Surveillance: Trump’s Legacy & Biden's Agenda

Bloomberg dot Com, and of course on the Bloomberg. Right now, Greg Vlli joins us with a f G O. Note that everybody in Washington reads each and every morning, and Greg, I do want to talk about something we've really avoided this morning is John Farrell mentions we get right to work and part of that work is impeachment. What will we see this Wednesday and Thursday on impeachment? Yeah, Hi, Tom,

good morning. Everybody talks about unity, and I know it's going to be a big fame for Joe Biden, but we have a decent trial coming up that I think will be better at think it will drag on for two or three weeks. I think they probably will fail. I think it could make uh Donald Trump look like a martyr. I think it will complicate Joe Biden's agenda. So right away after talking about unity, week of that, and I would just also add to the Janet yell

and hearing yesterday was not that unified. The Republicans pushed back hard on new spending. Yeah, well, that's exactly where I wanted to go, this idea that we talk about unity, and yet we have these divisions that are getting just deeper. Do you feel momentum behind this one point nine trillion dollar plan or do you think this is going to drag out for months, far longer than the market is pricing in. I think there's momentum behind a plan. I'm not sure if this plan that has a lot of

money for state and local governments, minimum wage. I think we'll get something, but I don't think it will be one point nine trillion. I think we could get a deal by the end of February, but the Republicans really showed their hand yesterday that they don't want anything that's expensive. One point nine audience, the number, What do you think it comes down to? Greg, Well, I've been saying something around one five. I think maybe one four one five.

I think that is is doable. The Democrats have to hold on to every one of their fifty senators, and I'm not convinced John that they've got all fifty. They might have forty eight, they might have forty nine. So that this will I think boiled out to negotiations between Joe Biden and Mitch McConnell. Great Valier with us with the GF, and he will stay with us at this moment, Greg, val so much of this And we just talked to

with there's the post poster for conservative Republicans. Is Republicans acting fast to get ready for two thousand twenty two primaries? What would you expect to see from conservative southern Republicans? Well, it is amazing, isn't a ton that we're already talking about twenty twenty two? But that's Washington. So a couple of points I'd make. Number one, I do think that the Republicans will hit hard on the issue of taxes and ending. I think the country doesn't want big new taxes.

I think that's going to be a potent argument for them. So I think that the other point I'd make is that historically a first term president in his first midterm election loses about five of House and Senate seats. If Biden were to lose five percent of House and Senate seats, he'd lose both houses. Greg, I want you to talk about the silence of Mr Hoover and Mr Roosevelt long ago and far away in the early days of the depression. Without question, the quietest car ride in the history of

our presidents. With all your perspective, Greg Bellier, is Mr Trump setting precedents here that we may see in the future or in your opinion, is this a one off of discord. I think it's a one off. I think most politicians right or left respect tradition. You know, Trump doesn't. He stirred the pot. I mean, that's Donald Trump. He didn't respect a lot of the norms. But I think as we go into other elections that there will be

more conciliation. Greg. When we talk about the presidency of Trump, it was one that was anti establishment, it was anti Washington. That was the goal of his taking out some of the career members of the cabinet, of the various departments and putting in his own people. What do you think the legacy of that will be as Joe Biden comes in and tries to reverse that. Well, you know, it's

one thing to blow things up. I get it that there are certain institutions that haven't worked well and you want to blow them up, but you have to have something to replace them with. And he would blow things up without any alternative, and I think that got tires up. I also think the level of personal rancorps, the vindictiveness, the ugliness of his tweets really distinguished him and really diminished his cause. John, I think the British do this better.

You lose the election, what do you are you leave in like three hours with the cardboard the next day. And I do think the events in the last few months Tom really exposed some vulnerability in that process. The process, of course established for good reason many years ago. But I wonder, Greg, just as a final question to you, sir, whether that's something that people will rethink, will need to rethink, whether you think we should rethink that well. I think

there were things that Trump did that were positive. Getting tough with China I think everybody would agree on. I think having fewer regulations people would agree on. It was the way he did it. The way he did it was was so over the top and outrageous that it hurt his cause. Greg Bella, thank you so much for joining us on the day of inauguration, and all of us thank you for your perspective across this historic campaign. Right now, with futures up seventeen and futures up sixty.

It is a market that is voting on prosperity for the halves, voting for the prosperity of those that participate in the markets. Alicia Levine is a wonderful student of this. She's a b and y melon with acute mathematics and a really really sharp set of critical thinking skills to get us through two thousand twenty one. Alicia, if you amended your view forward of the events of the last thirty days, Yeah, good morning, Good morning, dream team. Your

coverage has been really wonderful this morning. Really enjoying it. Um, Yes, we have, so we The way we've amended it is to say that we think that for markets, the cyclical trade has legs, it's deepened, and that the name of the game is rotation here. And we think that because as you can see, the stimulus is going to be enormous. The initial proposal put forth by the incoming Biden administration is double the size that Wall Street was really a expecting,

and direct checks to households are already being spent. We saw the December direct checks coming into households the first twelve days of the year on the order of a hundred and thirty billion dollars, and those people who received direct checks have already increased their credit card spending by in the first week of January alone. So what does

that mean? This this economy is seventy consumption and whether their households are saving the checks or spending them, g d P will be going higher and with that the sectors that are levered to the cyclical recovery will move higher as well, and this trade will have legs Alicia, where is that money being spent? So it's interesting. So the households that are spending it tend to be households that earned fifty dollars or less, and it's being spent

on things like clothing and food and and housing. Um. The household that are spending it tend to be the wealthier households. And that's why we think the second half of the year, when services can come back online in a more meaningful way, in a in a more regular way because of the dissemination of vaccine, those households right now have an extra one point for trillion dollars to spend in savings, and that pent up demands is going to meet that savings it's going to get higher with

increased checks to households. It's gonna be enormous spending in this country. I think the boom is coming. So how quickly could that spending drop off if we don't get some sort of additional fiscal stimulus passed in the upcoming to three months. So the bill that was passed in December was really meant to get us through the end of March, because the unemployment benefits expired and the extra three dollars a week expires at the end of March, and the checks really are of the amount to get

households through the end of March. So the Biden plan is is another bridge, right, and and that's really to look forward, get households um equalized here and how they can handle their other scourge of the pandemic getting us through into June and July. This is a lot of money, folks. It's very hard to overstate how much money is being spent on rescue here. And this is one reason why a lot of people are expecting inflation to pick up

as the year goes on. This is one of the big conundrums, though, couldn't pick up quite a bit more than people had expected, pushing yields higher, pushing the Fed's hands and frankly, torpedoing some of the most popular calls in the equity market. Do you see a growing risk of that given the pent up demand that can pent

up savings that you just talked about. Yeah, highly. So this is like the question for the markets this year, This is the defining question, and that's how quickly do yields rise and what does the FED do about it? So the biggest risk to markets here is the spiking yields, not so much the gently rolling higher, but the spike. And it's very clear that inflation will look hotter simply because of calendar effects, because of base effect into the spring.

So no one should get too concerned about that. What we've heard from the FED is that they're willing um for higher inflation prints in to kind of pass by. However, base effects can still seep into forward looking inflation expectations, and so it's not just a wash, it's something to look out for. We think the risk for inflation is higher. I think the market will overlook what happens in the prints for the spring as we move through the rest of the year. I think the risk of that inflation

is higher than markets are currently expecting. Alicia, there's definitely a lot of concern about this, and this is something that we keep hearing about, this idea of inflation and picking up. How do stocks respond if you do get

what you expect, which is higher than expected inflation. So it's going to happen as as bond yields move higher, is that you're going to compress some of the pees, the preceding ratios, and that's going to really affect some of the tech trades because what we because those are long duration assets with high you know, high cash flowing assets, So higher yields will dent some of the pe exuberants on the tech trade, which is why we like cyclicals here.

We think overall it's not going to be a dent in the market because the earnings power coming from the cyclicals should kind of overcome the lower pees that the market is willing to pay. Overall, we think earnings are going higher, particularly in the second half of the year, and that earnings of recovery is going to propel markets going forward, not so much the pees, it's the earnings recovery.

Felicia Levine Withe this with b n Y Melon we'd like to bring in right now is Mr Biden tense church at St. Matthew's Cathedral from my own in college. Jena Zana joins us, and Rick Davis joins us. Some Stone Court as well. We now have the automobile leaving Blairhouse and this is of course, uh Mr and Mrs

Biden moving off to church, Jennie. The symbolism here that we have this morning, the differences here of this visit to a church versus the visit by the President to a church in the Ride and storm of Black Lives Matter last summer. It's just as stark is anything in this nation. Yeah, absolutely, and and by design I think, um, you know, the Biden incoming administration has really been focused on making a case for bipartisanship. This is somebody who

spent his life in the Senate. He understands. As he gets set to send a huge immigration bill to Congress, maybe as early as today, to sign over a dozen executive orders to try to combat the coronavirus. With this almost two trillion dollar bill, he understands he is going to need the support of Republicans. With this Senate so

narrowly divided, and as he is trying. I agree with Kevin to use the trip to the church symbolically, and he's going to be accompanied by members of the leadership on the Republican side to make the case for bipartisanship, which we're going to hear an awful lot about unity today and a speech I suspect as well. Maybe there'll be some prayers in the Republican Party as they consider a new Senate and not a fracture, but a more

fragile house. Rick Davis joins us now with his service to the gentleman from Arizona, Mr McCain over the years, Rick Davis, How does Senator McConnell pick up this pieces? What is the McConnell process is minority leader even in the next weeks and certainly in the next months. Well, Tom, it's it's hard to conceive of that term Mitch McConnell as minority leaders. Uh, but he's already sort of tipped his hat. He's speaking pretty freely these days, which is

somewhat unusual about his plans as minority leader. And he he did talk about the fact that in a divided Senate, you're going to need to compromise and I thought I would never live to hear the word compromise come out of Mitch McConnell's mouth. But I think this is the new Mitch McConnell, and I think he'll use opportunities to ensure that legislation that does get through the United States

Senate has his work on it. He knows he can't control the agenda now, but he can impact the outcome of this legislation, and so I think that will be his top priority, is just make sure that things don't get through the Senate that cause irreparable harm to the economy and to the policies of our nation. When Rick what Rick? When Tom talks about unity and the fractures that we've seen in the Republican Party, it raises a

question of who Mitch McConnell is representing right now. Given the fact that a majority of Republicans polled according to a number of different polls, still support President Trump, do not think that he should have been, uh but impeached or that he should resign. What do you make of that in terms of how it influences Mitch McConnell and his Republican Party as he charts his path forward. Well Mitch mconnell still has office and office matters in these

kinds of cases. So regardless of the public popularity within the Republican Party that Donald Trump has, Mitch McConnell actually gets to go to work tomorrow morning and do the

nation's business. And so he will be one of a couple of national leaders who are going to form the Republican Party outlook on policy and politics between now and the midterm elections, which is the next real check in the system, and highly unlikely that there'll be a Trump on a ticket uh in two But Mitch McConnell will have a large cache of money and is currently recruiting candidates for Senate races that are up in that period

of time. So he's going to continue to be a very important mechanic of the Republican Party and a legislative strategists. And right now, uh, he is about all we've got as a leader in the Republican Party. Meanwhile, as we talk about fractures in the Republican Party, there certainly are fractures in the Democratic Party Genie, and there's a question of how much Joe Biden will be able to bring together the left and center and right frankly of the

Democratic Party in order to get through his policy. What is the unity like when it comes to the Democratic caucus. The unity we're seeing today is going to be really the height of the unity we will see going forward. It is going to be tough for Joe Biden to

keep this large, particularly in the House caucus together. We've already heard frustration in some quarters of the progressive wing in terms of his proposal on COVID relief, for instance, saying things like that almost two trillion dollar bill doesn't go far enough. And of course you look at the opposite side on the Republican side, and even moderate Democrats they say it goes way too far. In other words, what does a fifteen dollar minimum wage have to do

with battling the coronavirus. So Joe Biden is going to have his work cut out for him trying to keep the caucus together on the Democratic side and trying to please this really loud and energetic progressive wing of that party, because he's going to have to do that, and his focus is going to have to be trying to get to sixty in the Senate, and that means he's going to have to appeal to moderate Publicans and moderate Democrats,

and that's not going to make the progressives happy. So all these bills were seeing him talk about, from immigration to COVID relief. I suspect we will see watered down versions of that if we see them get through the

Senate at all. And yesterday in Congress we got signals it's not going to be easy, people like Josh Holly holding up the DHS cabinet nomination, not fast tracking it, Chuck Grassley saying he's got concerns about the COVID relief bill, amongst other things, with the liberal components of that in there.

So those are signs already before Joe Biden is even inaugurated that this is going to be a tough sort of line for him to walk here jeans Ana with us, and also Rick Davis here and again at the nine o'clock our the Air Force one pulling away at Andrew's Air Force Base, a president on his way to Florida, and outside the Cathedral of St. Matthew in Washington, we're waiting for Mr Biden, I believe, to uh enter the church,

and of course other worthies attending as well. The church is one of the Jewels of Washington as a LeFarge at the turn of the nineteenth century. It is Romanesque. For those of you know the know Boston, there's the church at Copley Square, which is much the same feeling, maybe a number of years earlier uh than that, Rick Davis, you know, is we go to this hour as the president flies away. It is a changing of the era.

And what's so interesting to me, Rick Davis, there's a huge presumption with Biden a seventy eight that this is a one term presidency. I believe in my life I've never understood this was a one term presidency as much as this moment. How Rick Davis does the assumption of a one term presidency changed the moment And it's a very good point, Tom. Joe Biden, because of his age, is probably termed out the day he gives his swearing in,

so uh it is something to remember. UH. Kamala Harris is a uh new vice president, as has been remarked many times historic UH, and she is going to be seen as an heir apparent uh to Joe Biden for a presidential run. In The question is can Joe Biden UH be relevant over the next two years in order to ensure that he doesn't start acting like a lame duck president. As we recall, UH, in the last term of UH Barack Obama's presidency, he was almost termed out.

In the first year of his second term, people saw him no longer as the future UH, and so policy waned and legislative action slowed down. UH Biden's got some momentum, and he can write it as long as he can, but the political realities are that he is in the future of the Democratic Party. Two of you, thank you so much. I know you'll be giving us guidance and

wisdom through the day. We greatly pre should a genius of my owner and Rick Davis as well joining us now handrittas Race of Vada Partners Economic policy director Handritt sid I spelled on the words of Kevin, the biggest policy battled down in d C still would come where does it lie? I think the most interesting thing, and Kevin gave such a great round up, is the reality that Senator Schumer is going to be controlling the Senate

floor from here. So perhaps Senator Marco Rubio and others in the Republican Conference want to hold out for the perfect they may be able to make some real changes, but when push comes to shove, it's going to be a majority Leader Schumer that decides which bills go to the Senate floor, and they're gonna have to vote against a direct payment to individuals, against unemployment insurance benefits at the federal level, against more vaccine and testing funding for

state and local governments. And that's going to be something that they have to wear that they have not had to deal with under Majority Leader Mitch McConnell. So I think that start rate a big number, a big number, one point nine really, and Henrietta and we've had a big conversation the last couple of weeks about how much

that will have to come down. If you've got a base case yet, Yeah, my base cases that we probably end up at the very low end, in the seven fifty billion dollar range, if they really try to get sixty votes in ten of which we need to come from the Republican conference. At the high end, maybe one

and a half trillion UM. I think that those negotiations will probably last until about mid February, and then we'll have an understanding of whether Democrats are going to have to go it alone or continue trying to negotiate a bipartisan package. Um, so it's gonna be a couple more weeks. Here Henry and the time keen here in good morning to you on this day of inauguration. Is the committee process broken forever? Uh? In the Senate? I don't think so.

I mean, if that's what you're referring to, I think that the committees are, especially with the Senators. There's a lot of seniority there. So, for instance, there's a lot of attention on Senator Bernie Sanders, who will be chairman or co chair of the Senate Budget Committee. They're gonna come with to an agreement on how to proceed. It may take a couple of weeks to hash out, but there will be a path forward. They will divvy up committee assignments, there will be staff and budgets prepared for

all of them. There will be a reconciliation bill potentially even three depending on who you talked to in the Democratic Conference, and this, this power sharing agreement will get. Sort of an interesting thing to keep your eye on is whether any of the senators decided to leave either of their parties become an independent and caucus with the other side. Last time around, that's what happened. We could definitely see that again. Yesterday we heard Jenny Ellen in

front of the Senate Banking Committee. We talked a lot about, or we heard a lot about the potential for taxation. This seemed to be a concern that Republicans were talking about as they were saying, we need to pay for this somehow do you expect that later this year we're going to start hearing more about taxation from the Democratic Party? The great question, Leasa, I don't think that the conversation

about taxation is ever going to go away. UM. I assume that in the first House field that gets rolled out as early as next Friday, there will be some taxation components in it. Um. Certainly there would be in a four trillion or six trillion dollar reconciliation build down the line to offset infrastructure spending. But what members talk about versus what's possible um in terms of actually legislating getting fifty one votes but too very different conversations. I

can't find you the votes for tax increases. If there are any, odds, it would come in very specific streamline components applicable to very high net worth individuals, or very specific income streams from very flush coverations, So the guilty tax, the tax on intangibles held overseas um, the capital gains tax. Those are conversations that could come up in the back app of this year. You'll probably see headline risk before then, but I don't anticipate that any of those tax pics

will actually be implemented. If they are, there will be a phase in u there will be a lag time. In twenty twenty three is the earliest that I see the tax increases actually coming to fruition. In the meantime, do you actually see any true fiscal hawks left in Congress or have they continued to remain extinct even as a Democrat takes office. Well, that's a good question. I think if the Republicans are trying to get back there, but Democrats are not really receiving that message right now.

The biggest component of having Bernie Sanders as Chairman of the sent Budget Committee is that he's going to be responsible for deciding what the appetite is for deficit spending, and his appetite is pretty unlimited. When you have Treasury sectary nominee Janet Yellen coming in yesterday and saying we think that now is the time to deficit spend. Interest

rates are historic lows, there's not a real concern. And again, having control of the set up floor and we're forcing Republicans and their fiscal conservative mantra to vote against these bills is much different than just avoiding these votes altogether. So I think fiscal conservative it might be something that we hear in the background, but for all intents and purposes instead for the time being, and I'm gona trieselfa Helenace Henrid. Always fantastic to get you with us. Thanks

for joining us today. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or whichever podcast out for him you prefer. I'm on Twitter at Tom Keane before the podcast. You can always catch us worldwide. I'm Bloomberg Radio.