U.S. Economy Is Pretty Solid at 2.5% Growth, Hyman Says

of course on the Bloomberg. On the show today, Max Bauchus, the former Senator, former US Ambassador to China, Libby Cantrell from PIMCO, and we'll talk to Black Rock's head of inflation linked to bond portfolios. But first Ed Himan joins us here in our Bloomberg eleven three studios. He's the rman of Evercore I s I. There was sort of a beautiful moment on surveillance television a little while ago,

Tom Keene having his Warren Beatty moment. He held up the ever Cores I s I note with headlines about the economy, good and bad event diagram with some on both sides of of the chart. There Ed Hyman, how's the economy look? When you look at the panoply of data right now about the U. S economy, what's your sense of how it's doing. I think the economy is doing okay. I have a little different view than most people. Um.

I see an economy that is pretty solid. Uh. I look at all the data, you know, like the leading indicator retail sales. But I also travel around a lot, and I go to different cities, and whether it's Denver or Boulder, or Dallas or Boston, Seattle, they're all doing pretty well. It doesn't really smack of secular stagnation. So I think the economy is pretty solid. My main mantra has been slow and steady wins the race, and seems to me that that's still pretty accurate description of what's

going on. We've been growing for seven or eight years, and I think over those years have made a fair amount of progress. We're learning a little bit here about what the White House hope it's hopes to advance, and it's in its budget. And one thing that Stephen Manwton, the new Treasury Secretary, said last week to Bloomberg News. Over the weekend to to Fox News in an interview is that his his assumption for growth is now two point four percent, So that's less than what candidate Donald

Trump said when he was on the campaign trails. There a new realism pervading Washington here a little over a month into the new administration. Uh, the airs out out of the balloon. A fair amount what looked like a case at the very beginning of this episode has faded quite a quite a bit, and that's probably a good assessment of it. My forecast is for growth of to an a percent for this year, which it doesn't sound like a lot, but it's frankly a fairly heroic number

because we haven't had to an apercent growth. Also assuming and inflation something like one and a half or two percent, so you're starting to get normal grow up over four percent, which is a key level to get. As you mentioned, your your growth is something there two point five percent. What are the driving factors? There was so much enthusiasm, it seemed, in the market for a big infrastructure spending

package after the elections. He said the era has maybe begun to dissipate from that that limited watching didn't what's going to be the driver there? Do you think Okay, well, I didn't have big hopes that because they're talking about a trillion dollars over a decade. Uh So that's that's not enough to fix the potholes, you know, a hundred billion dollars a year. But the economy is slowly becoming self sustaining with emplument gains leading to retail sales. House

prices are up something like seven percent. It's not markets up, so you're getting a broadening out of growth in the US. What you invented at C. J. Lawrence, and I think of Chairman Greenspan as well, is looking at tangible real economic data like what trucks are doing, what railroads are doom, what capital goods is doing. Within the I S I report that you created every day, what's the one metric

that gets you to some enthusiasm about a better nominal GDP? Well, we we survey about two or three d companies of a week. Uh and so I have a very I'm almost a perfect knowledge how the economy is doing currently. That forecasting, though and not predictive, and those have edged up a little bit, consistent with a little over two percent real GDP growth and probably something like four percent

nominal GDP growth. But uh, Thomas and I discussed a minute or so ago, what's driving the economy today is not what drove it forty years ago. Today it's sports and entertainment. It's a new tech, you know, like a Facebook or a Snap. It's e e commerce, And then it's healthcare and higher education. Of those things that you mentioned, the only ones that are gonna employ bodies, warm American bodies is healthcare and maybe education. Where are the jobs

going to come from? Where is how are we going to get the people employed that voted for Senator Sanders and that voted for Mr Trump. The You know, we've, as you well know, because you're such as a student of this stuff, Tom, we've had emplument gains, you know, pretty steady around a hundred thousand for years now. Uh stan Fisher says, we're fully employed, and Danny Blanche Flower

Upper Dharma says, no, we're done. So it's a debate and they and the coach or the referee on that will be what happens to wages, And so far wages have disappointed me. I thought they'd be over three percent by now and they're not. But when you get the full employment, you'll know it because you see wages accelerate. You know, when the FED makes its decision here March whether or not to raise rates, is that is that the big X factor here is our wages, the big

factor that they're going to be weighing. I think so. Uh So, I'm I'm sort of in the hole here because I've been acting wages to pick up for some time. There were one eight and now they're like two and a percent. So they have picked up, but not as much as I thought. The January number, which set the market back a lot, was only point one. Uh And when I look back at history, uh, it suggests that the February number will be point four. Now if if it is, then that will put the next meeting squarely

on track. Within this is the idea of Okay, we get rising wages, and I'm getting a lot of mail from listeners on this. We get rising, rising wages, but we also get inflation with it. So my real wage, my inflation adjusted wage, is flat or diminished. Is that a tangible risk inflation getting in the way of the goods you're talking about? I don't think so at the moment, because pricing power is so difficult to come by particularly

in the old economy. Like we talked about target this morning, there's no pricing power there autos all the time you shot up the term. Wait when I asked the question for you, continue and let me ask you about sentiment and optimism. We talked to Bill Dunkelberg. Every time the n f i B Survey Small business has come out, optimism seems very high. How much currency should we give that at this point in time? In other words, we see we see optimism about growth and hiring and spending

money on capex. Uh what from there? In other words, we see that optimism, what does that lead to? Well? Uh? One of the things I do, I think is to connect the dots. And consumer confidence has also moved up, and unlike the or say in addition to UH dunks is affectionately called an n f i B a survey which is skyrocketed. The Conference Board does a survey of employment expectations by consumers and that has a similar hockey

stick look to it. Uh. So I got three different measures of confidence and they've all moved up a fair amount. As I mentioned, Uh, animal spirits is one of the ways that you know trump Atomics can can work through the economy that precedes getting any fiscal stimulus working. We we talked to our calleing Michael McKee. He was down in Mexico City talking with the economic minister there. UH. And something he said in that interview is the moment that in those negotiations with the U S. Should they

happen over uh import tariffs? Uh that they mentioned tefne cars. In his words, he said, we say bye bye. Where do you see things going from here? What's the weight of this new protection? Isn't going to be on the U S economy? So I don't. My own personal view is that it's more barked than bite. But I'll watch it every day, uh to see if the bite starts to happen. But my my guess is that Trump is trying to uh to redo trade deals that are more advantageous for the US and his opinion as opposed to

tear up and after or tear up debut. Oh. But it's not clear, is it? Uh? As we sit here right now, I want to find out question to get your started on your day at time and Professor Summers talks about secular stagnation? Do you agree with Larry Summers that it's pretty moldy out there, and that we need a real jump start of policy. Boy, I don't so I think. I think, uh, Larry Summers, so I I think it's terrific. And you mentioned public service earlier. He's

really given and it continues to give. But he lives in Boston. Boston is booming. You walk out and it's just booming. Has all the things I mentioned, and then he spends a lot of time in Washington, d C. At Washington d C is strong too, still standing, still standing? Is that understatement? So? I think I think the U. S. Economy is slow and steady, and it's like managing money. If you can avoid to lose money, you can actually

make some real progress. Thank you so much for coming by today and particularly answering our questions in the future of the FED and Kevin Warshon and all that. Greatly appreciated. Edward Hyman is with ever core. I s I, David, I think it would be safe. I showed at the beginning of television the secret ed him and memo mentioned the bad news between the famous the famous. Yeah, really

the red that's what they should have done. They should add at him and be in charge of the envelopes at the Oscar that would have fixed things at Himan. Whatever core I s David bringing on our next guest. All I know is the newspapers in Bloomberger Trump Trump, Trump, Trump, Trump TRUMPA Trump, and our steam next guest doesn't agree with that. She believes the House has a little bit of Republicans have a little bit to do with it. Okay,

Liffy Cantell joins us now. She's executive vice president and had a public policy at Pimpco. Here with us in our eleven three oh studios in New York. Let's start with the budget. We're beginning to get some contries. What that's gonna look like? The White House budget's gonna look like. We have this fifty four billion dollar figure when it comes to defense spending, increasing defense spending. Help us understand

what we should make of that. We haven't had regular order, we haven't had reconciliation uttered on Capitol Hill for many years now. Are things changing? Are you optimistic that we're going to see a normal budget process here? And what should we make of this document that's going to be released by the White House here presumably in these next

few days. Yeah, I mean It's a great question. I mean, I think that just from as a starting point, everyone sort of needs to qualify kind of what the president's budget is. I mean, it's much more of a political document than it is UM in terms of actually having sort of the force of law. So it has to go through the normal kind of congressional machinations. It's really the Congress that actually sets the budget, and then also UM does the implementing, like the implementing bills, like the

appropriations bills. So what this is though, and what it should sort of be viewed as, is where Donald Trump's priorities are. So we knew that he was going to be supportive of defense spending. I think some people didn't know how much he was going to be, you know, supportive of that. UM. So this is I think sort of a living testament to that. But again it should be caveated that this does not have the force of law. This has to go through the congressional machinations and actually

in order to get enacted. Yesterday the White House, the President sat down with the House Speaker Paul Ryan and the Senate Majority leader as well. Presumably they talked about the budget, talked about this speech, that the President is going to deliver tonight. What's your sense of the relationship there between the White House and Congress. Tom mentions the the disarray even among the House. Uh, you know, what's your sense of how well the machine is operating and

Washington right now? Well, you know, it's it's interesting because I think you know, certainly what markets will be looking at for the speech tonight will be some specifics around President Trump's pro growth agenda, tax, your format, infrastructure exactly.

But I also think that congressional Republicans want those specifics because while sort of campaign slogans and sort of generalities and platitudes are certainly helpful, um, at this point, the rubber really needs to to meet the road, and Congress has set out on an incredibly ambitious legislative agenda. They need the president to provide some directions. Tell us about the power metric right now, I mean, we're gonna see

all these He's like the oscars. They're gonna be all these egos in the room, all focused on the president. I get, what is the power of the Republican leadership, What is the power of the chairman and chairwoman, What are the power of the tea party in the run of the mill conservative, austere Republicans give us a power

template right now? Well, it's it's a good question because I think if you just simply look at the fact that Republicans have majorities in the House and the Senate, and they dominate the White House, you would sort of think, Okay, well they're gonna be it's gonna be very easy for them to enact the their agenda. But within the Republicans there's quite a number there's quite a lot of divide.

There's a divide between the House and the Senate. Say, on tax reform, the House supports this border adjustment tax, some of the Republican senators have come out against it. Um there within House Republicans there's some divide, right there's the sort of the deficit hawks or the people who actually want to see some increase in spending, especially on defense. So there is not this is not a cohesive Republican

party necessarily. I think they can be brought together, and President Trump really, I think has an opportunity to do that tonight. It's just a question whether he's actually gonna be able to do that or not. If I'm your client, I want to know what we're talking about when we talk about a tax reform with a pologies to Raymond Carver there, but you get the Paul Ryan Brady plan, you have Gary Cone working on a tax plan of

his own. How do I make sense of what's most likely to be the blueprint for a tax reform and watched in right now? Do you have a sense of what it is? It's a great question, and honestly, this is the number one question that we're getting from our clients is what will tax reform look like? You know?

I think the conventional wisdom was right after the election that since Speaker Ryan had done so much work on tax reform as the head of Ways and means um in House leadership, that that President Trump would be more inclined just to defer to him, and that the Senate would likely to defer to him as well. I think that plan has been upended, um partly because of this border adjustment tax, which is at the center of the

House tax reform plan. We think that it is unlikely that at the end of the day that stays in and because it's a big revenue raisor and it allows, you know, the corporate tax rate to be cut even more. Um, you'll probably see a smaller plan and it will probably take longer going with the market, I believe it's billion is a delta on defense spending. How much does a border tax bring in? Have you seen a good so? The Tax Foundation has its scored at one point one

trillion over ten years. The Tax Policy Center has it about one trillion, So it is a huge revenue raisor so without that by definition and the tax reform, I believe, like what Tip O'Neill would say is, Okay, what's the number, what's what's a border tax propos So what if we see a two percent or four percent border tax? Yeah, you know, and you might see some some sort of

iteration around that. You Also, what I think is actually even more likely if it is included, is that you would see a very long phase in time, So it would be at the rate, but it would be phasing it maybe something like commodities twenty seconds left. And it's not about the Denver broncos. Are we going back to nineteen seventy six, nineteen seventy eight where there's actually the strange thing called legislation? Are we actually going to see that?

I think that as more time goes by, and it's more time that goes by that President Trump doesn't endorse a specific plan. I think it becomes increasingly harder to a tax reform as we get close to the intern. John Tucker, do you see how I said nineteen seventy six and nineteen seventy eight, and Libby Cantrill equated that with Jefferson. I wasn't actually born yet. I'm just killing it here. I'm just thinking, oh, go away, let me

control with Pimco. Thank you so much. I think this is Bloomberg brought you by Bank of America Mary Lynch, dedicated to bringing our clients insights and solutions to meet the challenges of a transforming world. That's the power of global connections. Mary Lynch, Pierce feederin Smith Incorporated, Member s I PC. What we're trying to do here today within the quiet markets is really recalibrate into a new month, the last month of the first quarter that I believe

that begins tomorrow. Today is too there's no leap here this year. He's the last day. Martin Haggerty where this black rock and what's great about him as he synthesizes in the fixed income that, excuse me, gas, Kate Moore and Jeff Rosenberg do, and everyone else but Martin, Howardy filters in the inflation dynamics is described by UH the

fixed income market, he joins us. Now, Martin, what does like the five year five year forward tell you right now that inside baseball idea of looking out five years at the view out five years from there? Well, Tom, I think it's worth while looking at that from two aspects. Basically, what is it telling us now and what was it

telling us roughly a year ago? Um, right now, it's telling us that headline CPI, as priced by the US Chips market is priced to be in the vicinity of two percent between two thousand and twenty two and two thousand and twenty seven. Now, if we compare that to the FITS inflation target, the FIT has an inflation target that is driven by PC inflation, and that is a slightly different metric that tends to run about thirty to

forty basis points below CPI. So are we basically pricing in a run rate of PC inflation into the future of about one point six to one point seven percent, which implies that despite the significant improvement in that metric, that we've seen over the last twelve months that the FED is still never going to hit its inflation target in that time period that I specified. I mean, I mean this folds right into FED policy in the ancient thing that all of our listeners know is simply a

fear of inflation. Do you wake up in the morning at Black Rock with a fear of inflation? You know, I was born and brought up in Zimbabwe, so that's somewhat genetic for me. Yeah, that's true. I guess it's it's yeah, I'll say. But I mean, I mean, I mean, we get this, David, and I get this in the mail where we receive we're gonna have runaway inflation, sixties inflation, oh my, oh mg, four percent inflation, eight percent nominal GDP, and yet none of the evidence shows that, does it? No?

And I think you know, a lot of the the views in that regard have been misfounded. And I particularly recall to the immediate aftermath of the crisis, where any sort of pundit you had on on on various platforms was talking about a Zimbabwe style inflation with the FED expanding the balance sheet and Kewi Operation twists and the various iterations of policy that we had, and I think that that was completely unfounded and continues to be so. But when we look at the macro backdrop, the economy

continues to heal in the aftermath. And I do think there are some dictionary disinflationary impacts from technology that are obviously pushing some UH some components of CPI down, as well as some of the international factors with respect to globalization. But if if we sort of mark to market where we are today and look at core CPI at two point three, do I see runaway inflation? Does that number get up to four or five? I don't think so. I I can see that the labor market in the

US continues to improve. We're at levels of unemployment consistent with nehru Um. We have had a tremendous amount of stability in the currency markets more recently on the back of significant dollar strength we saw from two thousand and fourteen into two thousand and sixteen. That is allowing some

of the UH internationally set drivers of disinflation. Now we have seen UH start to stabilize, and I'm of the opinion that course c p I as long as the US labor market continues to improve UM and and stay at a relatively healthy run rate in line or below NEHRU. Then we're in a in a path where core CPI by the end of two thousand and eighteen is probably going to be somewhere in the vicinity of two point seven percent. Alright, So tom asks is the zimbabweb barn

Martin Hagerty is worried about inflation? How about Fed? Sheer Janna Yellen? Is this something that she is still concerned about? Is the shifted almost entirely at the FED here too to the labor market? Well, I think it's it's one can never quite pin down what the focus at the

FED currently is UM. But if you look at the two pillars of their mandate, full employment and price stability UM, one could argue that we're at full employment and one could argue that we're at or very close to price stability. So it appears that the FED is looking at a

host of of other metrics as well. And when you look at the real policy path priced into the front end of rate markets, i e. Where are FED funds priced to be less inflation, you still have real policy rates that are negative out to two thousand and eighteen, and I would argue that that that is not necessarily consistent with an economy at full employment and and basically

at price stability. So, you know, trying to to sort of reference that back to the question you asked, um, you know what we have seen in the aftermath of the of the Trump election. We've we've seen sort of economic surprise. Data indices moved sharply to the highside. But when we break down those economic data surprises, a lot of the strength seems to be coming from survey based measures.

So we have not yet seen that translate into hard macroeconomic data, apart from the labor market and the pricing components that that I mentioned. So perhaps the FED are being a little more patient and waiting to see if the improved psychology prevalent in a lot of these survey based measures actually begins to show up into the hard data you mentioned Fed funds futures. I've got w ARAP go up here on the Bloomberg now looking at the probability of a hike at that March meeting. Now at

cent we saw it move yesterday. Help an amateur like me here, How predictive is w ARAP? What? What? What? Credence do you give to here? Well, I think that stems back to the FEDS reaction function, where we know that this fit is not or has not been one to surprise markets. So the greater the probability that that March pricing of a March hike goes, I e. The the if it if it continues to mention north, I

think the March becomes more and more into play. And actually I have been perplexed why March has been priced at such a low probability given the data evolution that I alluded to. Okay, I get that, and I take great note of your two point seven corps UH inflation rate out a bit and that's quite a lift. What we're waiting for, I would suggest, respectfully, sir, what you're waiting for, and more importantly, what chair yellings waiting for is decent economic growth? Help me here with a horse

and the cart. What's the horse and what's the cart? For chair yelling? Is it age growth as a horse? Is it just g DPS the horse? Or is it inflation expectations? I in this odd financial repression that we're in, I'm not sure I know what the horse looks like. I think that is a constant pursuit UM where obviously the I think all of them you mentioned Tom, to

tell the truth, are are very important horses. Where you have had the the healthy labor market data, the average hourly earnings has not necessarily correlated with the improvement in the labor market we've seen UM and at the same time, there appears to be a an inherent mismatch between UH the unemployment rate and GDP growth, implying some sort of

collapse in productivity. Now we can talk about, obviously the the mismeasurement of of g d P and how it may not necessarily be the mist of the best measure for for economic growth today. And I think a lot of those discussions are are well entrenched within the f

O m c UM. But I think that one cannot necessarily hop on on one data point where if we got a soft average hourly earnings for January, we need to look at it in in a in a greater context, I look at other labor market data with respective wages and reassess um that sort of three months run rate and average hourly earning right that we may see, well, this is really important. I haven't looked at the h chart and well, folks, I'm going to put it out

on Twitter. It's a great Bloomberg chart that shows the pullback that we've seen recently. But nevertheless, I'm gonna say, making back two thirds of the way to the lift of average early earnings seen in two thousand seven. In two thousand what did joy to speak to you about our miss our fictions of inflation, the gap between service

sector and goods producing inflation. I went back and looked in the reality as we've seen this before, this great divide between a three percent service sector and zero to sub percent goods. When does that end? That is a

very very good question. And you know when when we look at cp I, we look at it in much the same way, and we break down the the components into high volatility and low volatility, and the low voll components tend to be those service based measures, obviously with a significant contribution from shelter Um that continues to run

basically very close to three. Now, looking at the goods component, or the the sort of more international components of CPI, they're driven by by global demand and supply and and the value of the dollar. Now, if you go back to basically since when tips were first introduced and at the time when China was about to enter the trade the World Trade Organization. Subsequent from that point on, goods inflation has basically been zero so on average for for

the prior twenty odd years. And if one can look at the pace of globalization that has occurred, one can can understand that and rationalize that where if you were an owner of capital, you were incentivized to go and find cheap labor, and you did that either going to South America or to Asia. And at the same time that those parts of the world received a tremendous demographic dividend. By UM Eastern Europe you had a couple or a hundred odd million workers enter the global labor supply, and

in China you you had the same dynamic. And I'm of the opinion that we have reached the end of that demographic dividend to per se, and now we have a global labor market that is a lot tighter than it was twenty years ago. UM. So the disinflationary impact from globalization that has been in place, I think is on the verge of of going the other way now

ahead young um. Obviously there are some currency influences that that play a pronounced role on a more short term basis, And as I said in the segment before the break, that the US dollar appreciated meaningfully in in fourteen to two thousand and sixteen, obviously having a significant disinflationary impact on import prices. So if we look at the trajectory of the dollar going forward, UM, my expectation is unless we get some significant border tax adjustment UM that could

potentially move the Z dollar significantly stronger. I'm of the opinion that the run rate of good disinflation or lack of inflation now we have seen in the past couple of years is definitely behind us. You talk about global developments, let's let's talk in specific about China here and the role it's playing and how that's going to affect this

market here in two thousand seventeen. Well, China is the second biggest economy in the world, UM, outside of of the U S and and ultimately the largest consumer of commodities, and the market is paying very close attention to Chinese p p I and the developments that ensue from that.

We're looking more at sub components of that consumer goods prices within PPI to try and extract the the the significant influence of commodities, but they are obviously central to the global reflationary theme, and I think from a couple of perspectives. Obviously we can look at the macroeconomic variables

and and and analyze them. However, I think the role of global reserve managers in particular China have had a significant impact on asset prices globally over the last uh In fact, going back over the last fifteen to twenty years, where we've seen reserves accumulate meaningfully and then be drawn down in the last twenty four months, and that draw down of reserves I think had significant implications for global asset prices, particularly in Q one of two thousands sixteen,

where as reserve pressure began to accumulate due to uncertainty regarding Chinese effects policy, they were or they basically were forced to liquidate assets that that they held in an attempt to stem currency outflows, and that had As Tom said earlier, we live in a very in a world very sensitive to financial conditions, and ultimately that instability had

had a significant impact on global financial conditions. Fascinating, never have young enough for the inflation dynamics and the myths that are out there in Martin agaty is with black Rock your discussion today on inflation dynamics in this hour the Senator, and if you're from Montana, there's trust me, there's only one senator. I think they have two. Based on civics. We'll go to President Trump for a civics lesson on that. But Max bauchus Uh with us here.

We hope you have a great conversation. Of course, recently a minted ambassador to China, he's looking for a job in New York City. No, when he's gonna here, you got one here. We'll get to the Senator in a moment. David Gurrow, an exciting day. You've got an important duty

tonight at nine pm. Yes, we'll be We'll be helming the coverage here on Bloomberg Television Bloomberg Radio of that speech tonight before it joined session of Congress kicking off at nine o'clock Eastern time, and we will go through the address to have some analysis afterward and carry the Democratic responses as well as will be here til can I go third two miles south of Missoula. Can we do that down the bitter Root Mountains there Lifeline Artisanal Butter.

Tonight's discussion is about guns in butter, and Senator Bacchus knows in Montana, if you want good butter, you go to Lifeline Farm Creamery, Scenic Victor, Montana. You do that, David, It's great. It's it's great stuff, and it's what you know. It's a story here. We're all New York, New York. Our vision, Senator is about six blocks from Lexington and

fifty ninth Street. We're not very good at it, but it's wonderful to have you here today, and it's about the effect of all that we talked about, David, every day, I'm Montana. You've you've sat through a few of these speeches before, and there's some expectation on our our audience in particular, that we're gonna get more detail here out of the speech that we have in the past. Are

you at all optimistic we're gonna get that? Or? Is a State of the Union is a joint speech before a joint session of Congress, often just focused on soaring rhetoric and that's it. Well, it's a circus as going to be greater circus. Tonight I'm a new president, new Congress, and Donald Trump was very controversial and publicans are going to be shouting, jumping up and down. Democrats are gonna

be sitting on their hands. I was gonna ask you how you think Democrats will respond to this some Republicans as well. I mean, it's a it's a crowd that is a mixed minds. I think it makes a half jumping up, half not jumping up. And the big question for me is what Trump says. But the second question is, well, how will able will be to resist the Republican shouting and screaming? That is, will he say something and it's not on the teleprompter because he's just reacting to what

that's going on to the circus. On the campaign trail, we heard from him, we heard from others that he was going to be different if he were elected, that he was going to carry himself differently, he was going to act differently. We've now seen him in a variety of settings as president. I detected, most notably when he

doesn't joint press conference with the world leader. The tenor of that press conference seems to be different than when he does it alone in the Eastern with with reporters just speaking before Congress in this way have an effect on the speaker to see all of those folks that are gathering to have the import of the moment itself. Well, he's not going to White House correspondence dinner. He's got

a captive audience there. You may even hold up business is is iPhone and tweet something during the middle of it. Who knows, But it is a captive audience, and it's it's all sorry, we'll see what's go ahead. And well, Senator, you come out of Stanford in economics and law, and we think of the passing of Kenneth Arrow here, the giant of Stanford economics at here in the last week,

we need to get back to core principles. We've all been distracted, either Republicans or Democrats, we've been distracted, to say the least. How do we get back on track. What is the thing you're watching in the cacophony of Washington that will signal an administration it's getting on track to dispose and to make legislation. What's the process that we're going to go through. I think the town meetings are part of it. I think that the outrage people

are expressing it. A lot of these meanings around the country are sobering. Did you really have to face that anger? I faced anger. I faced a lot of questions, but nothing quite like that. What you were so instrumental, integraty involved with with crafting financial reform with the Affordable Care Act as well? What do you make of what's happening right now as you listen to Tonight's speech, as you

listen to what's coming out of Washington. How optimistic are you here that those two pieces of legislation are going to be preserved at least in good part. Uh? And how difficult and undertaking is it to tweak those two pieces of legislation? Well? I care. I worry a bit

about our country, Frankly. Um. In my last job over in China, I'm watching the Chinese think they can get an advantage of the United States, UM by seeing Washington protectionist inward dysfunctional, and it gives them China a bit of an advantage. Frankly, that's so. I I have very much hope that we in America can start showing that we're adults, we can take care our destiny. Um. We want to make sure that people do have adequate healthcare

a reasonable price. We want to make sure that the tax code is fair and efficient, and it means we're just gonna have to sit down and really work together. There really is no other approach to all of this. And I'm hoping that the President Trump tonight indicates that he's turned the corner bit, turned the page a bit. He says he's listening to lots of people, business groups, etcetera. And and certainly he eats about the town meetings, and I hope that he starts to signal um that he

wants to work with with the rest of us. I'm making jokes about Victor Montana and artisanal butter you started in the politics record out of Missoula Montien did years ago. Would you please explain to our global audience and our national audience how a guy that lives on Fifth Avenue at fifty six is supposed to represent the sprawl of agricult cultural, rural Midwest America. I mean, you're one of the voices, you and grass Lely of Iowa that they can answer that question. How do we get to this

point where a plutocrat is representing the Montana ethos. I just don't buy it for a minute. Well, he is the president. He did get elected irrespective where he lives and where he grew up. He is the president. And it's you know, you know, we are in charge. But that I mean the people are the employers. People still are in charge, and members of Congress and the president really are the employees. And it means we the people, as has have the town meetings, have to stand up

more and make it very clear what we want. How should the Democrats respond tonight, Senator Schumer, Speaker Pelosi, there there there has to be a method to their madness tonight. Should they do it with grace or would you suggest they do protest? They've got to be firm, very firm. Can't roll over employed head about all this. I would

air a little on the side of protest um. Democrats have to show to people in the country, especially Democrats, that they care to Chuck Schulbar asked to show it to Democrats around that country that he cares to British Sanders a bunch and so forth. Then after a while, we Democrats have to come up, I would hope, with an alternative and solids and and shop that around the country. It's gonna be difficult, but that's what I think we should do. I'm reminded of a piece that was in

the New York I think in two thousand ten. George Packer, the great staff writer, goes down to Washington to cover the Senate and stays there for a couple of months, and the advice he gets going into it is, you've got to cover this like a foreign capital in such a strange place. You brought up dysfunction. This has been an institution, a place that's been dysfunctional for a long while. Imagine on some of those fifteen hour flights to Beijing, you had some time to think about the state of

the Senate today. What's caused it to be as messy, as device ive, as dysfunctional as it is right now? And what's the hope for getting out of that? Sometimes I think it has to get worse for it gets better, Um, and it can you think it can still and and but if it gets worse, as soon as we can bounce back up, um, I can get worse. I hope that's not where we had I hope that doesn't happen. But we Americans have to get realized in a sober way. Hey, we can't keep going on like this. We can't keep

fighting each other. We just can't be locked in our little worlds as much as we have. We gotta democracy. I guess it is tough after all. I guess it does take some responsibility. After all. Then if it gets bad enough, then I think people start to Is it a problem with collegiality in the body? Is it a problem with some of the rules we heard about the nuclear option? All of this stuff is is that what's led to it? Or is it something greater? I guess greater,

no question. You know, the rules are the rules. It's the old thing life. You know. Sometimes people talk about float charts in the box. I think that's all all of it. It's the people. It's the people really make the decisions. When we're gonna have you back for another black hair, Senator, if we could what Senator Schumer's approach me to galvanize a minority? Protest you're gonna be a minority. Do you go out and try to find Republicans that have had it? Do you just try to get to

the mid term elections? What does a minority do? You faced this before, Chuck Um, far be it from me any advice to use such a character. He's quite a guy, but I would my advice would be, it's it's all if they'd be very stand up for people. People don't want to be disenfranchised, they don't want to have bad healthcare, they want to be respect to stand up for people, and and and surely really care about people that he has to he has to convey that in a measured way.

David gurin Tom Keene. Of course Mr Gurrow heavily involved in our coverage of the Trump speech tonight, the President's speech at nine pm. We are the great honor speaking with a senator from Montana, Mr bachus Uh and of course the former ambassador to China. David, why don't you pick it up because you're a lot more in Washington. A few months back, I was in Beijing staying at that West and overlooking the massive US embassy complex there that you're very familiar with, the of course, and I

was struck by the size of it. Wonder how it fits into the whole apparatus in China. You've got your successor head of their now, Terry Brandstad, to be the new ambassador to China. What advice do you give him? About carrying the flag over there, talking with government officials, making the case for UM American economic raighttness in concert

with the with the Chinese economy. Well, I fluted to mone about a month ago to C Terry A given advice, and my basic point to him was, you just gotta show very very strongly how much you care about this relationship, and you just gotta worked very hard to get access and talk to people and explained that you are carrying and do you want to make sure this relationship works. What We've asked a number of guests who have a lot of State Department experience, who drives this relationship? Is

it driven out of the State Department in DC? Is it driven out of the Treasury Department. I was in Beijing for the Strategic and Economic Dialogue and saw that firsthand. What person or what persons within the government drive this relationship. Is it the Ambassador to China? Well, it's it's there are a lot of players, and Ambassador is certainly as one,

and it's really sets the tone. And the master is the highest ranking American official UM in them in in the country, but obviously the White House, State Department, Defense Department, they're all part of this. It's it's somewhat coordinated out of the White House with the National Security Council, but a lot of these other agencies they've got their own agenda. They're pushing hard. So it's it's it's my job back there trying to keep everybody working together and on the

same page. My perspective the other day was to hearken back to Mike Mansfield and what he did with our relationship with Japan at a crucial time or even time fully I believe was over there on the watch at one point. We have a president who doesn't have that vision. Whether the president's right or wrong is not the issue. We have a zero sum. Neil merc Until is inward tone that we'll hear in that speech, you make America,

make Montana great again. I get all that. How do we get back to what Mike Mansfield represented and what you represented with your service. How do we get there? First to the president. You need a president who has those points of view, who looks at the world the way Mike Mansfield did and and Tom Foley did and

so forth. That's number one. Number two. Um, you know, I did my very best to explain to the Chinese, how important this relationship is, and all the things I'm doing, things they should do China should do to show that we really want to work together. That's my view, frankly, is that it's the old rising power and established power question, so called vicidities trap. And I say this over and over again, the Chinese, you gotta show to us, not

just tell us, but show it to us. You when I work with us, David, you again your more informed on this, advise us. And David jumping here with a better question than me on what we should look for from the Senate intelligence community, but this up river Russia, David rephrase that, yeah, we we hear about these investigations. We hear calls for an independent investigation. You've experienced with with that as well. I mean, how important is that?

Do you think to have an independent investigation into what we saw during the election and and uh, indeed afterwards, we do whatever it taste to get the facts. Um, if it requires an independent prosecutor, and so be it. On the other hand, if the Trump administration wants to reveal everything that happened telephone records and so forth, logs and so forth, that's fine too. But we just need to get the facts and it's gotta past the smell test. With the U. S. China relationship, there has been so

much focus on the national security side of things. Help us with the balance here, uh, national security in the one hand, economic on the other. I think back to the Trans Pacific Partnership now dead in the water, at least from a U. S perspective. A lot of the argument that Maastaard Mike Froman made was about the security reasons for doing it and giving power to the Chinese.

They would have more power if this, if this fell apart, did we focus too little on the economic side of things and too much on national scured when it came to right In particular, I think failure to pass t

PP is a major mistake. It's we are hurting ourselves a big time UM from security perspective and also from a geopolitical perspective UM and frankly from a trade perspective to it it create smart jobs in the loses jobs, and it's I wish there were some way to go back and resurrect and bring back t p P. I don't care. Maybe Trump could bring it back a little bit. And then he called Trump PP I don't care. I

just gotta find some way to get the thing passed. Senator, What the Democratic Party need to do to get Trump supporters in your Montana back into the full They lost Michigan, the lost Wisconsin, etcetera. How does the Democratic Party the coastal progresses, how do they re engage with the Max Bokas, Scoop Jackson Democrats of another time in place? Well, I can only to say what I did, which is it just tons of town meetings. I gave my personal telephone

number to everybody. I get my personal private email to everybody in Montana, and it got to meet people and talk to people, reach out politics and with respect. You'll listen. You'll listen, and you're listen to their assumptions with they're worries or fears, and you show that you're really trying to find some common cause to solve it. Well, very good, Thank you so much for attendant. I would love to see your Washington. Do we have Montanas? Do we need

to get them? I'll follow up. I'll open it up. We'll get you David. We'll get your David from Brooklyn, Senator, you know from Brooklyn. The okay, I did not know yes, Senator, thank you so much to look at your career. David, the Senator will be listening, no doubt tonight at nine pm to the President and we'll have coverage. David Girl, I'm Bloomberg Television, Bloomberg Radio worldwide at nine pm. This is Bloomberg. Thanks for listening to the Bloomberg Surveillance Podcast.

Subscribe and listen to interviews on iTunes, SoundCloud, or whichever podcast platform you prefer. I'm out on Twitter at Tom Keene. David Gura is at David Gura. Before the podcast, you can always catch us worldwide on Bloomberg Radio. Brought you by Bank of America. Mary Lynch. Dedicated to bringing our clients insights and solutions to meet the challenges of a transforming world. That's the power of global connections. Mary Lynch, Pierce Feerin Smith Incorporated, Member s I p C.