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- [00:00]
Joe Matt
At Duke Energy, we're making smart investments to add enough capacity to power 10.5 million more homes over the next five years. It's all part of our commitment to deliver the reliable energy America needs. Learn more at duke-energy.com poweringamerica
- [00:18]
Podcast Host/Announcer
Bloomberg Audio Studios Podcasts Radio News. 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.
- [00:40]
Kailey Leinz
Clearly the oil market is reflecting more oil flows coming out of the Strait of Hormuz over the weekend. We were actually back near levels we saw prior to Operation Epic Fury beginning. Some 20 million barrels boarded on tankers were able to leave the Strait over the weekend. And of course ensuring continued clarity of passage through the Strait of Hormuz is part of what supposed to be achieved over the weekend in Switzerland. It was a marathon negotiation. Round one between the US and Iran lasted some 18 hours in Switzerland, where of course, the Vice President, JD Vance, was dispatched to lead the US team and he echoed what we just heard from President Trump on such social the idea that Iran will agree to have major weapons inspections to ensure what Trump is calling nuclear honesty. Here's how J.D. vance characterized it.
- [01:30]
Joe Matt
Yesterday was a very, very good day. We made a lot of good progress. We did exactly what we wanted to do. We wanted to build a mechanism for keeping the Strait of Hormuz open. It is open. The Iranians have agreed to invite IAEA inspectors back into their country. That is a major milestone for the American people, a major milestone that the President is echoing. Tyler Kendall is covering all of this for us back at the White House, having traveled to the G7 with President Trump. He was at Camp David over the weekend. Tyler, it's great to see back on the North Lawn of the White House, he was spending a lot of time on Truth Social, in fact even threatened to start bombing Iran while the negotiations were underway. He was talking about the Reflecting Pool here in Washington. Have we heard from him his reaction to what came from this first day of talks?
- [02:20]
Tyler Kendall
Joe not yet, though we likely will hear from the President later today with some events on the schedule. The thing about where the talks stand now is that the US Is making very clear that this progress was made, but also that there still a lot of work to do. You heard the Vice president, in his own words say that essentially this weekend was geared towards building the foundation for the house to be built, but the house hasn't been built quite yet. Now, this White House can tout a few different tangibles that resulted from the negotiations in Switzerland, including that we got essentially what they are saying is this basis for the technical talks to continue. There was this mechanism set up to monitor communication around the Strait of Hormuz, as you mentioned, the confliction mechanism that is essentially to extend, extend the cease fire to Lebanon after Vice President J.D. vance himself confirmed that Iran had threatened to walk out of the talks over this issue. And then importantly, the vice president did announce that Iran has agreed to allow inspectors in to its nuclear sites. President Trump just posted about it moments ago. But at this point, the access and the scope that those inspectors will be allowed to have is one of the big questions here. Moving forward, though, Joe and Kelly, we have two important meetings tomorrow that we're going to be keeping our eyes on. One is that Iranian state media has confirmed that Iran's president is set to travel to Pakistan. Of course, a key mediator in this. But we're also expecting the key Iranian negotiators, including the foreign minister and the speaker of the parliament, to go to Oman. And that's very interesting here because Oman really hasn't been a party when it comes to the mediation that's been happening. That's really been focused on Qatar and Pakistan. But Oman, of course plays a very critical role when it comes to the Strait of Hormuz. And we've heard Iran float this idea that there could be some sort of agreement after this six day extension of the cease fire where we would see fees imposed and that would be in tangent with Oman. So that's going to be something to watch very closely because over the weekend we heard President Trump warn in an interview that he has told Iran directly there should be no fees imposed or we could see another escalation when it comes to military strikes by the U.S.
- [04:29]
Kailey Leinz
well, and of course, Tyler, at the G7, you had the chance to question the president about the suggestion Iran could be charging fees. You also asked him how immediately Iran was going to be getting relief when it comes to its ability to sell oil onto the market. And we're seeing those sanctions waivers as of today.
- [04:46]
Tyler Kendall
Right. Just moments after the vice president gave his news conference, we got this confirmation from the treasury that they are temporarily waiving, issuing this waiver to allow Iranian crude to market for the next 60 days. So that will align, of course, with this extension of the cease fire and then we'll have to see where it goes from there. We're watching very closely how these flows ultimately Tick up. While of course, well below the pre war levels. CENTCOM did confirm on Saturday that so far 55 ships that day carrying 17 million barrels of oil were able to successfully transit the strait. And then, Joe and Kelly, another interesting stat just to put on your radar and that we're going to probably start to see a lot more of is that data analyzed by Bloomberg News shows that four empty LNG tankers linked to Qatar are currently making their way through the strait. And that is important because this is the largest number of empty LNG tankers that we've seen. But it is an indication that many of these Middle east partners are trying to get ready to ramp up their exports as the strait becomes more fully open. But again, the threat that Iran could close it still remains after we heard negotiators saying that they were going to walk away from the talks and close it after President Trump's threats regarding Hezbollah and Israel.
- [05:58]
Kailey Leinz
All right, Bloomberg's Tyler Kendall live at the White House. Thank you so much. And of course, that's one of the major questions we were having in conversation last week, Joe, was the idea that, yeah, maybe all of the ships that have been stuck, unable to transit at the strait to get out, that's one thing for them to get out. It's another for empty vessels to be brave enough to come back in and
- [06:15]
Joe Matt
load up once more, especially with an insurance policy and a crew that's willing to do this. That's a big ask. And it brings us back to why so many suggested that just reopening the strait would not bring oil flows back to where they were. Goldman Sachs last week estimating that we might get back to about 70% of pre war levels before some time goes by.
- [06:33]
Kailey Leinz
And of course, opening the strait had to become one of the objectives of the end game of this conflict. The original objective that the United States outlined, of course, was in part addressing Iran's nuclear program. And that work is the one just now beginning as Tyler was talking about the president and vice president now saying Iran is going to be letting weapons inspectors back into the country from the iaea. So on that note, we turn now to Heather Conley who is back with us of the American Enterprise Institute where she's a non resident senior fellow. She's also former Deputy Assistant Secretary of State for the Bureau of European and Eurasia affairs in the George W. Bush administration. Heather, welcome back to Bloomberg.
- [07:08]
Heather Conley
Thank you.
- [07:08]
Kailey Leinz
Good to see you. If we could just reflect on the most recent development. It is a true social post from the president who echoed JD Vance in saying Iran will agree to have major weapons inspections in order to ensure nuclear honesty. Sounds familiar. Sounds like 2015, does it not?
- [07:26]
Heather Conley
It does. Congratulations, you're back to the jcpoa. And I think this is. We have to take this in very measured steps. First and foremost, it will be great to get the IAEA back into Iran to see exactly what the state of play is, but I think we have to be extremely cautious. The Iranian regime is not going to allow the transparency that we're going to desire. Even when the IAEA was allowed in, we know that they were, you know, hiding their enriched uranium in some of their nuclear facilities. So I think we have to be cautious. This is a good step. Let's get in there. But this is not going to be what we insist on, a really robust, transparent regime to understand what they've been doing.
- [08:09]
Joe Matt
Well, talk to us about the difference between being on the ground and being able to watch from space. The President likes to talk about the cameras. We have cameras, satellites he's talking about that are so powerful you can count the dimples on a golf ball is what we are told. Why do we need people on the ground to find these things?
- [08:28]
Heather Conley
Because, Joe, a lot of what Iran did was underground. The storage of their missiles, their drones, their nuclear centrifuges, and that's recall. The President always talks about nuclear dust and that, you know, the 12 Day War last year was those bunker busters to crush and annihilate. We don't know what has been destroyed or entombed. And so you really do need the physicality of inspectors going in. And it could be the dirt removal. It's going to be extremely dangerous, extremely intrusive, and that's what, you know, I caution that allowing IAE inspectors into a country right now where the regime is cracking down on everybody, it's a dangerous position to be in.
- [09:12]
Kailey Leinz
Well, and on your point on dirt removal, the President has suggested numbers a number of times that it's only the US And China that have the capability and equipment required to actually go in and get the quote, unquote, nuclear dust. So we can't even guarantee that the IAEA is going to be able to easily get sight on that.
- [09:31]
Heather Conley
Absolutely. And you're hearing through the initial phases of some of the negotiations before they made it to Switzerland about doing this, you know, in situ, in presence. They don't know what is there. And we honestly don't know if some of the HEU was not removed from those locations. I mean, with full respect, the satellites are exceptional. We can See a lot, but it's not perfect.
- [09:54]
Joe Matt
It's not being there.
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Heather Conley
You need to be there and be there persistently. I think that's the most important part.
- [09:59]
Joe Matt
Talk to us about the importance of this deconfliction line or deconfliction cell as it's being referred to avoid incidents and miscommunication to keep the strait open. We have successfully used similar technology with the Soviets, now again with Russia. Is this maybe the best thing to come out of this session?
- [10:17]
Heather Conley
Well, I think the best thing to come out of the session was actually they're starting to break down structurally, these working groups to get experts working in these different things. At this point, we need to get this out of a vice presidential level negotiation. This one image of Vice President Vance like on his laptop, like he was, you know, doing this himself. I'm like, whoa, whoa, whoa. Let's put the experts on these very specific technical issues. I mean, we're all trying to figure out what in situ removal looks like. You need those experts in there. But this deep confliction, I mean, Joe, you're right. I mean, we always want adversaries to have communication lines so if something happens, we don't quickly escalate or misinterpret something always important. But I find it so difficult. Those original sort of hotlines were being used quietly, privately. We have megaphone hotlines in the form of social media. And that's what got us in this crossfire over the weekend. And that's the discipline that everybody needs to show. We have incredible amounts of work to do in 60 days. You need to get down to work, get this as detailed as possible. But meanwhile, Iran's being paid to open up the strait to put pressure on Lebanon. We're really not getting to the nuclear part. So they're being rewarded without really touching the nuclear part, other than letting IAEA inspectors in. And that's what should have been happening, you know, for years.
- [11:39]
Kailey Leinz
Well, it's important that you phrase it that way, Heather, because we've been told repeatedly by defenders of what the President is trying to do with this interim deal, including Republican senators on the Hill, that this is a pay for performance plan, that Iran doesn't get anything unless they take a specific action. But you're suggesting that while the performance is still lacking, the payments have already begun.
- [12:01]
Heather Conley
Absolutely. I mean, treasury just solicited, let the. They're going to get revenue from the sanctions. That's why the strait will remain open. We need the energy prices to continue to be low. They need to get the relief and the financial relief and of course the Gulf countries also need to get those exports. No, we are paying for maintaining an energy price that can be, you know, reflective here politically, but we're paying them. And the more Iran places pressure on the strait or on Lebanon, which corners Israel in such an untenable position. They're controlling the narrative right now. This is their negotiation, the Strait and Lebanon. I feel like the second part of the negotiation gets to what we need focused on the nuclear, but again, nothing on proxies, nothing on ballistic missiles. We need to get that back into the negotiation channel.
- [12:47]
Joe Matt
Do we need to keep this full military force in place for at least the next 60 days to maintain leverage?
- [12:52]
Heather Conley
Joe, you're absolutely right. And this is the other sort of question. We're not. I mean, the cost of this pretty significant military presence is going to have to stay. I think they have to stay in the next 60 days to ensure some
- [13:05]
Joe Matt
compliance kind of signal. Would that send if we, if we sent a carrier strike group somewhere else home or somewhere else in the world,
- [13:10]
Heather Conley
it would signal to the Iranians this is over and they can continue to leverage their proxy networks, put pressure on the region. The problem is we cannot sustain this posture. We don't know the exact figure that the Pentagon is spending per day on this. But we do know that the budgets are tough, trainings are being rescheduled. I mean, this is not, this hasn't been an unfunded, unbudgeted military operation. And you know, this is where the reckoning will come in to the costs of this four month conflict, the military costs, the economic costs. And sometimes when you alleviate the pressure, those costs really come to being. And a lot of folks are going to have to decide, was this worth it? I think they're going to question mark, did we really get the results we needed?
- [13:54]
Kailey Leinz
Well, and there's also opportunity costs to consider, including where the US Is directing its, its attention. It is Iran and the Middle east that have taken up a lot of oxygen versus, say, Ukraine and the ongoing war with Russia. The President did suggest at the G7 last week that he wants to shift his focus to ending the war between Russia and Ukraine. And I wonder, Heather, in our final minute if you think that may spell a better, a better meeting this time around for the NATO Secretary General Margaret, as he comes to meet with Trump on Wednesday.
- [14:23]
Heather Conley
Yeah, all eyes right now. I mean, the President's anger is against our, our European NATO allies. This, this incredible spat between Italian Prime Minister Giorgio Meloni and the President. Yeah, yeah, yeah, yeah, yeah. You know, this is where are you attacking our allies? Are we attacking the mutual problem? But I will say on a positive note in our last few seconds here, the president did seem to be receptive to the Europeans saying, hey, I think the Ukrainians are starting to turn the corner here. Let's get on the winning side. And he seemed to be more open to that. So I'm going to hope for the positive. But I am worried about this July 7th NATO summit, particularly Secretary thinks that comments last week in Europe don't, don't attack our allies, attack the problem together.
- [15:07]
Joe Matt
Interesting how the president wants to be aligned with a winner though in this case. Right. You wonder if the more advance Ukraine can make here, the more pro Ukrainian Donald Trump may be.
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Heather Conley
Well, they're making some great headway in Crimea. They are really affecting the Russian economy. But this is going to get worse before it gets better. But we like where we're going right now.
- [15:26]
Joe Matt
Well, always so much to talk about with Heather Connelly. Thank you so much as always, Heather. American Enterprise Institute with us live in Washington after round one of talks between the US And Iran. We've got a lot more to follow on Balance of Power to spend some time later this hour with Frank Luntz taking the pulse of the American voter on all of this, straight ahead on Bloomberg. Stay with us on Balance of Power. We'll have much more coming up after this. At Duke Energy, we deliver reliable energy that powers lives, grows businesses and transforms communities. That's why we're making smart investments to add up to 14 gigawatts of new capacity over the next five years.
- [16:08]
Frank Luntz
That's enough to power 10.5 million more homes, putting customers first, advancing American progress,
- [16:16]
Joe Matt
powering the next generation.
- [16:18]
Frank Luntz
Learn more at duke-energy.com poweringamerica.
- [16:23]
Podcast Host/Announcer
You're listening to the Bloomberg Balance of Power podcast. Catch us live weekdays at noon and 5pm Eastern on Apple CarPlay and Android Aut Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa, play Bloomberg 11:30.
- [16:42]
Joe Matt
Unbelievable to see a new all time high from Micron as Matt mentions, up what, 5% here on this deal with Anthropic. Caterpillar is $1,000 stock. It's amazing. They're part of that deal with Microsoft and Chevron. Yeah, Caterpillar is doing the gas turbines to go in there, $1,000. General Motors pushing higher too. They're getting in the defense business some really amazing stock stories out there, single stock stories. Even as the indexes try to keep us guessing, we're going to have, by the way, Micron earnings. I'm just going to mark that for you because this is the stock that is apparently driving the market Wednesday after the bell. I'm glad we didn't go down to the reflecting pool last week. They've been arresting people down there. Did you see we have five people arrested? Remember Kailey Lyons went down to the reflecting pool the week earlier and they were putting the American flag blue down there. Remember they had the big day, all the squeegees and the brushes, everything out. It was going to be perfect. It was going to last a hundred years. According to the President, an indestructible material that they put on the bottom of the reflecting pool that would make it look better than ever. And for a couple days there it did look pretty good, right? And then, well, then the allergy came. And if you're with us on YouTube, maybe we'll even get to the bottom peeling off. That's kind of what we're dealing with now. The President's pretty upset about it. He's been talking about it on Truth. Social work will begin immediately on fixing the seriously vandalized reflecting pool. He says, I just inspected it and could only say to myself and those gathered around me, wow, who would do such a thing? Sick, deranged people followed on with another post. Of the many statues and fountains we rebuilt, renovated, cleaned and fixed, the only one vandalized was the reflecting pool, which is being taken care of asap. And by the way, I'll tell you, go down there now, there's dozens of people there. It is, he writes, it has been given a 300 foot long gash. Chemicals have been illegally placed in the water and the beautiful new grass field has been destroyed with a gigantic 8647 chemically carved into it. Probably inspired by dirty cop James Comey. Please remember there is a 10 year prison sentence for the destruction or even the attempted destruction of such things, which will be fully enforced. They even caught up with an Olympian. You hear David Hearn got arrested and charged having, I guess he reached his hand and picked up, tried to pick up one of the pieces that was peeling. He said he reached down to touch a loose flap of coating because he was curious as a concerned citizen and he got booked. Now the Washington Post has been doing some interesting reporting here with regard to vandals taking a knife or a blade or whatever. The administration says five people have been arrested. They talked to some pool experts though. First of all, there's no video or evidence that anybody was in fact vandalizing. I just want to mention that. And I'm pretty sure they've got a lot of cameras around there, don't they, on the National Mall? But pool experts suggest that there might be more at work here. The way the, the surface was treated might have been an issue. And the fact that water got underneath the sealer they would suggest is why it's being peeled back. Steve Goodale, swimming pool expert, looked at some images of the peeled sheet. He said if there are any deficiencies with the surface prep, this is what happens. The lining is extremely tough and durable. It would take a specific failure or deficiency to fail like we are now seeing. So I had an idea here. Let's stop fooling around. America's reflecting pool needs to be treated by America's producer. You might not know this, but producer James was a pool boy at one point. He has shocked many pools. He's probably shocked more pools than Donald Trump has built. I say that euphemistically, of course, they put chemicals to shock the water. Has anybody thought about James? You can answer me. They were putting peroxide or something in there. The stuff that you used to like bleach your to get rid of the algae. Could that have brought up the paint on the bottom, James? Yeah, if you use a lot. All right, we'll get back to you on this. Kaylee reminds us it killed a baby duck. There was a duckling, a dead one, floating around in the reflecting pool yesterday. We're going to get James down there with one of those big things that they clean the, what do they call those, James? The skimmer. We'll get back to you on that. We're coming off of an important I, by the way, I'd love to hear from the panel on this, but I won't do that to them. Rick and Jeanne are back with us after the long weekend. I know Jeannie wants a piece of this. It is a presidential issue. I understand he flew over it when he talks about inspecting it. There is a connection here, though, because while we're coming together here to talk about the first round of negotiations between the US And Iran following the signing of a memorandum of understanding, the president is posting all weekend on Truth Social about the reflecting pool and at one point threatened to bomb Iran while JD Vance was at the table with the negotiators. Imagine the feeling in the room when Truth Social hit. The president has danced around this before and has actually spoken to it directly. If this doesn't work out, Maybe this is J.D. vance's problem. Remember at the news conference at the G7? Listen, I like that idea.
- [22:37]
Kailey Leinz
Sure.
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Frank Luntz
This way, if it works out, I'm going to take the credit. If it doesn't work out, I'm blaming J.D.
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Joe Matt
you better be careful, J.D. he's going to turn his plane around and get the hell out of here. Yeah, I like that idea.
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Frank Luntz
I think it's a good idea.
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Joe Matt
Well, I don't think J.D. vance does. Although J.D. vance likes the proximity to peace, maybe this plays out very well to him. We assembled our panel. Now for more. Rick Davis and Jeannie Shanzano are back. As I mentioned, Bloomberg Politics contributors. Jeannie is our Democratic analyst and democracy, a visiting fellow at Harvard Kennedy School's Ashe Center. Rick is a Republican strategist and of course, a partner at Stone Court Capitol. So let's get to it, Jeannie. While the President's looking at the reflecting pool, J.D. vance is looking at the speaker of Iran's parliament across the table. Which one do you think is more seriously in line to bring peace?
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Podcast Host/Announcer
Well, I think Donald Trump needs to call James in now that I know he has this skill. Did you say he knows how to shop a pool? I never even heard.
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Joe Matt
He sure does.
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Podcast Host/Announcer
So this, this is who Donald Trump needs to come in. Forget about these canoeing Olympians. I didn't even know there was a canoeing in the Olympics, So this all new to me.
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Joe Matt
That is weird.
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Podcast Host/Announcer
Yeah, it is very weird. You know, I was thinking back this weekend with all of this sort of back and forth and Donald Trump's truthing and tweeting, you know, during the JCPO way, we didn't have truthing and tweeting, but we did have similar days and days, in fact, years of theatrics. And I think that's what we're going to see around these negotiations as well. So Good news, Joe. 60 days or more of theatrics with threats and recriminations and reports and coming back and forth and Donald Trump, you know, bloviating, you know, a lot of hot air when he's frustrated. But I don't think any of that really changed what was going on necessarily in the room, except as we understand, the Iranians wouldn't pose for the picture at the end. But besides that, they did come to this sort of agreement, if you will, in terms of taking steps as it pertains to Lebanon. So I think a lot of that was theatrics, and the impact on the negotiations was minimal at this point.
- [24:49]
Joe Matt
Interesting. Major progress. Rick Davis, is what Iran claims came from the. The all Nighter at Birkenstock. Are you encouraged by hearing language like that from the other side?
- [25:02]
Rick Davis
Well, it mirrors the language that J.D. vance had, you know, major progress on his part. I watched on this press conference and he couldn't have been a happier young lad. I mean, talking about setting up all these, you know, organizations that would help administer the current reopening of the Strait, getting rid of, you know, mines and things like that. I mean, he was very proud of himself, hopping on a plane, coming home, job done. Problem is, none of that really addresses the deficiencies in the 14 point plan and it hasn't quelled any of the rebellion going on in the Republican Party about this entire deal there. Republicans right and left talking about what in the world was the national interest. We thought we were going in there to get the, you know, bomb making material out of there and destroy their ability to pursue this. Now we've got IEA going in there and, and that's the same thing JCPOA allowed to have done. So I mean, like we really are scratching our heads within the Republican Party trying to figure out like why is this something we think we should be celebrating? The way JD Vance and the Iranians are really interesting.
- [26:19]
Joe Matt
The Strait is open though, Jeannie, and we've got a de confliction line apparently put together. Rick mentions this idea of a high level committee, as they called it, I think, to oversee the talks. They're going to be dealing with nuclear issues and a number of other things. It will also include a deconfliction cell that would avoid incidents and miscommunication. Not unlike we had with the Soviets, I think we still have now with Russia. That's something that nuclear powers could benefit from. Should we be glad that this is in place and maybe is this the model we just keep calling each other when the threats arise?
- [27:01]
Podcast Host/Announcer
You know, I'm not sure we have a good definition at this point as to what this deconfliction mechanism or cell as they're calling it, really entails. Yeah, but I think if we look back at recent history, we had something similar between Iran and Israel as it pertains to the last ceasefire in Lebanon or a cease fire a few years ago, and that didn't contain the conflict. So is it a positive step that they're talking about? Sure, it's better than not, but I'm not convinced it's going to hold. And so, you know, I. As we look at this, the major problem is is that Iran's position as it, it pertains to nuclear, its nuclear program, its Enriched uranium has not changed in over a decade. And over the weekend, you had the president of Iran say, you know what? Still not changing. We retain the right to enrich uranium. And that's what sent Donald Trump in part over the edge. Our position that they have to stop hasn't changed, changed. And so I'm not sure we're any closer than we were February 27th before the war began, last summer before we bombed them or quite frankly, when the JCPOA was signed. And that's where I think you get this frustration that Rick is talking about with Republicans. You see it with the American public writ large, which is that, what was this all for? Because, you know, sure, we don't want a war to keep bombs to keep falling, but we're no better off than we were 10 years ago or even a year ago or three months ago. And that's where I think the administration has a problem.
- [28:35]
Joe Matt
Well, so what's going to happen, Rick, in our remaining moment here when Donald Trump walks into the Senate Republican steering lunch on Wednesday? I know that Rick Scott will be happy they've got the Save America act in common, but what's going to be the mood music in the room?
- [28:50]
Rick Davis
Oh, I think it's going to be a requiem. If you were picking programs, him, Donald Trump's going to go in there and basically, out of the power of his personality, try and change everybody's minds. I think on the myriad of issues that Donald Trump is going to have to address, most of the senators, if not all of them, have already made up their minds. They're not the votes for things like the Save America Act. And he can scream all he wants. He wants us to pass that in the Republican caucus. But you don't have enough votes in the Republican caucus. And it's a loser politically if you go out and try and campaign on it. The one thing he's not going to talk about in that caucus is affordability. And that's the one thing these guys all want to try to tackle between now and Election Day. They don't want to talk about Iran. They don't want to talk about Save America. They don't want to talk about Pfizer. They want to get their job done,
- [29:41]
Frank Luntz
get out of town.
- [29:43]
Joe Matt
And the Senate will be voting on that bipartisan housing bill with affordability in mind today. Stay with us on balance of power. We'll have much more coming up after this.
- [29:55]
Heather Conley
The thing about AI for business, it
- [29:57]
Joe Matt
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- [30:25]
Podcast Host/Announcer
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.
- [30:43]
Kailey Leinz
I'm Kailey Leinz alongside Joe Matt Matthew here in Washington, where of course, we spend a lot of our time talking about dysfunction in the United States government. We know that things don't always move smoothly. There's plenty of strife between the various parties in power, even when the same party is in power here in Washington, as is the case now. But one thing we can say is we don't have a leadership change as frequently as they have it in the UK Our system obviously is different. These are two different countries kinds of democracies. And yet the United Kingdom is on the cusp of getting its seventh prime minister in a decade since Brexit. As the current prime minister, Keir Starmer, announces his plans to resign, his labor party obviously having suffered in recent special elections. Pressured by low polling figures, the momentum was building and perhaps his fate was sealed when Andy Burnham, the mayor of Manchester, was won a seat in Parliament last week, setting him up to, of course, be the next prime minister in the UK but here is Keir Starmer recognizing what an ally close to him called the political realities as he reflected on the situation in his government.
- [31:56]
Joe Matt
The question my party is asking now
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Frank Luntz
is whether I am best placed to lead us into the next general election.
- [32:05]
Joe Matt
That is why I will resign as leader of the Labour Party. Indeed, setting us up for another interesting process here, although Kaylee already mentioned the name that matters, and that's Andy Burnham, said to be prepared to succeed Keir Starmer here, it's just a matter of the coronation. Therese Rafael, Bloomberg editorial board member, joins us now, knowing that Keir Starmer lasted longer than ahead of letter. Therese but it's obviously a situation that has a lot of Americans wondering how this can happen so quickly in this case. Did this begin with Jeffrey Epstein and the fallout surrounding that scandal, or was this more to do with the economy in the UK I think it began
- [32:53]
Therese Rafael
pretty soon after that momentous 2024 election in which labor replaced the Tory government and Keir Starmer became Prime minister, promising to sort of end the chaos of the last five years. But certainly last year, almost the last 14 years, where we saw successive changes of government, economic troubles, and he promised stability, he promised competence in government. And almost immediately there were doubts that he would be able to deliver it. There were policy reversals. The polls began to reflect a lot of problems with the way he communicated. You know, one contact of mine who makes no bones about his Conservative point of view, says, you know, he only really had one adenoidal register. And I think that that kind of timber, though, the way he communicated, you know, even his resignation speech, I think people just grew a little bit tired of that. But yes, the economy did have an impact, and the Peter Mandelson. Peter Mandelson firing and his involvement in Jeffrey Epstein had an impact. There were so many issues that just piled up over the last two years. But ultimately, what I think made the biggest difference is that MPs, Labor MPs, began to really doubt that they would be holding their seats in the next election. And Keir Starmer couldn't survive that. The popularity of the reform uk, of Nigel Farage's party had really soared and he needed to go if Labour was going to have a chance to hold
- [34:34]
Kailey Leinz
on
- [34:37]
Therese Rafael
at the next election.
- [34:40]
Kailey Leinz
Well, of course, there will be the question of governing between now and the next election, Therese. So when we consider Andy Burnham's path here, knowing that it seems all but guaranteed he will become the next prime minister potentially as soon as Mitchell mid next month, what decisions is he going to have to make immediately as he considers his own cabinet and the people that will surround him, including Chancellor of the Exchequer, for example?
- [35:05]
Therese Rafael
Yeah, huge decisions. There are a lot of names that have been thrown out for Chancellor of the Exchequer, including Ed Miliband, who is very unpopular with the union. So the conversations that are going on now behind the scenes will be between Andy Burnham and union leaders and labor heavyweights. And the signal that he sends to the markets especially, is going to be enormously important. And we've heard him very quickly reverse that. The gaffe where he said, you know, Britain is too in hock to the bond markets and quickly got slapped down for that some months ago. So he'll have to make that decision. But also foreign policy. He's not experienced in foreign policy the way. And will not have credibility on that front the way Keir Starmer does. Who will he appoint as Foreign secretary? Will he publish the Defense Investment Plan, which governs Britain's entire defense strategy and spending and has been long delayed and will determine how Britain meets its NATO targets and its credibility among its NATO allies, allies on defence and security issues. So they're big heavyweight issues. It's a long way from Manchester to London, even if it's just, you know, a very short train ride.
- [36:24]
Joe Matt
No doubt. What happens to Keir Starmer after this? You could put a small orchestra together with all the former prime ministers of the past 10 years.
- [36:33]
Therese Rafael
Yeah, I mean, he said he wanted to focus on being a good husband and dad. He's, you know, is still fairly young. You can't really, you wouldn't, you know, imagine that he would want to be on the sidelines for too long. There have been some suggestions that he would make a very good foreign secretary, allowing Andy Burnham to focus on the domestic policy. But that would require them to really, you know, to put aside a lot of personal animosity. You know, Starmer had backed Burnham, I think it was 2015 when he ran for labor leader. Burnham's very belatedly backed Starmer in 2020. There's no love lost between the two. But, you know, if you're looking for someone to front Britain's, you know, Britain to the world, you could do worse than Keir Starmer. I think that's one area where the public have given him quite a bit of credit on. But there are other candidates too. Yvette Cooper's in the job, so who knows. But I think Starmer will probably want to take a break to consider things for a while, but I wouldn't have be surprised if he's back in some capacity.
- [37:42]
Kailey Leinz
All right, Therese, thank you so much. Therese Rafael, member of the Bloomberg editorial board. We appreciate it as we consider the turnover once again in the UK government. But as Therese talks about this notion that it wasn't even just the tide shifting against Keir Starmer, but his Labor Party after their sweep to power in 2024. It raises questions about whether this is just once again a year that is working against, against incumbency. And you certainly see echoes of that anti incumbent behavior here in the United States as well as we careen toward our own midterm elections. And it's on that note that we welcome now back to our Washington D.C. d.C. Studio, Frank Lutz, the pollster and CEO of FIL Inc. Who is with us now on Bloomberg TV and Radio. Frank, it's good to see you.
- [38:24]
Frank Luntz
Good to see. You know, I was just in London last week.
- [38:27]
Kailey Leinz
Were you?
- [38:27]
Frank Luntz
I met with Tony Blair, who's been the most successful labor leader of the last 50 years. And the fact is when labor tacks towards the center, when it takes common sense, approaches policies and doesn't try to govern with an ideological bent, labor wins. And when labor goes ideological, they lose. And that's something that the people who are still in power now need to consider. Common sense solutions, resolve results, get things done. That wins. Ideological politics, even in the UK and we see some of that here in America, that loses.
- [39:05]
Joe Matt
Well, it's easy to connect the dots to the US on this, right? We're going to see the Senate today, Frank vote and likely pass a bipartisan housing bill that every lawmaker who comes on this program is going to talk about because it's the one thing they could collaborate on after this is the store closed,
- [39:25]
Frank Luntz
see what happens in Iran. But we don't even know whether we can trust the agreement, whether we trust what we're seeing. The problem is deeper than just the politicians. The problem is that the American people have lost faith, trust and confidence in their leadership. Not just in the political leadership, but the leadership of lawyers, doctors, professionals, business people, people. We are suffering through a crisis of confidence in the people in charge. And until people step up and say, enough, I hear you, I get it, and let's start bringing accountability, responsibility, until that happens, this is going to get deeper and deeper.
- [40:10]
Kailey Leinz
Well, you talk about the deal with Iran and it's unclear whether or not we can trust it. Does the American electoral want to see an end to this conflict that the vast majority of them didn't want started in the first place? I just wonder for all of the talking about how this may or may not be an ultimately strategically satisfactory detail deal for the United States here in Washington, if everyday people are saying no, we're glad it's over, it doesn't matter what the end game ultimately was.
- [40:34]
Frank Luntz
So here's the problem. They want it over that you're correct, they didn't want it to start in the first place. But now they don't trust the details. They don't trust what's actually being written there. They do not want Iran to have nuclear weapons. They do not want Iran to be in control of the straits, of the oil market, but they're not willing to do those things that will remove control from Iran. So now in this catch 22 where I don't know how you fix something that's so horrifically broken that we, we want services, but we don't want to pay the taxes. We want Social Security and Medicare, but we don't want to invest in the future. You can't have it both ways. And at some point, someone has to say, look, they made promises to you that they're going to break. Sorry about that, but we have to get our act together.
- [41:24]
Joe Matt
So does President Trump get credit for stopping the war or is he blamed for starting it?
- [41:28]
Frank Luntz
Oh, there you go. That's perfect. He gets, he does get blamed for starting it. They did not want this. Republicans did not want this. And he cannot keep pursuing it. When the public says no. And the issue with Congress is that they keep saying, this is our responsibility, we declare war, it's our vote. And the public says, I don't trust you either. I don't want what's happening in the White House. I don't what's happening on Capitol Hill. At some point, who do you turn to? The Supreme Court has lower approval ratings now than ever before. The media, this institution, lower levels of trust and respect than ever before. Every institution. What the hell are we supposed to do when we look at television and we say, I don't trust me, I don't trust anyone who's speaking to me now and I don't know how to fix it? Wow.
- [42:22]
Joe Matt
If you don't, who does?
- [42:25]
Frank Luntz
I'm listening to the experts. And if you're an expert, and I use that in quotation marks, we don't trust them either. We don't trust the scientists, we don't trust the experts. In business, Bobby Kennedy is able to lead the Health and Human Services Department because he shares that same kind of skepticism to the people who got us here. The problem is, who's going to get us out of here?
- [42:50]
Kailey Leinz
Well, and when we consider that, obviously this erosion in Trump trust didn't happen overnight, Frank. This was, you know, through repeated majorities and minorities and what have you. So it probably can't be expected to change overnight either, no matter what happens in November. But with all of this in mind, if you had to call the outcome of the midterms in November right now, where will we be? Is it a Democratic House and a Democratic Senate?
- [43:16]
Frank Luntz
Democratic House. A tie in the Senate Senate, which will go to the Republicans because of the Vice president. But right now, Republicans are not participating. And this is what I say to every American right now, because this is important. It's not the pollsters who are going to get this wrong. If Republicans aren't voting and Democrats are, that tells me they're going to be a couple of Democrats who get elected in the Senate who we did not see and it's not the polling is wrong, is that Republicans didn't turn out. And that's why it's too close to call.
- [43:47]
Joe Matt
What's going to happen? I think it's Wednesday. The president goes to this steering committee lunch in the room with Republican senators. Will it feel different.
- [43:56]
Frank Luntz
No.
- [43:57]
Joe Matt
Than it did last time, the time before that.
- [43:59]
Frank Luntz
There are some of them who are angry at him.
- [44:01]
Joe Matt
Yeah.
- [44:01]
Frank Luntz
For the Texas, for the endorsement that cost John Cornyn the Senate seat. And the fact is a Democrat can win in Texas if you have low Republican turnout and the Hispanic vote, which had moved towards the GOP but is now dead center, undecided, you could even see Texas flip.
- [44:21]
Joe Matt
Wow.
- [44:22]
Frank Luntz
And that was a decision that the president made. Ohio Republican incumbent, a previous Democratic senator seeking to get his seat back. Alaska turnout is critical. Alaska and Maine turnout is critical in determining who wins. North Carolina, Trump bullied and just pushed Thom Tillis out untilis said, enough, I don't want to do this anymore. Well, that seat's going from Republican to Democrat. So I can show you race after race where the president's involvement is more likely to lead to a Democrat than a Republican. But in the end, if he focuses on affordability, if he focuses on health care, if he gives people the confidence that they need to believe that next year will be better than this year, he'll be okay. But I don't know if he's going to do that. I don't know if his language is going to be sufficiently targeted to say to people, have faith and trust in me, have confidence that things are going to get better. Because I'll tell you, the words that he's using right now are not affecting effective.
- [45:30]
Kailey Leinz
Well, he, of course, though, isn't running for election again. It's Republicans in Congress who are up for the vote this time. So is it, if it, is it wise at this point in the cycle for those Republicans who are on the ballot to break from the president if he's not doing those things, or does it still serve to have close ties to him?
- [45:50]
Frank Luntz
That is a great question. And the answer is if you break, you break the party. If you break to save yourself, you hurt everybody else. So in the end, the Republicans will rise and fall based on what the American people think of the president. And make no mistake, Donald Trump is the most powerful political leader in my lifetime, even greater than Ronald Reagan. People are going to vote based on what they think of Donald Trump, not necessarily what they think about Congress. And it's behoven to him to communicate more effectively he's doing right now. And if he chooses not to, if we keep hearing about inflation. I love inflation or affordability is a hoax. If that's we're going to hear from this White House, then Republicans are in trouble.
- [46:36]
Joe Matt
We got a wrap in a minute, Frank, but we woke up the news of Alan Greenspan passing today emblematic of a Washington that valued institutions and in this case, a giant of a man whose voice people did believe. You don't see that very often anymore. Is this and watch the counter to what you're describing.
- [46:56]
Frank Luntz
Yes, and watch the when people come to pay their respects to him in the next few days, watch how many Democrats will be there. There'll be Democrats, Republicans, political people, business people. Greenspan could bring everyone together in a single room at a single time, and that doesn't exist in Washington anymore. More Alan Greenspan was more than a legend. He was a guy who could his voice was so significant, so essential, and we don't have that kind of person right now.
- [47:26]
Joe Matt
I appreciate your being here as always, Frank. It's great to compare notes. 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 Game Night Rush or any night of the week. Really.
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Rick Davis
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Joe Matt
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