D (3:11)

Well, Joe, I have to say I actually was out there for President Trump's departure and he didn't come and talk to US Press. Instead he got onto Marine One. And then moments later, while he was in the air, he posted this on a truth social. Now you really hit the headlines there. He accused China of, of being hostile. In his words. Just for some context here, we have seen Beijing move in recent days to unveil new export curbs on critical minerals and rare earths, expanding that list of elements and technology that is on its control list. They've also forced overseas exporters of items that even use traces of certain rare earth sourced from China that they will now need an individual export license as well. That is also a new development in recent days. And we have to keep in mind that China really does have this grip on the global supply chain when it comes to rare earths. They accounted for about 70% of the global supply last year alone. But of course, this is coming against this backdrop that we are just weeks away from a potential face to face summit. Now there is doubt over whether or not President Trump will meet with Chinese President Xi Jinping. And of course they had a long list of agenda items related to trade. But I'll point you to one of them that we knew was going to be at the top. According to the White House, President Trump was going to address those soybean exports to China. China is the top importer of U.S. soybeans and has not imported so far this harvest season. So there's a lot of different threads here for us to pull on. But that threat, Joe, of massive tariffs, we have to see what that is going to mean. As you well know, there's currently that 30% baseline rate on China from the U.S. when it comes to two tariffs, 20% is related to those fentanyl concerns, 10% is that so? Called reciprocal tariff rate. Some items see higher rates of 3, they're subject to what's known as a Section 301 investigation. But Joe, we were up against a firm deadline mid November. President Trump had signed that 90 day truce and that is up in mid November. We're going to have to see if there's an escalation before or after then.

B (5:11)

Yeah, it sounds like we might have one already. Tyler, just quickly, what's going to happen after the doctor's visit? We get a note from the doc on the president's condition.

D (5:19)

We'll see. They're calling this his semiannual physicians visit. President Trump himself says that he is feeling great and he's also going to Walter Reed to meet with the troops. You alluded to this at the top. There has been a scheduled 5pm event with the White House press poll. A White House official confirms to us here at Bloomberg News it will be related to pharmaceuticals. We'll see what that means. We know, of course, that he had unveiled that drug pricing initiative alongside Pfizer last month for what's known as most favored nation rate status for certain Medicaid prescriptions. We'll see if it mirrors something close to that.

B (5:51)

All right, stay close, Tyler. We'll talk to you in about an hour. From the North Lawn, Tyler Kendall reporting for Bloomberg. We will be following the president's tracks as he gets out of Walter Reed back to the White House for the announcement that will carry for you most likely on the late edition of Balance of Power, assuming things stay on time here. I have to admit though, it's not helping pharma stocks see a little pop in J and J. That said have been under it lately. But Eli Lilly, which the president had been talking about at the Pfizer event, is actually lower. Financials are lower. Vix is up, back over 20 right now. Bitcoin is down over $2,000. Mag7 down. This is not great. And when I heard that we could spend some time with tk, I was delighted because this should be surveillance nap time, I think. He's live with us from world headquarters in New York, the great Tom Keene. Did the market just bump its head, Tom, or do we have a new taco buying opportunity?

C (6:45)

Well, that's what we have to see. Retail clearly over the last number of these events is stepped in and bought. I'm not saying they're buying right now with the dow just printing 500 points down. The Vix out to 22 on the initial shock. We're back to 20.48. So somebody's on the bid right now off of 500 down. But I would say Joe, that retail has shown a trump pattern of stepping in and buying off of his excitable moments. As you mentioned on truth as Social, let me paint you quickly here. And you did a great job with the cross correlations. But as you look at the Bloomberg screen and let's say for the public, for the balance of power public, they don't know dollar yen from Naki stocky. You look at the Dow -400 aspects down 1.3%. Nasdaq hit down 1.8%. But I look also the way oil has pulled back. See American oil under 60 a barrel 58 handle on Nymex crude. Global oil 6278. It's come down $7 from a 70 level of a number of weeks ago. And then another way to look at it, Joe is like the pro way where we look at cross rates. And the first one I looked at was yen as compared to yuan. This is way inside baseball. But you see a three standard deviation jump move, that big jump move and you see that Joe in that currency, obscure currency pair which shows the tension on the Pacific Rim.

B (8:22)

Fascinating. How would you describe this market before that post? Because we hear about the froth right every morning, the wall of worry. The most hated rally was this thing due to tip over, right?

C (8:33)

No, it's the closest the balance of power has gotten to Bloomberg surveillance. The only difference is you have Tyler Kendall. I can never get Tyler Kendall. I haven't seen Charlie Powett in like nine months. It's great to be here with people.

B (8:46)

You're up too damn early.

C (8:47)

It's just way too early for Tyler Kendall. But the point, the point is here is it's a geopolitical linkage into our economics, finance and investment in the president has done that. Let's get lined it up, Joe. And you're better at this than me. France, Japan, the United Kingdom with their own set of worries. And now we see a tariff redo with all the balance of power tensions with Beijing and they, they buffet off each other. I'm looking now at Japan and China is the point there? Here's the headline this morning. First headline they look like, Joe, you weren't up yet. You were. You were not. Here's the first headline I looked at today, folks. I'm trying to find it right now. It's so long ago, Joe, it's fallen off the screen. Japan, decades old, ruling coalition collapses, jolting markets. And what the President doesn't, doesn't understand in his bilateral dealmaking focus is when he does something, as you witnessed an hour ago, it affects Japan and the idea of their coalition collapsing. They're all interdependent.

B (10:00)

Fascinating. This is a market that was pretending not to care about tariffs. Lately I keep hearing that the uncertainty had passed us Tom Keene. But a lot of folks were cautionary saying that we were whistling past the graveyard because China was still a wild card. How did we get so far over our skis with so little settled in the world's second biggest.

C (10:21)

It ebbs and flows. One of the interviews of the day for me, Joe, is KPMG out with a new report on the tone of business across America. And their lead word is uncertainty. And you see that uncertainty in our politics. You see it within global Wall Street. And the answer is we jump from the, to borrow from El Erian, we jump from unknown to unknown. The President just assisted us going to a new unknown. As Tyler said, looking forward to apec. Now what?

B (10:54)

Now what is exactly right now I get back to my first question. We've seen a lot of posts like this from the President and he does stuff like this right before a meeting. Are we, are we serious that he's walking away from China with massive tariffs, knowing what happened after Liberation Day?

C (11:11)

I would look to the Secretary of Treasury. The President has many other challenges out there and you know the stuff that you report on and balance of power each and every day. But no, I don't think anything's codified. The history of this president is, is to shoot first and think about it later. And that's what we're going to see here, particularly if right now what do we. My Joe, my eyes are failing me. You think I was a relief picture for the Red sox? See, negative, negative 541. I mean you give me. We're up 100 earlier, so we got a 600 point swing from surveillance. You give me another 300 points down and all of a sudden the Secretary treasury is saying, Mr. President, about that tweet. That's, you know, that's what we see.

B (11:53)

And you're up a thousand points on Monday and the taco trade exists.

C (11:56)

Yeah.

B (11:57)

It's the third anniversary of the Bull on Sunday. Do you care?

C (12:01)

Yeah, I do. You're in Timmer on today with Fidelity of Boston. And you're in Timmer was just absolutely fabulous about the duration of a Bull market. He measures his bull market. Joe, 16 years out, we are 16 years into a bull market, which means we're about due for the Red Sox to win. I think, you know, 60 years into a bull market, maybe next year's the time.

B (12:26)

Well, okay, second half of the year has been pretty interesting here. And we're going into the seasonal period where everybody loves stocks. Do we melt up into Christmas or is this going to keep that from happening?

C (12:37)

I'm not going to predict that. But I want to say what I am focused on and what team surveillance is focused on is the earnings season, starting with J.P. morgan on the tech. And Joe, we're looking not only at the quote unquote earnings, but we're looking up the income statement to that revenue pop of a US economy that has stunned with a sprightly nominal gdp.

B (13:00)

What does it tell you when financial stocks look like growth stocks? Is that due because of their valuations? Is it the animal spirit that we're still ready for and have a big IPO pipeline or what is it, you know.

C (13:12)

You know the answer. I mean, I'm hardwired to the animal spirit. And I think if you talk to the leaders of our financial institutions, they see a less regulated Washington. They see a Washington really across all politics that is not apologizing for going out and doing business. And that builds confidence. I mentioned Joe, someone you know well, Michael Turner, the former mayor of Dayton, Ohio, and that's the kind of Republican I'm looking at right now. Are these centrist Republicans and Democrats and how they bounce off shut. Why? Wait, Charlie, why is Joe Matthew working? There's a shutdown.

B (13:52)

Well, here, here, let me, let me.

C (13:54)

Let me send that over and suggest.

B (13:55)

Why is Michael McKee working? There's a shutdown with no government data.

C (13:59)

That's right.

B (14:00)

There's no data to talk about.

C (14:01)

Well, Joe, this is great. I love your music. Your music's more musical than my music is.

B (14:06)

Well, I don't know. You've got that hard hitting morning stuff. Will this ever happen again or is this a one off?

C (14:11)

No, it's not a one off. This is the President of the United States. America knows. Whatever.

B (14:15)

No, I mean Tom Keene, on balance.

C (14:18)

Well, you got lucky. Your agent ran into my agent and there was, you know, this, this.

B (14:22)

And he must have been having lunch in the, in the neighborhood. He was at the Monkey Bar or something. Thank you, Tom. It's great to see you. Have a great weekend.

D (14:29)

How did he.

E (14:30)

He's a man of impeccable taste.

B (14:32)

That's where he goes when he comes.

C (14:35)

Around the TV that plays Phil Silver. So he knew I was under that tv.

B (14:41)

We got to do this, the three of us. I mean my God, just stay right where you are. Stay with us on Balance of Power we'll have much more coming up after this.

F (14:52)

What does being financially invested sound like? A retiree on a cross country drive. Someone with new long term goals. A student getting their start with over 450 ETFs, iShares gives you access to countless market opportunities. IShares by BlackRock the market is yours. Visit www.ishares.com to view a perspective which includes investment objectives, risks, fees, expenses and other information. Future Reading Consider carefully before investing Risk includes principal laws. Prepared by BlackRock Investments LLC Memphis.

A (15:24)

You'Re listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.

B (15:40)

What is it about Truth Social at noon? Well, it was right before noon we got the Truth Social from the president that sent the markets south promising massive tariffs against China. We thought we had the new lead story of the day, right? All the scripts go out the window. We're coming in, crashing in hot off the top rope at noon with the news. And as soon as we start talking about that, the announcement from Russ Voltlands when the budget director took to Twitter to write very simply that the RIFs have begun reductions in force. He could just call them layoffs because that's what they are now. We don't have numbers for you. I will tell you there's a punchbowl report referring to them as substantial but will not hit every government agency. What's Wall street going to think about this now combined? So you've got massive layoffs coming. And we just learned today that BLS is going to scrape together a CPI report for later in the month. But we still don't know what the heck the jobs numbers look like. And maybe suddenly, as the layoffs hit on the same day that federal workers start going without their paychecks, maybe suddenly Wall street is going to be caring a little bit about the shutdown that it has been bored by so far. The Dow's down 500, Nasdaq's down 500. So let's get into it with the panel. I'm delighted to tell you they're both with us and we need them now. Bloomberg Politics contributors Jeannie Shan Zaino and Rick Davis Jeannie is our Democratic analyst and Democracy visiting fellow at Harvard Kennedy School's Ash Center. Rick, our Republican strategist and partner at Stone Court Capitol. Guys, we're going to be in for a long one because I know you're back on the late edition of Balance of Power. And just as everybody was taking a bite of their sandwich here in Washington, Rick, the whole world changed with Truth Social. And now this word from Russ Vogt. Is the president trying to change the topic here? What do you make of the timing on these two hitting today?

G (17:35)

You know, it's a little bit of coincidence, I think in some cases. I think the China reaction obviously was spurred by something that the president got briefed on yesterday and he was reacting to it. Clearly a, you know, degrading of the US China relationship before the meetings in South Korea. Obviously, we'll wait and see whether or not there is actually going to be a QI meeting with the president, but doesn't sound like it. But, but things like this rough vote move, that's, that's obviously planned. That's a Friday afternoon massacre. We don't know what the extent of it is or how it's going to actually unfold. But the reality is they've been forecasting this for some time. And I think the idea that the president could be leaving town to go to the Middle east, you know, drop a bomb while he's out of town so he doesn't have to answer any questions about it. I mean, that's sort of standard operating procedure at the White House.

C (18:35)

Boy.

B (18:35)

Okay, we just got another one, Jeannie. The Associated Press reporting layoffs will be in the thousands. That, that could be a lot. I don't know exactly what that means, but substantial. Again, we see this word that was used by Punchbowl now on ap. Substantial firings of federal workers have started as White House exerts shutdown leverage. Bloomberg News reporting federal layoffs will be in the thousands, according to a White House official that we have spoken with directly. Now, I can tell you that that is a trustworthy headline from Bloomberg. Jeannie, how bad could this get?

H (19:11)

Very bad. And you know, they are using the shutdown as an excuse to do what they have been doing prior to the shutdown, which is trying to cut the federal workforce. It is bad politics for the White House and for Republicans. And I suspect we are going to hear more. Marjorie Taylor Greene's she's come out, of course, on the issue of health care subsidies. But we're talking thousands and thousands of layoffs. If these reports are to be believed Many of which will be in districts and states where you have congressmen and women who are on the Republican side. So it is devastating politics for Republicans. And you know, it is coming at the same time that, as Rick just mentioned, the president is leaving the country. It's understandable. Middle east peace, this peace deal, very important. But he's leaving the country with the government shut down. And, oh, by the way, Scott Bessen and the administration have decided that while we're shut down, $20 billion of our tax money should go to Argentina. And that is something that Democrats in the Senate have been talking about because what happened to make America great and keep things at home? So I feel like the White House has gotten a little bit off its rails politically and out of line with its its own populist message and is listening to the folks like Russ vote and Project 2025, folks who have long wanted to take steps like they're doing now with the Doge cuts.

B (20:43)

Well, with what we do know about this and what we've heard from Russ Vote, what was written in Project 2025, Rick, should we assume that furloughed workers being laid off are permanently no longer part of the federal workforce? They're not coming back.

C (20:58)

Yeah.

G (20:58)

A furlough is different than a RIF. What they're talking about today, all these 750,000 government workers are furloughed, meaning they're not collecting a paycheck and they're not working, but they expect to come back to their jobs. These rifts, reduction in force are permanent by definition. And so those people that are identified in these will be, in essence, losing their job today. Now, there are all kinds of legal remedies. This is not the typical reduction in force. There are a lot of procedures that are in place. Maybe this is what they've been doing for the last two weeks of the shutdown. But the reality is we saw these kinds of reductions in force last time when Doge did them, and a lot of those people wind up getting their jobs back. So, you know, it's kind of a new spin on the taco trade, right? I mean, like the administration doing something, they think it's politically salient. They think they're going to, you know, like attack the government, which is the deep state, and we're going to fire all these people. Then they're going to realize that they got stuff they got to do and they got, you know, go back to them and say, hey, look, we need you to come back. I mean, it's not exactly the way to build morale and productivity within the government workforce.

B (22:14)

It's also deja vu. I'll tell you what, Jeannie, the headlines are just crashing in here. This has been a heck of an hour. Now Axios is reporting that we have some detail on the president's travel plans. I'll remind you he's up at Walter Reed for a doctor's appointment right now. We don't know if he's under anesthesia. We don't really know anything about what's been referred to as a semi annual checkup. We thought that was annual until now. Donald Trump to arrive in Israel Monday morning. According to Axios, he will travel to Egypt Monday afternoon. Jeannie, there's also reporting that while he is in the region, he's going to hold a summit of sorts while he's in Egypt. I'll back up a little bit and remind everybody that there is a public event in the Oval office scheduled for 5pm Eastern Time. It's billed on the White House guidance simply as an announcement. We have since learned that that will involve pharmaceuticals. And CBS News is now saying that AstraZeneca is the pick for a most favored nation pricing deal like we saw with Pfizer. I don't know what the second half of this day is going to be like here, Jeannie, but I feel like the president's going to have a heck of a lot to talk about. Will he need to quantify these layoffs tonight?

H (23:25)

He very well strapped in, Joe. It's going to be a ride.

B (23:29)

Yeah.

H (23:29)

We are always you going forward, always on Fridays lately. Yeah. AstraZeneca looks like it's going to be joining Pfizer. This has been great PR for Pfizer. It'll probably be great PR for AstraZeneca, not so great for consumers. But of course, the president is going to have so many other things on his plate. And if he allows for questions, and he usually does, to his credit, he will likely get a lot of questions on these mass layoffs and of course on the big news out of the Middle East. Also, as you mentioned, his health. So, so much going on like that. You know, it's really important even though the government is shut down, that the president goes over to the Middle east because the White House is going to have to keep pressure on both Israel and Hamas in order to get from a phase one, which looks like it's, I shouldn't say a done deal, but everybody says cautiously optimistic. But the phase two and the phase three are going to be the much harder parts of this. We've Even seen the Israeli members of the Israeli cabinet on the far right do not describe this as a peace deal or an end of the war. They're describing it as a, a stop in the hostilities. And that suggests that they may want to resume that once the hostages are back. And of course, Hamas on their side does not want to disarm. And so a lot to do to get from phase one to two. And that's why it's really important that the president go over there, talk to our Arab allies and of course, keep the pressure on both of these sides to move this, because he's been through this before. We had in January and we never got to the phase two in January.

B (25:10)

Rick, were the layoffs meant to coincide with the day that federal workers stopped getting paid and do you think this would have been announced if he won the Nobel Peace Prize?

G (25:22)

A lot to unpack there. No, I don't think it's related to the payment. Remember, to most government employees are on a direct deposit. That means they get their money three days earlier than this. So mostly it's a bit of a fantasy on these, like, dates of the, the payment of people's salaries. That being said, like, you know, he's not happy with the decision by the Nobel Committee. And by the way, terrific selection. Maria Machado is a patriot, you know, promoting democracy in Venezuela. Very dangerous business. She lives in hiding. Yeah. Somebody you would expect. But at the end of the day, I think he felt he earned it. And maybe next year's prize will go to him, who knows? But, yeah, I mean, I would think that maybe more the reaction that he had to China change in their export requirements for rare earth, maybe have a little extra push in there because he's.

B (26:25)

A little grumpy about that. Well, he did mention Middle east peace in that very long missive. Jeannie, I've got news for you here. Donald Trump may not be the man you thought he was. He called Maria Machado to congratulate her for her Nobel Peace Prize, according to people familiar with the matter. As I read here in the copy, you know, I've got to finish the line here. Despite speculation he would be indignant at not receiving the award himself, what does that tell you about the president?

H (26:56)

I think it tells me a little less about the president than about Machado, you know. I know, I know. Rick was singing her praises. There's a lot of people who are not singing her praises. She is described as a right wing, somebody who has sided with people like the leader in Argentina, who is a close ally of Donald Trump. This is a big win for somebody like Marco Rubio. And of course she has been on the side of the United States in its battle so far. And I'm not saying war battle, but battle on the open seas against Venezuela. So I'm not surprised. I thought and I think I've heard many people describe this as the Nobel Peace Prize trying to have it both ways. They couldn't have possibly voted for Trump. This deal wasn't signed until after voting. But they did go with somebody that clearly his administration support.

B (27:49)

They're reacting to breaking news today. That's just the vibe here in Washington. Rick Davis and Jeannie Shan Zaino Blake, Bloomberg Politics contributors will be back on the late edition of Balance of Power. Stay with us on Balance of Power. We'll have much more coming up after this.

F (28:06)

What does being financially invested sound like? A retiree on a cross country drive. Someone with new long term goals. A student getting their start with over 450 ETFs. IShares gives you access to to countless market opportunities. IShares by BlackRock the market is yours. Visit www.ishares.com perspectives, which includes investment objectives, risks, fees, expenses and other information you should read and consider carefully before investing. Risk includes principal loss. Prepared by BlackRock Investments, LLC member Finra.

A (28:37)

You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa, play Bloomberg 1130.

B (28:56)

We haven't even talked about the controversy over the super bowl halftime show. It's a pleasure to go to California to speak with Brad Sherman and I'm sure that the congressman has some thoughts about the layoffs that have just been announced. The Democrat representing California's 32nd district, Congressman Brad Sherman. Welcome back to Bloomberg TV and Radio. Russ Vogt says the rifts have begun. Bloomberg News is reporting that they are in the thousands. Are you hearing anything more specific? And what will this do to negotiations if they ever happen or the standoff in this government shutdown?

E (29:31)

Look, there's no reason to do rifts now. They could do have done them two months ago. They could do them two months from now. They're doing them as an act of vandalism against the federal government, as if that will take revenge on the Democratic Party for not completing completely ceding all power. I mean, if it was up to Trump, there wouldn't be a Congress. So few dictators want a Parliament messing up their lives, except, you know, North Korea style to gather and cheer. And in fact, that's what Speaker Johnson has agreed to. He has sent Congress home. Not only are we not opening up the government, we're not doing any of the other business we're supposed to be doing much of it that we're very, very far behind in doing.

I (30:20)

Congressman, I want to ask you, given your years in Congress, decades watching these sorts of spats go on, where do you put this into context? It certainly feels like this is an escalated tensions on the Hill right now. I'm reminded of your late colleague, Senator John McCain, joking that, you know, if we try real hard, we'll get into the single digits on congressional approval in rough times then two decades ago. Where does this fall? Are we at a new low in decorum on the Hill?

E (30:50)

We're as low as we've been since the 1860s, and I wasn't around then. You can compare this to other shutdowns, but you, the level of division in the country and, you know, Donald Trump's personality and personal approach is throwing kerosene on the fire.

B (31:12)

Well, you know, we saw what happened with Mike Lawler getting into a shouting match with the Democratic leader. We saw Democratic senators standing in front of the Speaker's office making noise about Jeffrey Epstein. I don't know if few guys are going to start caning each other like we used to in the old days. But, Congressman, to Michelle's point, you've been up on the Hill for a minute. How do you get around this? Or should we assume that when the cameras turn off, you're having a beer with your Republican colleagues?

E (31:44)

We're not out drinking. We get along reasonably well, perhaps as well as you get along with the people where you work. But we are responding to, to our constituents who are divided. And so many Republicans are not only loyal to their constituents, they're loyal to the president, whatever he says. And not only technically, but emotionally, that's what they feel. And it's, it's divided. Does that mean that if I'm walking into the floor of the House that a Republican sticking out is like to trip me so I fall on my face? No, that's not happening.

I (32:23)

Well, Congressman, you mentioned Trump's approach is pouring kerosene on the fire. I want to ask you about something else today that's kind of in your lane, in the foreign affairs lane. His true social message on China. How do you think this, you know, changes the game in the overall U. S. China negotiations? How worried are you about not Getting some sort of deal with China. And what are your constituents saying?

E (32:48)

Well, they haven't responded to this tweet. It's so strange because for so many years I was here and diplomacy was handled carefully and now it's an emotional tirade sometimes at three in the morning directly from the president. That's not the way to conduct foreign policy. It's not the way any other president has conducted foreign policy. And we see China uses its control over rare earth elements and America has done nothing over the last several years to weaken that control. We should have strategic reserves of all those rare earth elements and we should have alternative supply. It is not true that all of the ore from for those elements is in China. It's just they're the ones who have created the big industrial apparatus necessary to extract and refine them. That could be done elsewhere. But that's just one of the many things that Congress should have been focused on and should be focused on today. Except.

B (33:54)

So here we are here in the.

E (33:55)

Raybright building and there are no Republicans.

B (33:58)

I said you were in California. Forgive me, by the way, it matters right now when members are here in Washington. When's everybody else coming back? The Senate apparently is going to be here next week. Now, but the vibe we're getting from any lawmaker, D or R congressman is that this will be protracted. We're nowhere near an off ramp, even as John Thune suggests privately that he may offer Democrats an up or down vote on extending Obamacare subsidies. Where are we? What inning are we in in this shutdown?

E (34:30)

Well, and offering a vote if you know you're going to lose is symbolic and perhaps nice, but not all that important. This is going to last a long time. Both sides are digging in. The base of each party isn't saying, how do you put this together? They're saying, stand up for our position. And I think as long as the focus is on health care, and that is where we have put the focus, that the people will be with us. What should happen, of course, is a negotiation. We may not get everything we want on health care, but the current position of the Republicans is give us what we want and we'll talk to you about whether we do anything that you want. That's not the way to treat a party that got 49% of the vote. And keep in mind, Republicans wouldn't talk to us in January, February, March, April, May, June, etc. About this health care cliff that we're about to fall over where 22 million people will see their premiums more than double. And the letters are going out now. People have to decide whether to sign up for health care coverage. And as far as they know, it's at double the premium. They can't afford that.

I (35:46)

Well, Congressman, there's certainly no shortage of big stories to ask you about today, but we'd be remiss if we didn't ask you about the Middle east and the President's forthcoming trip to the region. How are you feeling about this tentative peace deal? Are there reasons to be optimistic? Bright signs here. Even though it feels like we've kind of been close to this before only to see a setback.

C (36:09)

Hopeful.

E (36:10)

Optimistic may be too strong a word. But if the hostages are released and Hamas is no longer in control of Gaza, then we can move forward. And it looks like that's what the settlement calls for. We'll see whether the top whether Hamas disarms and whether their leadership departs the region. But phase one is the recent release of the hostages. And that day can't come too soon.

B (36:45)

Just got about a minute left. Congressman, if this does hold, should Donald Trump get the Nobel Peace Prize? He didn't make it today.

E (36:55)

Look, you'd have to evaluate Donald Trump's actions on the world stage in total, and I don't think they're quite Nobel Prize winning material. But. But look, Hamas has been pushed into a small corner of Gaza. They realize that Israel can take that corner as well. And I think that it's not so much what the President has said. The deal that he has offered is very similar to what the Israeli negotiating position has been all along. Free the hostages and free the people of Gaza. Two million of them. From oppression from Hamas.

B (37:46)

No, he's on his way. Be there on Monday, apparently. Congressman, great to have you back. Brad Sherman, Democrat from California. Thank you. Markets are extending losses now. The S and P down 2%. This is Bloomberg. Stay with us on Balance of Power. We'll have much more coming up after this.

F (38:06)

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A (38:36)

You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay and Android Auto with the Bloomberg business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa.

B (38:52)

Play Bloomberg 11:30 here with Michelle Jamris. Moscow and Washington. We're spinning a few plates today because the headlines keep popping on the terminal. We started with the truth post about China sent the market south as you just heard from Charlie Pellet. Then Russ Vogt shows up just in time with the word that the rifts have begun. He says so on Twitter. We've been doing some reporting to suggest that it will be in the thousands. We're also seeing now I believe it was Punchbowl. Yeah. Pentagon expected to be spared from a layoff. So this is not every agency I.

I (39:24)

Was going to say. I can't even remember if that's where we started with China or if all of this is kind of meshed together. Of course we've seen the markets react to both things. So it's interesting to follow today's events as they unfold for sure.

B (39:35)

It also happens to be day 10 of the government shutdown, which in any other world would have been our top story with people crying as they can't get into the zoo, although the zoo is still open. I think at this point I have to check on that. It was at the Smithsonian last week. And thinking it might be my last chance to for a minute. All I know is about a month ago might have been a little bit more than that. Patrick McHenry said in this studio that October is going to be a doozy. He might have used a different word than that, but he's with us now. Bloomberg Politics contributor, former Republican congressman, chair of the House Financial Services Committee, speaker pro tem, the only in American history. Patrick McHenry, great to see you.

J (40:12)

Thanks. It wasn't doozy. It was off camera and it was more colorful language.

B (40:16)

I thought that was right. Yes. Therefore I could have said anything and they would have believed me. But it's coming true. When you see Mike Lawler standing in front of Hakeem Jeffries office with a piece of paper to get into a shouting match for the benefit of the cameras tells us we are where not.

J (40:30)

Yet at the negotiating table.

B (40:32)

The performative.

J (40:33)

It's a piece. The only thing that brings policymakers to some resolution is pain. And the announcement, announcement. It's not goodwill. Everybody's like all everybody's got to come together their disagreements and it's going to be goodwill. They get out of the shutdown. It never is that. It is the party that instigated it has to take the pain in order for us to get out of it. That's where we are. Usually it's been Republicans, this has been a much more chill shutdown in terms of what's happening here in D.C. like the rhetoric here in D.C. and it's because the Democratic Party is traditionally the defenders of federal employees and the federal government and federal regulatory powers. They're the ones that have instigated the shutdown in the name of a health care battle. Health care policy, but they've instigated it. They've been very muted about the effects of the loss of government services. They're usually the ones that are first at the press.

B (41:28)

Yeah.

J (41:29)

And now you have. Republicans are traditionally believe that we need to spare, like I'm sorry, pare down the federal government. Not spare anyone in the federal government. They're the ones that are saying, well, look, we, we need to try to make this work for as long as we can. So you see, some agencies are still open because they have account balances. OMB has these massive set of powers during government shutdown, which enables OMB director in this case Ross Vogt to take very specific action, individual by individual agents and account levels to either continue normative services or in this case have substantial layoffs.

I (42:10)

So, Mr. Chairman, we had House Speaker Mike Johnson on the other night and Joe, try as he might, did not help resolve the shutdown that evening. But one thing he did ask the speaker was why not just schedule a vote as the Democrats have been asking for and the shutdown, that's obviously not in his political will to do. He was saying it was not in his process capability to do. How do you unpack that? Take us behind the scenes. Could he do that and would it.

A (42:37)

Be true at all?

J (42:39)

Two things. Two things can be true at once. And in this case, Mike can be correct and Joe can be correct. So I love Washington.

A (42:47)

Everybody wins.

J (42:49)

So. So what the speaker has said is we've passed a continual resolution that is a normative act in D.C. unfortunately, since the 52 years we've had this budget process, we've failed most years to follow the budget process in the law. But a continuing resolution is now the default in the fall. What the Democrats say is we have to, in order to reopen the government, you have to have this expansion of health care benefits into next year. And what Republicans have said, if you want to have a debate about this, let's have a debate about it, but we should not hold the government hostage. Now, the last government shutdown we had, it was flipped it was Republicans saying, we're going to hold a hostage and Democrats saying, no, no, once you reopen the government, we'll have that conversation.

C (43:38)

Right.

J (43:39)

So these roles are completely reversed and scrambled. The process in the House would require us, the House, initiating a new bill going through the Rules Committee. They're not the votes on the Rules Committee to pass what the Democrats have requested, which is about $200 billion of new spending for next year on health care in order to reopen the government. That is a really large bid just to keep the lights on for six weeks. It is an absurd bid in order to continue the Obamacare subsidies for one year. That was the original debate here. It would cost about $26 billion to keep the government open for six weeks. I mean, these are big numbers. And so what the speaker said is, look, we'll have that debate. Happy to have the debate, but I'm not going to go originate a piece of legislation in the hopes my Democratic colleagues will then adhere to their rhetoric about why we have the shutdown.

I (44:34)

Okay.

B (44:35)

That said, we also talked about back pay. Oh, yeah. The president really started something here and said, wait, listen. He said, maybe not everybody gets back pay to the point of saying some don't deserve to be taken care of. And I asked the speaker about that, and he said, well, there are a couple different legal interpretations of that law because we all thought the 2019 law made clear that they had to be paid back when they were brought back from furlough. Are we really making this a jump ball? Is that good Politics?

J (45:05)

It's before 2019, the law change. It has been. It's always been a jump ball. Yeah, it's always been a jump ball. An open question whether or not federal employees will get back pay.

C (45:15)

Okay.

J (45:16)

However, history has shown at every government shutdown that has ever occurred in the last century, they've gotten back pay. So these are federal employees that have signed up to do a job, and it is not their fault that the government shut down. It's not their fault that Congress can't get their act together. So I believe that Congress will have the sense to pay all federal employees for back pay, number one. Number two, I don't think there's clear debate. I don't think there's. This is a debatable thing. The law is very clear that this is what will happen. And number three, you have the filibuster in the Senate, which means the Democratic minority controls whether or not the government is open. We have a shutdown right now because Schumer has the votes to withhold to, to filibuster and and to stop the bill being taken up that was the passed the House to keep the government open. I don't think the Democrats would come to the table unless there's back pay. So there's a waterfall of things that are, that are true here. I think if you're a federal employee, you know, so that is a distraction. It is a distraction. Now the pain of the rifts, that's real. And there's a massive amount of not legal uncertainty, but definitive certainty on the power of OMB to take these actions and a governmental shutdown that should be concerning to Democratic leaders on the hill.

B (46:31)

Absolutely.

I (46:32)

So Mr. Chairman, you correctly predicted this would be a mess a while ago. So I'm going to ramp up the pressure on your predictive capabilities. But next week when we're looking the days ahead, we've got the military paycheck issue as well. Is this going to be resolved next week? Week or is this something that waits until after the shutdown? Whenever that is, I'll take the over.

J (46:50)

I'll take the over and every offer that I've, everybody that presented me with the date, I've taken the over. I think the backstop of this is Thanksgiving. I think we're going to have a lot more pain before this thing gets resolved and people come to their senses. The fact is that you've already seen Schumer lose three Democratic senators. It hasn't spread beyond that. But as the pain ramps up, I think Democratic politicians in the Senate will come to the negotiating table. I think we'll have a reopening and then we'll have a debate about health care and extending some of these subsidies and then we'll have the longer term funding for the federal government. But it's going to be choppy waters.

B (47:32)

This piece of paper is going to be junk soon though, right? November 21st. Who cares are going to if they pass it in a couple of weeks, weeks, the government's just going to shut down again. And there are many who do think that once this is resolved we will hit another shutdown at the end of the year. We just keep kicking cars through the spring or what's the best case scenario? Don't say regular order.

J (47:53)

Well, this is regular order. Continue. This is regular normative thing in the House two years ago this was the finite cause of the ouster, Speaker McCarthy that we passed a clean continue resolution. So this is a normative act in Washington. Unfortunately, these every couple of administrations. The normative act is also a government Shutdown, it doesn't win you the policy, the underlying policy, it does elevate your party in a political fight. And this is not about the policy, is actually about politics. Schumer is getting hammered on late night TV like never before. Jon Stewart, who I don't frequently quote, called him a flat tire. These are very insulting sketch.

B (48:38)

That was a bad joke that the kf.

J (48:41)

I mean, there are a lot of bad jokes on late night tv. Don't get me.

B (48:44)

I mean, I mean, the Schumer joke, that got him in hot water there.

J (48:47)

But Schumer, Schumer's in this fight because he looked feckless and weak in March and is now trying to look like he's given a valiant fight to his Democratic base. Hakeem Jeffries is doing the same thing. So those, those fights, that physical confrontation you almost saw in Capitol Hill is trying to elevate Schumer, Schumer and Hakeem Jeffries, Hakeem Jeffries to the speakership, Schumer to the majority. They need to show a fight against President Trump and they have very little power to do it outside of a shutdown.

B (49:15)

If a Democratic member had done that, we'd be talking about censure. Oh, for sure.

J (49:19)

I mean, look, all this stuff, all these performative acts are fun and games until somebody opens the door. And that is always the case, Right. You're like, I'm going to go fight with somebody. And you're like, well, you're on a tv. I think they're in the two rooms behind you.

C (49:35)

Right.

J (49:35)

Why don't you go just talk to them instead of yell on the screen.

I (49:38)

So as far as the pressure points, though, you mentioned Thanksgiving. I wonder if part of that timeline is the flights issue. Are we seeing enough pain on flight delays, air traffic controller shortages, that sort of lane that the American public cares about to have a change in the negotiations?

J (49:55)

Yes. And this is about, again, the nature, the timing of the reopening will be based off of pain and how that maps out. And you can't predict what the pain will be like for either party in a week's time. Now, I think the Democratic Party is the one that has to fold in order for the reopening to happen. But you can see different movement based off of who is deeply influenced by their constituents feeling pain or frankly, they go to the airport and they can't get on their flight. That is a form of pain for those of us that travel.

B (50:30)

So you're still looking at Virginia, Maryland, with the big concentrations of federal workers to maybe crack and join the jailbreak.

J (50:39)

Yes, but those senators, the Democratic delegation there in the Senate is Warner, right?

B (50:46)

Yeah. So Van Holland, not so much now.

J (50:49)

But you also don't know how these federal employees map out like if you're talking about air traffic control, disproportionately, they're located in Oklahoma. There's not a single Democratic federal office holder from the state of Oklahoma. So you don't know how these things are going to model out.

B (51:03)

Really interesting.

J (51:04)

You also don't know how that Oklahoma delegation is communicating with the OMB to ensure that their people are paid. So there's all this subtlety that if you're in charge of the omb, you can either meet out met out pain to your opponents or help your friends. And in this case, I think OMB is being quite adept at being targeted on who they're who they're sharing pain with and targeting who they're helping and maintaining account balances where they need to help.

B (51:35)

Speaking of mapping out, it'll be really interesting, interesting to see where these all end. I don't know how long it'll take before we have that data, but we'll of course bring it to you here on Bloomberg. Patrick McHenry, Bloomberg Politics contributor, former Republican Congressman, great to have you. How often when you're on the plane, they recognize you're the guy who replaced Kevin McCarthy?

J (51:51)

Zero. Without a bow tie?

B (51:53)

I don't know. That's a good answer and he brought it with him today. Michelle, thanks for spending time with us. Michelle Jam Risko Joe Matthew in Washington on Bloomberg. Thanks for listening to the Balance of Power podcast. Make sure to subscribe if you haven't already at Apple, Spotify or wherever you get your podcasts. And you can find us live every weekday from Washington, D.C. at Noontime Eastern@Bloomberg.com.

A (52:14)

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