to be encouraging public private partnerships, reducing regulations, encouraging the private sector to build its own infrastructure, getting out of the way. When you look at public private partnerships, what's the role of them in improving or building on our infrastructure here in the in the US? Is that the the end goal to move to that

realm entirely? What role should should public private partnerships play when it comes to infrastructure, Well, the end goal should be moving towards a situation where they are much more private and much less public. But in situations where the federal government actually owns the assets, such as the bridge, or the highway or the airport. Uh, then the federal government has to do some kind of permission, some kind of agreement to allow the private sector to invest. But

there should be the maximum private sector investment possible. I look at what is going on here now in the cacophony in the White House. Have you spoken to the president? Uh? Recently? Diana, I have never spoken to the president. I was part of his team, but not everyone on his team spoke to the president. Okay, well that's fair as well. What would be your prescription for the White House to get a more cogent budget plans? For school plan linked with

all the other distractions out there. I think that the White House is UH producing these budget plans, and I would suggest that the next step is for Congress to actually take them up and implement them. It's Congress that's the bottleneck. It's people who are saying Congress, and you said it earlier in the program, how is Congress going to pass tax reform? How's it going to pass healthcare reform?

With a few legislative days left, when I suggest that Congress take part of the August recess and stay in Washington to work on these items and also move the process through faster. Yesterday, UH the due to the extremely tragic shooting of Steve Scalise, there was very little done, which is understandable. But Congress needs to make up that time and move these bills through. There's also debt, feeling problems. Budget, There's many things to do infrastructure. I'll sleep that there, Diana,

Thank you so much. Danna, first to go through off is with a man Hair Institute. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast platform you prefer. I'm on Twitter at Tom Keene. David Gura is at David Gura. Before the podcast, you can always catch us worldwide. I'm Bloomberg Radio Brunch You by Bank of America Mary Lynch.

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