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Balance of Power
US Awaits Iran's Peace Deal Response, Mulls Restarting 'Project Freedom' in Hormuz
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- [00:01]
A
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- [00:56]
C
The US is considering restarting Project Freedom of the maritime effort to escort vessels through the Strait of Hormuz safely as soon as this week, after Saudi Arabia and Kuwait have agreed to lift restrictions that were imposed on the use of military bases and their airspace in order to conduct this operation, this mission, this project, however you want to characterize it clearly. The market is reacting negatively to this headline, and I wonder what the reaction is of Evelyn Farkas, the executive director of the McCain Institute, who's joining us now here on Balance of Power. She, of course, is former deputy assistant secretary of defense for Russia, Ukraine and Eurasia in the Obama administration. Evelyn, welcome back to Bloomberg. It's always great to have you. If we're to see a restart of Project Freedom Potentially just what, 36 hours after it was paused, just shortly after it was announced in the first place, what does this signal to you?
- [01:54]
D
Well, it signals clearly that the Trump administration wants to get this underway. But I think that there are still potentially obstacles, a lot of risk out there. So, you know, I'd be calling up the insurance companies to find out whether they feel comfortable with the current arrangement. So I feel like there's probably many questions that are still unanswered.
- [02:20]
C
Well, certainly so. And of course, the proposal that we have seen reporting us has made to Iran around peace remains unanswered. We have yet to hear from Iran, but our basic understanding, understanding of what is essentially a short memorandum of understanding, Evelyn, is this notion that they want to prioritize the reopening of the Strait of Hormuz and that any kind of definitive deal around the nuclear program might be put off for some time. Even as President Trump said, Iran has agreed to never have a nuclear weapon, something, of course, Iran has maintained for some time. If that ultimately is is where we end up, if we're Just back to some kind of moratorium ultimately on Iran's nuclear enrichment. Did we achieve much through this entire conflict?
- [03:03]
D
Yeah, I mean, Kayleigh, obviously we didn't have this problem with the Strait of Hormuz before this war that the US And Israel launched against Iran. So that's a new problem that now we're focused on solving as the number one problem, at least according to the headlines. But the reality is, the real number one problem is what you said, the Iranian nuclear program. And the reality is that, yes, if they get a moratorium, if they, if they freeze the program and they ban Iran from enriching uranium, that would be a win, clearly, for the United States, but it has come obviously at great cost.
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C
Well, I also wonder at the costs the Iranians have been dealt to this point, Evelyn, as we saw reporting in the Washington Post about analysis from the CIA, which was delivered, according to the Post reporting, to administration, administration officials this week that concluded Iran can survive the US Naval blockade, which of course is still being actively maintained for at least three to four months before it faces severe economic hardship. So is this really an Iran in a position right now to make great concessions on the nuclear program or anything else, or do they still have the ability to withstand this for some time and maybe less inclined to make a deal advantageous to the United States?
- [04:27]
D
Yeah, I mean, Kelly, they have the ability to bring in this revenue because there's still oil out there that's being sold. Now after that three to four month period, they'll have to get new oil out. And that's why they want to work with the United States to open the strait. Having said that, you're right. The Iranians have always dealt this way. They always will draw out the negotiations as much as possible, especially when they're looking at a US Administration that seems, you know, almost desperate to want to get onto the next issue. I mean, President Trump himself has even talked about Cuba as the next challenge. So, you know, the fact that we seem to want this deal so badly will incentivize, unfortunately, the Iranians to dig in their heels. And as the CIA notes, yes, we have not completely decimated their missile capability and of course, we know their drone capabilities. So they still are formidable and the regime is more hardline than it was before the war started. So there are all these new challenges in a sense that we face. Although, make no mistake, Iran is a lot weaker than it was a year ago.
- [05:34]
C
It's weaker than it was, but it is going to be weak enough for Israel to be satisfied with a deal to end this conflict. As you talk about the ballistic missile program, which of course was a grave concern of Netanyahu's, one of the reasons we understand he was pushing President Trump to begin this joint operation in the first place, it obviously feels it has an existential threat. If Iran has the capability to one day become nuclear, what's going to be enough to satisfy the other party in this conflict?
- [06:01]
D
That's a really good point, Kaylee. The Israelis will not be satisfied with the information, at least, that we saw coming out of that CIA report about ballistic missile capabilities or stockpiles. The other thing that the Israelis will not feel comfortable about is that this regime, you know, has not indicated that they're willing to give up their support to proxies. And that's actually what's at stake here in the talks that are coming up in Washington between Lebanon and Israel in the United States, which is good because we should be involved and we should be helping the Lebanese government and the Israelis figure out a way to dismantle or at least the military arm of Hezbollah, if not the political arm. But Iran has indicated no interest in giving up their support, as I said, for the Hezbollah, for the Houthis. And so we can continue to expect problems from those, from those Iranian aspects of their foreign policy as well.
- [06:58]
C
Well, and we're still seeing Israel go after Hezbollah targets. We saw strikes in Beirut that they said were targeting Hezbollah earlier this week. There is still kinetic activity to the northern border for Israel. Against the backdrop of all of this going on, how quickly could that spill over? I guess, Evelyn, knowing Iran had previously set a precondition to any kind of peace agreement or to coming to the table for talks in the first place. Was a ceasefire sticking between Israel and Hezbollah?
- [07:29]
D
Yeah, I mean, I'm not super optimistic about the likelihood of a quick resolution to the problem between Israel and Lebanon in terms of dealing with Hezbollah and southern Lebanon, the Israelis are going to try to insist on a buffer zone, which of course, the Lebanese government will view as an affront to their sovereignty. And frankly, domestically, it's really difficult because the Shia people, who are the ones who are obviously under some sway, some Hezbollah sway, but they're also the ones who have been pushed out of those southern areas, so the part of southern Lebanon. So for the Lebanese government, this is a difficult predicament and they will need the United States support to come up with a good compromise with Israel.
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C
I'd also like to ask you, Evelyn, about what we're expecting to take place a week from now, which is A visit President Trump is planning to make to Beijing to meet with China's President Xi Jinping. And how knowing that that visit is on the calendar, at least we assume it is, though China has not yet confirmed, which is kind of par for the course for the Chinese when it comes to these things. But how much of what we're seeing play out now in regard to the push for diplomatic resolution of some. The Middle east is tied to that summit and President Trump's desire to have at least it somewhat tied up or cleanlier when he makes that trip to China.
- [08:53]
D
Yeah, I mean, I think President Trump understands he will look stronger going to Beijing as a president who has essentially figured out a way to bring the war to an end, because right now the war is ongoing and it's pressuring the Chinese, of course we're pressuring the Chinese. And so it's a bone of contention, frankly, between the United States and China. So he, you know, he would like to, as you say, kind of clear it, you know, dust his hands of it, but it's not going to be that easy. And the Iranians, of course, are not interested in helping President Trump have a good summit meeting with China.
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C
Hmm. Well, what is China interested in here, Evelyn? We saw the Chinese foreign minister meeting with Iran's foreign minister in Beijing this week, talking about the need to reopen the street to Hormuz, urging against a resumption of hostilities. They have an economic stake in this game as well, that the buyer of 90% of Iran's oil exports. So would you expect that they're going to play a greater role in trying to see this conflict come to some kind of resolution here?
- [09:56]
D
Yeah. So what I could foresee here, Kelly, is that the Chinese probably don't want this resolved before President Trump shows up in Beijing. Why? Because this is leverage for them. They can tell the president, well, you know, Mr. President, President Trump, we can help you end your war in Iran if you do X, Y or Z. Because, remember, the agenda is quite broad that we are having that we're the agenda for the summit between President Xi and President Trump. So the Chinese government want a lot of concessions out of the United States. One way to get them is to say, we'll help you with this Iran war if you help us. So I think that the Chinese can be helpful, but they're going to be helpful on their terms and on their own timetable.
- [10:40]
C
Well, and I know that the McCain Institute is obviously fresh off the Sedona forum, which was. Which took place in Arizona last weekend. Evelyn, I'm sure you're still recovering from what I'm sure was a very busy few days. But the theme of the, of the forum this year was challenges to American dominance. And I would imagine that the competition and the power struggle with China featured quite heavily in those conversations. What did you hear on the ground?
- [11:05]
D
It did, Kelly. I mean, I think we heard from lawmakers who were there. We had 10 members of Congress and of course, Arizona's Governor Katie Hobbs present on the stage. We had members of Congress discussing the challenges posed by China. Clearly, you know, this is going to require bipartisan work. And that really is the underlying, you know, message from our Sedona Forum is that it can't be a one party situation. Both parties have to work together on our foreign policy. That's when we have the greatest success. And that's the case with China. We can't cut off trade. We have to trade with them, but we have to restrict their access to critical technology. And we have to make sure we can continue to compete with China where it's really important for us so that we can continue to have trade access. And that, you know, there was a lot of discussion of China's repression as well. We don't want a system like theirs. So we're also interested in making sure that we protect our way of life here in the United States.
- [12:03]
C
And what of the conversation around the challenge posed by Russia and the ongoing war with Ukraine, Evelyn? It's obviously one that has not been able to get as much oxygen with a hot war in the Middle East.
- [12:16]
D
Yeah, I mean, I think there, most of the participants at the Sedona Forum understand that the urgent war, the one that we need and we can bring to an end almost quicker, frankly, or easier in a way, is the one between Russia and Ukraine, because essentially if we put more pressure on Russia and we help Ukraine, Russia is in a weak situation right now, a weak economic and political situation. And so we can prevail. If we prevail in Russia, it will make it easier for us to address the challenges posed by China and Iran, frankly. So there was a lot of discussion about that. And just really the fact that the Ukrainians have been, frankly, the only country that benefited from the war in Iran. And I say that because they're selling the counter drone technology to the Gulf allies and to the United States.
- [13:09]
C
Yep, very good point. Evelyn Farkas, great as always to have you, the executive director of the McCain Institute here with us on Bloomberg, reacting in part to the breaking news reported by the Wall Street Journal earlier this that The US as soon as this week could look to restart Project Freedom in the Strait of Hormuz in cooperation, it seems, with the Saudis and Kuwait, which have agreed to lift restrictions on the use of their bases in airspace for those operations.
- [13:35]
E
Stay with us on balance of power. We'll have much more coming up after this.
- [13:40]
F
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- [14:40]
B
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 11:30.
- [14:59]
C
We have an important conversation to bring you ourselves as I'm joined here in our Washington, D.C. studio by Liz Pancati of the Groundwork Collaborative, where she's managing director of Policy and Advocacy. Liz, welcome back. It's good to see you. Thanks so much for having we consider the war, or as the administration is arguing that the war is over, Operation Epic Fury is over, this is now a defensive mission, and the Strait of Hormuz in a diplomatic effort to address Iran's nuclear program. If this were to end now, and even if the Strait of Hormuz were to open now and again, there's no sign of that happening imminently. What happens economically? What's the lag effect?
- [15:36]
G
I think that we are, you know, two and a half years months into this conflict into a basically functionally closed Strait of Hormuz, and the effects of that around the world, and especially in the US Are very evident. And coming out of this, you know, contrary to the president's two social post from what, two weeks ago, the floodgates might open today if there is actually a resolution reached. Again, I think the big if there. But we are looking at the fallout of this extending certainly through the end of the year and likely into next summer. I would put it at about 12 months. Just given the fallout of fertilizer, of oil, other petrochemical products like plastics. I saw this morning in India, they no longer have Diet Coke because they all come in aluminum cans. They can't get aluminum cans. And so I think the effects of this are going to be wide ranging. And I don't anticipate price effects from the shock to come down back to where they were beforehand until the end of the year.
- [16:30]
C
Well, that's incredible to consider. At the end of the year obviously puts us past the midterms. And there's a question of where consumers and voters will be sentiment wise when they go to vote in November. And obviously a lot of that sentiment is tied to gas prices. Specifically, how long does it take for $4.50 gallons of gas to filter through into a wider pullback in consumer spending?
- [16:52]
G
That's a good question. You know, this morning we saw Secretary Duffy tell consumers across the country that it's a great time to go on a road trip. I'm not sure if he's saying that because we see that airfare prices are up, you know, 30% over the last few months. So he's saying if you're going to travel, take your car rather than deal with the jet fuel prices. But I think the question really is what? And I don't think we know the true extent, but what kind of long term damage has been done to oil capacity in the Middle east given whether it's shipping, refining, drilling? There are some long term effects of that. And I think we don't quite yet know how much capacity is affected by that. We're not totally sure where OPEC stands right now given the news last week. Saudis. And so I think a lot of it is less dependent on the exact conflict in the war. But where oil prices go and how long it takes them to come down with gas prices at 455, we are seeing really detrimental levels of consumer sentiment. The lowest on record ever recorded by the University of Michigan. Consumer confidence is low. In fact, we saw Whirlpool saying in their earnings call yesterday that these are recession level, recession levels of consumer confidence cutting their outlook by 20%. Given where they think consumers are in buying appliances, where commercial purchases will be. And I think all of that people are really on ice. As Charlie was mentioning Planet Fitness Signups are down. Why would you sign up for the gym right now if you're not sure if you can afford the gas bill that's coming?
- [18:18]
C
Well, and that's an economist's way of looking at it. I'm wondering if it's people who are on GLP1s instead, why work out if you can take a pill or a shot? That's a separate conversation list to this notion though of a spending slowdown. Is it at least less bad than it could be because of higher tax refunds? Is there something of an insulating effect there?
- [18:39]
G
I think what we have seen with gas prices and tariffs and the health care expiration, the expiration of those subsidies, we have basically offset any bump we would have gotten from those tax refunds. So Neil Mahoney and Ryan Cummings out of Stanford estimated this week that they are entirely wiped out by those three counter effects. I also think that, you know, we didn't fully expect the effects of that tax law to go into effect on the opposite side of the equation, those health care and snap cuts, but families will start to be hammered by those in the coming months as those start to go into effect, especially on food stamps for low and middle income Americans. They are not seeing the benefits of this tax bill. And I think we kind of further see this K shaped economy entrenched given that those tax refund bumps are really going to high income consumers which are just they have a lower propensity to spend and even if they are spending it, they really cannot prop up the entire economy well.
- [19:34]
C
And of course prices you're paying factors into that whole confidence equation. But so too does your confidence in your ability to retain or get a job if you you need one. We obviously have a payrolls report due tomorrow morning. Liz, what are you looking for? What are you expecting in terms of the health of the labor market?
- [19:49]
G
The thing that I am really looking at is are we seeing any sort of broad based growth in those job gains which over the past year we have not. So many of those job gains have been concentrated in the health care sector, which is one affected by that budget law. And a lot of health care folks are pulling back in anticipation of those Medicaid cuts going into effect. And then on top of that, really looking at the wage growth levels. So we have seen wage growth really slow down over the past few months. We have not yet bottomed out on that, I don't think. And so, you know, bank of America was out with a report this morning showing that wage growth for the top income folks are is it 6%? Whereas for middle and low income is hovering below inflation levels right now. And so tomorrow I'm looking at those, I think also in this kind of low, higher, low fire job market that we have right now where not a lot of people are moving around, the people that are taking jobs right now, they're going to be lower wage jobs. So if you lost your job, you're taking a pay cut, you're lowering your expectations in your job search. And certainly if you're graduating from college this month, the outlook is pretty poor.
- [20:51]
C
Well, that's an important consideration as those graduations are indeed coming up. Liz Biancati, always great to have you joining us from the Groundwork Collaborative. Thank you.
- [21:00]
B
You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon, 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
- [21:17]
C
WTI back positive on the day, higher on the day to $95 a barrel once again. That, of course, has a translation into prices at the pump, which as we've told you over the last day or so is north of $4.50 a gallon on average across this country, according to AAA, the highest we have seen going back To July of 2022, of course, aftermath of Russia's invasion of Ukraine. The question is for how much longer is this politically tolerable for this administration and is that perhaps the why we are seeing such a hard push toward a diplomatic resolution to the conflict with Iran? Let's get into that now as we turn to our political panel. Bloomberg Politics contributors Rick Davis and Jeannie Shan Zaino are with us. Rick, of course, back with us. He is a Republican strategist and partner at Stone Court Capital. Jeannie, a Democratic analyst and democracy visiting fellow at Harvard Kennedy School's Ash Center. So, Rick, to come to you first, $4.50. I'm sure a lot of Republicans would come back and tell me, well, it was north of $5 at points during the Biden administration, but how much more difficult is that argument going to be if we remain at these levels for much longer with November only drawing closer?
- [22:29]
E
Yeah, I'm not sure it's a winning argument to say, well, we're not at historically high levels yet, but we're getting there. And I think idea that oil prices go down, the market goes up and and gas prices continue to climb is really not a great thing for Republicans or this administration entering into the midterms. You know, more and more, we're seeing negative attitudes toward consumers. And, and in the polling data, people just don't like this conflict. Less than 33% support Donald Trump, what he's doing on this. So the public is really being clear that they want to see the cost of living reduced, and that includes gas prices.
- [23:13]
C
Well, and so with, with that public pressure around this, Jeannie, I wonder if, if you think that pressure might ultimately force President Trump to quickly seek a resolution with Iran, that would be more disadvantageous to the United States, as it otherwise would, if he could take his time and allow this to draw out longer.
- [23:37]
H
It absolutely is. And just to underscore how bad things have gotten, the latest Marist poll has 35% of Americans disapproved, approving rather of Trump's handling of the economy. It's hard to get that low because, of course, that's basically your party base and 63% blaming him for the price of gas. So he is being pushed, and we just heard from that interview with Mary Daly, he is being pushed on all sides to come to a resolution. There is so much political and economic pressure on the President to do that. And you can just hear him repeatedly this week, Kelly saying, there's a deal, there's a deal. We're close to a deal. But what's happening, of course, is that in the last 24 hours alone, we have seen how Iran has the upper hand. For the President to tell Iran over the weekend that it is, we are going to escort these ships out of the Strait safely and to send out Pete Hegseth, to send out Marco Rubio to make these statements and then within hours to pull back on that because he doesn't have air cover from Qatar and from Saudi Arabia, is just fueling Iran's sense that it has the upper hand here. I suspect what we will see, since both sides want the war over, is some kind of 30 day cease fire. But a 30 day ceasefire is nowhere near close to what the President promised. When we start this, this, we started this thing, which was a nuclear deal, regime change and all the rest, if anything, we are crawling back to square one and hopefully getting the strait opened, which is of course a lot less than what the President went into this calling for.
- [25:18]
C
Well, and a lot of it, of course, with regard to the Strait of Hormuz circles around. Back to the gas prices conversation, Rick, obviously higher gas prices is a headwind for Republicans, but I wonder to what extent you think redistricting might be able to offset those headwinds when just, just a week or so ago, in the aftermath of the Virginia initiative that saw a netting of four seats, Florida made its move, the Supreme Court rules on the Voting Rights act, and suddenly we're having a conversation about a whole load of Southern states redrawing their maps as well. Are Republicans actually going to be able to carve out a few seats that they otherwise or a few extra numbers that they otherwise risked losing due to the economic reality because of redistricting into rudder district?
- [26:02]
E
Yeah, you know, look, Kelly, I mean every couple of years we have a redistricting fiasco where a state decides to do something New York was ordered by the courts to change. They didn't do it until right before the elections, creating a lot of confusion amongst the electorate who's who they're supposed to be voting for, what district do they live in. And I think we're entering that phase now, but on a much larger scale. As you point out, the the Supreme Court kind of opened up the window to dismantle a lot of these traditionally minority districts and states are making a judgment as to whether it's too late to do that or whether or not, you know, they think they can get away with it right now in advance of their primaries and of course into the general election. And so I do think it creates a lot of confusion, which is both bad for both parties, Democrats and Republicans alike. Very hard to figure out who they're running in what district. And, and that creates confusion on part of the electorate. Secondarily, every Republican district that gets an addition of Democratic voters in them to increase the number of Republican voters in other districts runs the risk of passing this important threshold of whether or not those incumbents can actually win in the districts that have been dismantled to some degree. I mean, it's a push and pull and I, we call it dummy mandering. I know it's one of your favorite topics. You know, we could lose as many as we gain by watering down these if indeed the Democrats have a bit of a blue wave that allows them to win districts that are traditionally plus 10 Trump districts around the country.
- [27:38]
C
Well, and it's that notion of the blue wave that has had Democrats feeling pretty confident about retaking the House to this point. Jeannie, do you think they have cause for concern though, if we are going to be looking at many more new maps than previously thought?
- [27:52]
H
It is certainly a concern and a consideration. But, and I wish I had a sports analogy here for you, Kelly, but you know, I don't play a lot of sports, but in my mind, this entire debate about Gerrymandering is sort of playing on an entirely different field from where we need to be. What Americans care about as they go to the polls is the economy. And so just to give you two quick examples, yesterday, Donald Trump, UFC fighters around him speaking of sports, he's talking about how the stock market is higher and how beneficial this is, yet not even thinking about the fact that that's good for the wealthy, it's good for people invested, but most Americans going to the polls are not. And second, of course, is Kevin Hassett, the national economic adviser to the president or the White House economic adviser, going on a television and talking about he had a leader of a big pie bank in the office and how people are putting so much more, spending so much more in gas and other things on their credit and celebrating that. And it was really so striking that you had somebody, one of the hosts of Pont Save America, come out and say he's got to be working for the Democrats because what are they talking about? They're talking about people spending more on gas and other things on their credit cards, which, yes, is very good for the big banks and not so good for voters. And so I think unless they start to grapple with the issue of affordability, not Donald Trump's favorite word, and prices and inflation. All of this focus on gerrymandering, dummy mandering, which I hear now from Rick, you love, it's all going to go for, not because it doesn't drive people to the polls in a positive way for the people in power. Who are the, who are the Republicans right now?
- [29:38]
E
Stay with us on balance of power. We'll have much more coming up after this.
- [29:44]
F
Support for the show comes from Public. Lately it feels like there are two types of investing platforms. Some are traditional brokerages that haven't changed much in decades and others feel less like investing and more like a game. Public is positioned differently. It's an investing platform for people who are serious about building their wealth on public. You can build a portfolio of stocks, options, bonds, crypto without all the bugs or the confetti retirement accounts yet.
- [30:10]
B
Yep.
- [30:10]
F
High yield cash. Yes again. They even have direct indexing. Public has modern design, powerful tools and customer support that actually helps go to public.com market and earn an uncapped 1% bonus when you transfer your portfolio. That's public.com market ad paid for by Public Holdings Brokerage services by public investing member FINRA SIPC advisory services by public advisors SEC registered advisor crypto services by ZeroHash. All investing involves risk of loss. See complete disclosures at public.com,/disclosures.
- [30:43]
B
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 11:30
- [31:03]
C
for further clarity as to whether or not this conflict is getting closer to its end. So how should we consider this politically? Let's pose that question to former Republican congressman from North Carolina, former chair of the House Financial Services Committee, Patrick McHenry. He, of course, is a Bloomberg Politics contributor now. Always good to see you, Mr. Chairman. Welcome back to Bloomberg TV and Radio. I wonder, as we see this administration pushing clearly very hard for a diplomatic resolution here is if you see that as mostly being politically driven rather than strategically driven and, and what the strategic outcomes need to be in order for the administration to be able to sell to the American electorate that this whole thing was worth it in the first place.
- [31:47]
I
Well, there are a couple conflicting issues here. You have domestic politics, where clearly the president is on the hot seat with rising oil prices and the impact on daily lives as a result of the Iranian conflict. There's the international piece, which is regional, largely with Iran and its neighbors, and whether or not we can come to a satisfactory resolution here, open the strait and return to Middle Eastern normal for the movement of commodities. Then the third element, which you mentioned in this, in the last reporting here, and Bloomberg's got done a great job of highlighting this, which is the meeting with Xi and the impact of Iran on Iranian oil, in particular on the cost of everything in China and China's dependency on the Iranian regime and China's funding and military and technological support of the Iranian regime. So there there's a threefold set of things here that are alive, real and quite impactful and require a matter of nimbleness by the administration to handle that. Like we saw from Marco Rubio at the podium the other day, it's going to be a complicated, complicated outcome here.
- [33:07]
C
Well, of course, Marco Rubio at that podium was trying to sell Project Freedom, which has now been on pause, why it was necessary to have this defensive, what he described as a rescue effort in the Strait of Hormuz. But your former colleagues also have to defend this in their own way, maybe not at podiums but in town halls on the trail as they fight to keep their seats in November. How, what do they need to be able to say was accomplished in order to make the case to their constituents that the blood and treasure spent, the higher gas prices that they've been facing now for months was ultimately worth it. I just wonder what politically ahead of the midterms is kind of the minimum bar here.
- [33:46]
I
Well, the minimum bar has not yet been met because we've not talked about the impact of the Iranian regime over the last 25 years, over the last last 50 years, nearly. The, the, the, the blood that they have, that they've let, the attacks they've, they've instigated, that they have funded on American troops in the Middle east and their neighbors and globally. They're one of the greatest funders of terror in the world in the 80s, 90s and through just this year. In fact, that is a change thing. Now that regime is gone, number one. Number two, it is no longer an offensive weapon to harm their neighbors or the rest of the world. They cannot fund outside their own dire needs internally for their economy. Those things need to be talked about about what the regime was. And that storytelling has not been part of the administration's talk track, if you will. They need to highlight that. And policymakers on the Hill need to do a better job of talking about the impact of Iran and the impact it's had destabilizing the Middle east and funding terror in the world. Now, that is one component of it. And then what is the benefit with a changed Iranian regime, what do we bring to the world? Greater stability, Pulling over somebody who has been on the, our opponent's side of providing them oil, natural resources and funding and now could be, at best, a neutral party party maybe. Well, maybe slightly better than that. But at best, I think hope is to be a neutral party in the world. That is a massive change in the order of the world that the President's brought brought about in just a short order of time.
- [35:31]
D
Hmm.
- [35:32]
C
Well, it's important to consider, of course, that massive change has brought with it higher gasoline prices, which we've often talked about as being detrimental to Republicans as the incumbent majority heading into November. To what extent, though, will Republicans be able to opposition offset that negative impact by carving out potentially more safe red districts for themselves via a redistricting war that seems like while it was reaching an end, a Supreme Court decision may extend even further.
- [36:03]
I
Well, first, gas prices, the cost of living. Huge issue for the midterms that is going against the incumbent party, which is the Republican Party. And the midterms are going to be hard for Republicans generally because they're the party in power, but specifically because of the cost of living. Now, the question of redistricting is a countervailing force to that movement against Republicans. There are more state Republican controlled states, there are more Democratic gerrymandered districts. And the Supreme Court has ruled that there are now very few rules governing redistricting at the state level. That means that you have additional Republican states trying to carve up additional districts that could benefit Republicans. Florida just last week bringing at least four new Republican districts out of that state. What we have now is a much more competitive landscape. Even if the environment's bad for Republicans, that gives Republicans opportunity to keep the US House. That means that we have a very, very different midterm election, not assured for Hakeem Jeffries become Speaker of the House anymore.
- [37:13]
C
Well, I wonder how we're defining safe Republican district here with some of these redraws. I got into this yesterday with Mark Short, who of course ran Legislative affairs during the first Trump administration, served as Vice President Pence's Chief of staff. This is what he told me about this whole thing.
- [37:28]
E
If you're basically watering down solid Republican
- [37:31]
C
districts to create more opportunities, you're making
- [37:33]
E
and R +4, R +5, if this is a real blue year where you
- [37:38]
F
won't be Safe in an R 8 or 9 seat.
- [37:41]
E
And so actually you might end up losing seats by, by this, by this grab. And so it seems to me that, that, yeah, you might be chasing it in the moment, but come November, this actually could be counterproductive. We're actually making more seats competitive. The Democrats could take.
- [37:59]
C
What say you to that, Mr. Chairman?
- [38:01]
I
Well, that is on the pessimist, mystic side, I would say. If you're drawing like the state of, the state of Florida did, these districts are roughly 54, 55% or more that the President Trump's number in the district. That means that they're more likely to go for the Republican than an R plus 3 or 4. As, as Mark said, his point there is when you do a narrow gerrymander like that, we call those a dummy mander. Right. You think you're being super crafty and you've, you've just made a competitive seat that will go for Democrats or your opposing party, what you see in most of these states is drawing pretty solid Republican districts. The question is the magnitude of this. If you're, if you see a massive movement against Republicans as a result of higher prices, the economic questions that we, we think are very, very important, Republicans will be punished. And those districts that Republicans won by 3, 4, 5 points in previous elections will be gone. So there is, there's truth in what Mark said. Yesterday. But the facts of these districts are that they're more Republican than what is the likely sweep against Republicans in the midterm.
- [39:19]
C
And finally, can't let the former House Financial Services chair who fought hard for market structure legislation when it crypto go without asking. Are we actually going to see the moment in time now for the Clarity Act? We've had some optimistic conversations on this network this week.
- [39:34]
I
Well, look, if I'm in the prediction markets, I would say that this bill gets signed in a law in the month of June or July. And I do think Senator Scott is is moving ahead with a markup. He has a coalition of Republicans and hopefully Democrats that will be willing to vote for what is bipartisan policy that we've crafted over the last seven years that I started seven years ago in the House of Representatives. So I'm bullish on the opportunity to see sound law for us to have a permanent market structure for crypto and for America to emerge as the crypto capital of the world. Very optimistic.
- [40:10]
C
All right, well, we'll see if we have another July 4th bill signing for the second year in a row. Patrick McHenry, the former chairman of the House Financial Services Committee and now Bloomberg Politics contributor.
- [40:26]
A
Thanks for listening to the Balance of Power podcast.
- [40:29]
E
Make sure to subscribe if you haven't
- [40:31]
A
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 for many men, mental health challenges aren't recognized until they've already taken a toll. Work pressure, financial stress, changing relationships and trad emotional expectations around masculinity can quietly wear men down, often without clear warning signs. In season three of the Visibility Gap, Dr. Guy Winch and his guests explore how these pressures show up, how to spot them earlier, and how men can access meaningful support. Listen to the new season of the Visibility Gap, a podcast presented by Cigna Healthcare. From coast to coast, Unlock adventure at Red Lion Hotels by Sinesta, where restful sleep, friendly service and trusted local knowledge are part of every stay. Red lion makes it easy to feel welcomed, comfortable and connected wherever the road takes you. Whether you're traveling for business or pleasure, you can spend less and make more of every trip. When you sign up for Sinesta Travel Pass, you'll get their best rates instantly. Go to sonesta.com to book your stay and unlock the best rates with Sonesta Travel Pass. Here today, roam tomorrow. Join now@sonesta.com Terms and conditions apply.