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This is.
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Your weekly Washington Policy Pulse on the Balance of Power podcast. I'm Joe Matthew. Every Monday, Bloomberg Intelligence senior Policy analyst and friend of the show, Nathan Dean shares his weekly call on upcoming catalysts in the nation's capital. Listen for the most recent and relevant policy research from our team at Bloomberg Intelligence. Now with today's installment, here's Nathan Dean.
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Welcome to the Washington Policy Pulse. My name is Nathan Dean. I'm a Senior Policy Analyst with Bloomberg Intelligence. We want to say very much thank you for attending this call. We also want to say thank you to those of you who are coming to us via the Balance of Power podcast. We always welcome your comments and your suggestions. Now we're recording this on September 29th at approximately 10:02am and the reason why I bring up that date is that the US government is scheduled to shut down at 12:01 on October. So this is Tuesday night going into Wednesday morning. Now last Friday I was at a 40% chance of a shutdown and where I am this morning is a 40% of a chance of a shutdown. But I may be wrong on this one and that's my tongue in cheek way of saying that look, things are getting tight and the odds of a shutdown are increasing. Now the reason why you would not have a government shutdown is because the Republicans have offered a clean CR, a seven week extension that goes us through November 20th. And generally the party that offers the clean CR is the one that usually has the high ground and doesn't pay the political price of a shutdown. Then on the other hand, you have the Democrats and we talked about this case in our last week call where the Democrats need to be seen fighting President Trump. The approval ratings aren't the best already and there is plenty of time before now in the November 2026 elections to be able to fix anything if there was any negative impact from the shutdown. Now what do the Democrats want in this? Most likely it's an extension of the ACA subsidies that are doomed, that are actually destined to roll out in the next few weeks. What do the Republic essentially just continuing to keep the government open, or at least via this clean CR puts us through very close to Thanksgiving. And then additional negotiations can take place over the next few weeks. Now, ultimately, I think what it's going to come down to is figuring out what tomorrow brings. So tonight. Sorry, not tonight. This afternoon at 3:00pm Eastern, President Trump is scheduled to meet with both Republican and House leadership at the White House. I don't anticipate much positive news coming out of that meeting. For one thing, I think President Trump's going to make a statement that the Democrats are going to cause a shutdown. I think the Democrats are gonna make a statement that President Trump is ultimately not negotiating. And I think this is anticipated. For me, it really comes down to what does Senator Thune give and what does Senator Schumer give tomorrow morning? If they are talking, then potentially you could see a scenario where you have a one week continuing resolution. And the way that would work is that the Senate would pass it and then the House would have to pass it via unanimous consent. The House is not here, House Democrats are. But House Republicans have remained out of town because of Speaker Johnson's ability put pressure on the Senate to accept the already housed resolution. Now, I think if we see tomorrow morning and both sides aren't talking, then most likely you are going to see a shutdown. Now, what happens in a shutdown? Well, for one thing, the contingency plans for the agencies should start trickling out between now and most likely tomorrow. So each agency has already gotten their guidance from the Office of Management and Budget. And then each agency has to put a contingency plan of what is essential and what is not essential. And for a lot of the folks who are looking at this from the market perspective, if we've got a lot of questions about the Bureau of Labor Statistics jobs number that's coming out on Friday, we'll have to see whether or not the BLS determines that's essential or not. But most often that is not essential. And so that report actually wouldn't be made public. And one of my colleagues over in London even pinged me this morning, said, well, what about the Federal Reserve meeting? You know the Federal Reserve, they need to have this data. Well, they may not. So we'll have to see what the BLS says tomorrow. But those contingency plans should be coming out tomorrow. And at least if they're not made public, they should be distributed to the employees. So then ultimately the folks over at Bloomberg News should get a decent idea of what's going on with the contingency plans. So you know, again we're going to wait and see. But the other thing I would keep in mind is that and one of the reasons why I think there's a local political angle to this is because of Director Russ Vote who is the director of Office and Management and Budget. Now just last week Russ Vote has hinted that he was going to start wide scale layoffs amongst the government workers. We've talked about this in the past. If 85% of the US governments are deemed non essential, maybe there's a scenario where they don't come back. Well, you know, I think there's a local political argument to be made here of why the Virginia, Maryland senators may vote ultimately for a deal to keep the government open is because the bulk of the government workers that would be impacted are here in the Washington D.C. area and there are four Democratic senators who may not want their constituencies impacted like that. Now if there is a deal to be made that's ultimately would negate a lot of this essential, non essential stuff. But again, keep that in mind. Last thing, just again we always repeat this. We don't see much market impact to this. Even amongst defense contractors, their contracts are usually two years, three years in length. But also keep in mind if you're trying to forecast this out for a longer term economic perspective, most government workers are paid on a every other week cycle and the paycheck I think would start this Friday. So you're talking about essentially 10 to 15 days before the paychecks start to not come forth. Every government shutdown in the past Congress has retroactively paid those workers. Contractors who get furloughed are not. But for the government workers who are retro, they're retroactively paid. Again, we're not sure if that's going to happen in this scenario. If it was up to Congress it most likely would happen. But again, we'll see. So that's where we are in terms of the shutdown. I'm going to be having a lot more discussions with clients this later today. So if you want to have a check in with me, just feel free to send me a message or email me and check in with me tomorrow and I'll be happy to give you an update on what happened with that 3pm meeting. Other things to keep in mind. Last week we had the United Nations General Assembly. President Trump gave a speech to the United Nations. I was curious about this speech. So I went over to Bloomberg Economics, who sits behind me, and I asked their senior Geo Economic analyst, Adam Farrer on what he thought of this meeting was and depending on based off his comments, I was like, you know what, why don't we record this and put it out on the terminal? So if you're a terminal subscriber, ping me. I'll send you a link to that discussion. But essentially Adam's key points was that it was kind of interesting that he didn't mention China in this speech. He previewed what President Trump could be doing at the South Korea Asia Summit at the end of October. He also talked about whether or not there was actually some teeth there in terms of President Trump's statements of allowing Ukraine to go back and win the land or Ukraine could win this war. And so if you're interested, definitely let me know and I'll send you a copy of that conversation. Other things that we're keeping an eye on, there was a lot of chatter last week about farmer aid. The Department of Agriculture, the secretary made some comments about how there's going to be new aid for farmers. President Trump even went far further enough to say that we're going to use tariff revenue to pay for farmers. So there's this general anticipation here in Washington that you're going to see another round of farmer aid. As you recall, we saw some of this in the first Trump administration where $23 billion was distributed out to farmers. I am going to think that we're going to potentially see something similar to that, but I'm going to have a much more in depth note talking about the timing of that, probably later this or the beginning of next week. And just for a heads up, we've talked about the farm bill in the past. The skinny idea of a skinny bar farm bill, it's not going anywhere. Nobody's working on it right now just because of the government shutdown issues. Also wanted to give a crypto update. The Senate Banking Committee had originally tried to get their crypto markup. Remember, they had the Responsible Financial Innovation Act. This was the Senate counterpart to the Clarity Act. Remember, this is only Senate banking portion, not the Senate agricultural portion. So this is the security side of crypto, not the commodity side of crypto. Well, the Senate Banking Committee had wanted all of this wrapped up by September 30th. As you can note, it's September 29th and they haven't worked on this. This is well within lines of our anticipation and our expectations. And actually, I think this actually made bode Better for the bill if the Senate Banking Committee and the Senate Ag Committee is actually tied up on the same timeline. So, you know, just I think that actually helps somewhat as well. And then also in the crypto space, you're going to see the SEC and the CFTC come together for a roundtable later this week about Harmon. There's actually some very powerful panelists on here. We're talking about CEOs of Terry Duffy at CME, NASDAQ CEO. There's a lot of folks who are coming to this roundtable and this is really just a good way I think in The SEC and CFTC's perspective is to air out some of the areas that potentially could be more friction going on in the crypto space. For example, just as remember CFTC owns commodities, the SEC owns Securities and both sides sort of want to be able to just play in their space. But also potentially could draw some space from the other side. Where I'm going at is that this meeting could potentially actually, potentially actually this meeting could potentially stave off some, you know, jurisdiction grabbing fights later this year. Also wanted to give an update on what we're seeing with Bank Capital just because again September 30th we anticipated a stress testing proposal coming out from the Federal Reserve. We're in the hearing that that proposal still on the timeline that this is going to be more robust bust proposal than the one that came out in April which just dealt with the timing of stress tests. We're also hearing that again there is another proposal out there maybe potentially tied to the G Sib surcharge. So keep that in mind. Governor Bowman, Vice Chair Bowman actually gave a speech just last week where she pushed the Basel III timeline from late early next year to potentially the end of this year, early next year. I still think the Basel III endgame is going to be early next year and I still think it's going to be one of the more later proposals that comes out from the Fed. So we' waiting on that last three things I want to talk about. You're going to see some news this week related to a meeting over at the Department of Defense. War generals and animals have been flying in from across the globe to have this meeting. I have done no analysis on this whatsoever. I am just telling you what Bloomberg News is reporting. But Bloomberg News is reporting that this meeting is essentially a pep rally. For those of you, I don't know if pep rallies are something that they have outside the United States, but this is something to fire up the troops. It's going to be recorded. It's going be distributed out to the rest of the nation and also to the rest of the military. So again, we'll see what happens with this meeting. But that's what Bloomberg News is saying. Also I will just point out is that even though I've highlighted the meeting with the Democratic and Republican leadership over at the White house today at 3 o', clock, we also have a meeting between President Trump and Prime Minister Benjamin Netanyahu. So I anticipate some headlines on that. Again, I have not done any analysis on this, nor I would, but again, Bloomberg News has some great reporting on that. The last thing I want to leave you with is just this morning we saw two truth social posts from President Trump on tariffs. One was directing a 100% tariff on movies made outside the United States. My first thought, because my wife loves Hallmark movies and they're pretty much made in Vancouver is okay, does that mean there's no more Hallmark movies? But this isn't new. President Trump actually floated this idea back in May and my colleague Holly Fromm actually looked at it at the time and she essentially said weak legal grounds for a tariff of this nature. We don't know if this would be under IPA or something else, but just her high level reading from the Truth Social post back in May that it's on weak legal grounds. We even don't know operationally how it worked because a lot of times movies are filmed outside the United States and then post production is in Los Angeles and vice versa. So again, a lot more theories on that. And then finally he made a post about furniture and calling for tariffs on countries that don't buy furniture in the United States. I think what President Trump's meant to say is that he would put tariffs on any type of furniture, furniture that has been imported from outside the United States. There's already tariffs on furniture that are being imported from outside the United States. So I think this is one of those posts where it's sort of just like I think he meant something else and it just didn't come out that way. But again, we'll see. So with that, I'm going to say thank you very much. We really appreciate your time. Again, feel free to IB me as the headlines come in this week, if you have any questions or even just send me emails and we'll make sure to get you all the information that you.
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Our thanks to Nathan Dean, Bloomberg Intelligence Senior Policy Analyst, bringing you the latest installment of his weekly Washington Policy Pulse. For more from BI or to join this call live each week you can email nathandeenlumberg.net that's n d e a nloomburg.net and come back to the podcast later today for the latest edition of Balance of Power.
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