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- [00:00]
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- [02:00]
Tracy Alloway
It's Tracy Alloway and Joe Weisenthal. We are very excited to announce that Odd Lots is going to Washington.
- [02:08]
Joe Weisenthal
That's right. For the first time, we are going to do a live public Odd Lots recording in our nation's capital. That's going to be March 12th in Washington D.C. at the Miracle Theater and guests will be announced in the coming days. But in the meantime you can find a Ticket link@Bloomberg.com Odd Lots Bloomberg Audio.
- [02:31]
Jill Wiesenthal
Studios Podcasts Radio News.
- [02:45]
Joe Weisenthal
Hello and welcome to another episode of the Odd Lots podcast. I'm Jill Wiesenthal.
- [02:50]
Tracy Alloway
And I'm Tracy Alloway.
- [02:52]
Joe Weisenthal
Tracy, let's get back on the supply chains, shipping and industrial policy beat.
- [02:57]
Tracy Alloway
I love it. I've been waiting for us to get back on that. Although actually. Okay, so I'm excited about this for two reasons. One is I enjoy talking about supply chains and talking about how goods are actually transported. And I think I've told you before, I actually wanted to be a commodities reporter because, like, there's this element of romanticism to shipping actual things moving actual stuff around the world. But then secondly, the reason I'm excited for this conversation is because this is a rare example or instance of something that has bipartisan support.
- [03:32]
Joe Weisenthal
Yes, that's right. And so obviously during the last administration we saw these things. There was the CHIPS act, there was the Inflation Reduction act, which primarily focused on energy, a lot of alternative energy. There's been some question, obviously with the changing of the guard in D.C. are we going to see some more like activist efforts to shore up certain aspects of the US Industrial capacity? There's a lot of anxiety about that right now. But, you know, it's obviously an open question where that's going to go. But one of the things that has come up in some of our conversations that we haven't dived too deep into it is American maritime capacity specifically. And it comes up when we reference the Jones act, and it comes up when we talk about port automation and we've talked a little bit about icebreakers and things like that and how sort of atrophied US Capacity has become. And so then there's this question like, you know, A, what can we do about it? And B, how urgent is there a reason to rebuild this capacity?
- [04:34]
Tracy Alloway
I was kind of wondering how long it would take for us to bring up the Jones act in this conversation. And the answer is about one or two minutes. But I think this is, it's a really interesting topic from an odd lots perspective. We have done shipping episodes in the past and obviously everyone learned during the pandemic that shipping costs are really important. But also I'm just interested this discussion from a sort of policy design perspective. How do you go about actually designing something like this that at first glance seems absolutely sprawling and complicated and touching on all these different things?
- [05:08]
Joe Weisenthal
Well, I'm excited to say we really do have the two perfect guests for this conversation. We're gonna be speaking with Republican Senator Todd Young from Indiana and Democratic Senator Mark Kelly from Arizona. Senator Kelly is a trained merchant Marine. I see a class of 86, the Merchant Marine Academy. So like I said, truly the perfect guests. Senators Kelly and Young, thank you so much for coming on odd lots.
- [05:37]
Mark Kelly
Thanks for having us.
- [05:38]
Todd Young
Yeah, thank you Joe and Tracy for having us on.
- [05:41]
Joe Weisenthal
Why don't we just start? Why don't you describe one of you or both of you describe the existing state of America's maritime capacity and just like why it's something that we need to in your views, address.
- [05:56]
Todd Young
Joe, this is Mark Kelly. You know, just to start, I would say big picture. The state of our maritime industry is really, really poor. I was in a brief just yesterday with the Admiral, the four star admiral, Admiral Paparo, who's the head of Indo Paycom and we're talking about the Western Pacific and he was talking about the Military Sealif Command and how it is in bad shape materially and also from a workforce perspective. But when you consider where we were and where we are today. So when I graduated from the US Merchant Marine Academy in 1986, as you mentioned, we had about 400 US flagged ocean going vessels and that was down by the way from thousands after World War II. Today that number has fallen to 8 80. So 80 US flagged vessels in international commerce flying the US flag. China, our peer or near peer adversary, has 5500. And most of the cargo that comes to the United States can come on Chinese ships. So if you remember what happened in 2021, 2022 with supply chains and bottleneck at seaports, especially on the West Coast. But if China wants to do that similar effect to us, they can on any day President Xi could say, hey, no Chinese ships take cargo to the United States anymore and it would essentially shut down our economy. So this is a problem, it's a national security problem. We got to fix it.
- [07:37]
Tracy Alloway
So how did this happen? I mean, 80 US flagged vessels versus 5,500 out of China is probably pretty stunning statistic. What are the things that went into making I guess the US less competitive when it comes to shipbuilding?
- [07:53]
Todd Young
Todd, I don't know if you want to take that or I could, yeah.
- [07:56]
Mark Kelly
I'll speak at a high level. I mean what we have seen over the years is China in a number of different sectors of the economy, they've subsidized their activities in furtherance of national security and domestic job creation and to master certain technologies and crafts so that they can leverage those for geopolitical purposes and also for commercial purposes to put other industries and other countries out of business. So examples, one example would be semiconductors. And it's not just the Chinese. Many other Asian nations understood back, you could point to the 1980s, they understood that having some measure of control and expertise over semiconductor technologies was important to their growth and also important to their military. Using these technologies, embedding them in different military platforms, and so they invested in them. We instead we have a more efficient economic model that doesn't lead to the sort of over investment and waste by our capital markets and others that the Chinese do. We also don't look at economic exchanges historically through a military lens. Well, the disadvantage of that is when other countries are subsidizing their businesses, in this case shipbuilding, and we're not subsidizing, they will undercut us on price and given enough practice, sometimes undercut us on quality. So we have gotten out of the business, in the case of semiconductors, of making them. And over time we became vulnerable to interruptions in the supply chain. The interruption that we might experience in shipbuilding, our maritime industry that Mark just alluded to, is one we're trying to prevent. We don't want a situation, whether it's a pandemic or a military conflict in which we are dependent on our chief adversary, China, to move materiel and personnel to other places. And on a day to day basis, as our government leaders are making foreign policy, we don't want to be coerced into making certain decisions by the mere threat of Chinese interruption of our economy. So that's why at the highest level this is very important and why some sort of, of government intervention is needed. Because this in the end is an economic security issue and also a national security issue.
- [10:40]
Todd Young
And Tracy, you know, to add on to that just a little, in the 1980s we used to do this differently and before there was some more government involvement, we got out of that kind of left the maritime industry totally on its own and it just decayed over decades, over the last 40 years. And the other concern here about it's not only the number of ships, but the Chinese ships, the ocean going, their Ocean going vessels, 5,500 or so, that they have requirements put on them by the PLA Navy. So these ships are well equipped and configured to be what they need if they were in a conflict with us. Now we rely on the Military Sealift Command for our initial capacity to move combat equipment and troops, in some cases troops overseas. But those numbers are rather limited. And the reason why you want a large maritime fleet is not only peace time to move cargo and it's healthy for our economy and it also helps US Shipbuilding. But the other reason is in time of conflict, we might have to rely on this capacity of ocean going merchant vessels to get combat power across the Pacific or Atlantic.
- [12:09]
Mark Kelly
Sorry, I was just going to build on Mark's point and emphasize the capacity that Mark just alluded to is what we're essentially trying to do is we're trying to train more mariners, build more ships, and then create more yard space in our existing yards and perhaps some older yards that need to be refurbished. Create more yard space that can support additional military shipbuilding and repair during a wartime situation.
- [12:48]
Jill Wiesenthal
Foreign.
- [12:54]
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- [13:53]
Jill Wiesenthal
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- [13:55]
Todd Young
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- [13:58]
Mark Kelly
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Jill Wiesenthal
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- [14:01]
Tracy Alloway
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Joe Weisenthal
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Mark Kelly
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Jill Wiesenthal
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- [14:24]
Tracy Alloway
Therapists were compensated.
- [14:26]
Joe Weisenthal
It's interesting, you know we're having this bipartisan conversation and you laid it out the sort of tension very well, which is that sort of American economic philosophy has been optimized for efficiency and profit and obviously we're extraordinarily wealthy as a country, probably enlarge part of that. But a there's the geopolitical risks that emerge with losing basically the ability to build stuff. And you mentioned semiconductors and ships, and there's a lot of this. And so a, you know, you run the risk, it's overseas. And then over time, perhaps they don't even need the subsidies anymore because they just have years and years and years of practice getting better and better at it. Do you see this sort of framework, this sort of lens with which to view economic policy is fundamentally changing in D.C. because we're trying to sort of understand how much momentum and continuity there will be for just this general notion of what people call industrial policy?
- [15:25]
Mark Kelly
I do. I believe a lot of minds have been changed and policymakers penchant for embracing these sorts of policies has fundamentally changed. Mark was helpful to me as we tried to push through the Chips and Science act, dealing with the semiconductor challenges. And I think through that exercise, many of us had to make some what were challenging arguments to colleagues about why we needed to bake in a national security premium to the price of certain products, knowing that if we didn't make them here, had the capacity to make them here in the future, there would be national security consequences to that. And we've done that on so many other technology areas in the past. The only difference now is that we have an adversary that does not really look at any commercial transactions through a purely commercial lens. There's always a geopolitical or military overlay to it. So we have to extend the longstanding philosophy to other areas of our economy in order to protect our people. So if we continue to make the arguments, I think more people in Washington will embrace what most people across America already intuitively understand, which is, yes, I remember during the global pandemic when I tried to go to Walmart and buy a consumer electronic and the shelves were half empty. They understood why that was and why it's hard to run a modern economy without more resiliency and a little more just in case instead of just in time.
- [17:09]
Tracy Alloway
So one of the things that comes up quite a lot on this show is the importance of institutional knowledge. So, you know, you can have people in D.C. agree that the U.S. should build, you know, more big and complicated things, whether those are semiconductors or ships. But you actually need people who know how, how to do that. And if we haven't been building these things for decades, then there probably aren't that many people around who have practical knowledge or experience of how to do this. And in fact, I don't think there's any major shipbuilder that is actually headquartered in the US Although there are some subsidiaries. How do you actually go about building up institutional knowledge for shipbuilding.
- [17:50]
Todd Young
TRACY so one of my classmates from the US Merchant Marine Academy in 1986 is a woman named Jennifer Boykin. She's the president of Newport News Shipbuilding. And before I was in this job, I remember going down there to visit her and talking about some of the workforce issues. She builds aircraft carriers and Virginia class submarines. You know, one of the preeminent shipbuilders in the world. When you consider just the capability of these vessels, a US Aircraft carrier or the Ford class aircraft carrier and the Virginia class attack submarines are, you know, there's nothing better. So we can build really, really good and capable ships. But one of the challenges, you know, the chief faces is what you're talking about is the workforce. You know, constantly trying to find people that will do these jobs and do them well and have the skills. Now they train a lot of their own people, welders and pipe fitters, electricians, but they often run into challenges in finding people to go into these jobs. And when they need people that are trained already, that ecosystem of shipbuilders doesn't really exist anymore in the United States. So part of the benefit of this and in the legislation itself is a strategy to provide help for training programs. So to build the workforce. You can think of this as kind of a three legged stool, one of them being the shipyards, one of them being the US flagged vessels, and the third being the workforce. And by supporting the schools like the US Merchant Marine Academy and the state maritime academies, and also the, you know, the schools that train the unlicensed mariners, but then also programs to, you know, help shipyards find pipe fitters and train them, and welders and electricians and all those trades will then grow this entire ecosystem. So there's extra capacity of a workforce that existing shipbuilders that build naval combatants can rely on, and then that extends not only to the workforce, but to the companies that build the parts, you know, pumps and pipes. If you grow that, there's a more competitive economic environment, there's more availability. In some cases now, when they're buying, you know, a pump or pipes, they might have only one or two vendors that they can rely on. So the idea here is by building the U.S. merchant Marine and the shipbuilding workforce, we're also going to help our naval shipbuilding.
- [20:44]
Joe Weisenthal
Well, this is actually just a good moment. Why don't you describe what, give us the outline of the Ships for America Act. How much do you want to spend? What does it hope to achieve? What would the US Industry look Like if all successfully implemented.
- [20:58]
Todd Young
Well, it's a 300 page piece of legislation. It touches every aspect or nearly every aspect of the maritime industry. I guess we'll, I'll just start kind of in a random place here. Provide for a maritime security advisor within the White White House who would lead an interagency maritime security board to make some whole of government strategic decisions on how to implement a national maritime strategy. It also establishes a maritime security trust fund that would reinvest duties and fees that are paid by the maritime industry into maritime security programs and infrastructure programs. With the goal here of having 250 Oceango and merchant vessels in 10 years. We would create a strategic commercial fleet program. We would change or establish a rulemaking committee on commercial maritime regulations and standards. And then we would do things like requiring government funded cargo to move on US flagged vessels and requiring a portion of the cargo imported from China to go on US flagged vessels starting at a later time. There's tax Credits, there's Title 11 Federal Ship Financing, there's shipbuilding financial incentive programs in the legislation. There's also a part of this that's about manufacturing and innovation and coming up with the next generation of ships and ship energy systems and I could go on.
- [22:36]
Tracy Alloway
Yeah. The bill in its official format is actually 344 pages long and I will confess I did not read all of it.
- [22:43]
Joe Weisenthal
Did you upload it to ChatGPT?
- [22:45]
Tracy Alloway
I did not. That's a good idea actually.
- [22:47]
Joe Weisenthal
Yeah, I did.
- [22:48]
Tracy Alloway
One of the things I was wondering is, you know, this is kind of a devil's advocate question, but a lot of the act as you just outlined is about creating incentives to build ships through things like tax credits or providing some subsidies for construction or training. Why can't the US government just fund ships directly? If ships are so important for national security and trade, why even try to leave it to private capital to build?
- [23:18]
Todd Young
Well, that's a good question. I mean, I guess that's what China does, right? They, they build them, you know, they put them out there on the oceans. They really belong to the Chinese government in a way. We are a democracy, we're a capitalist society. We believe in private markets and private ownership and we believe in to some extent maybe helping companies but eventually getting them to the point where they're on their own, they're profitable, they're creating good paying jobs. These are jobs often that you can raise a family on that do not require a four year degree. So these are, you know, great, you know, jobs that are, you know, provide an economic benefit, not Just to the people who work them, but to our country. And they help us grow the economy. I don't think the government operating its own, you know, fleet vessels to move commercial cargo, you know, makes a ton of sense because this is, this is an important part of our economy. It's deteriorated over the years. But what you're suggesting would be really like a wholesale pivot to government owned industry.
- [24:31]
Joe Weisenthal
Let me ask another question. We've done a lot on industrial policy in the past, and one of the preconditions, industrial policy can fail easily. And you can have cronyism and you can have companies over billing the government for mediocre products. And this is just one of the pitfalls of any time there's a lot of public money going to something. But one way that this gets addressed historically in some markets is this idea of the domestic champion has to be competitive on the global market. And so if you're a car company or a chip company in China or something like, you know, you don't have any guaranteed buyers overseas because the chip maker is still competing with Texas Instruments or BYD is still competing with Tesla. What are the mechanisms that you have in place or that you envision to still have that sort of market discipline, so to speak? So that, yes, there is this public money going, but there is still this element that, yeah, we want the ships to be really good and competitive and competitively priced and to sort of win, so to speak, so that we know we're getting value from the spending.
- [25:46]
Mark Kelly
Well, yeah, let me take that. And frankly, this builds off of the previous question. First, I've learned a lot and frankly thought a fair amount about industrial policy in recent years through the CHIPS Act. From a purely economic standpoint, there would be no difference when it comes to direct payments to grantee companies that are charged with building ships on behalf of both our commercial industry and for future national security reasons. But administratively, you can cut down on any concerns over cronyism or waste by having a neutral arbiter. And despite some anomalies over time, our IRS is a pretty neutral arbiter. So when you are funding this shipbuilding initiative through the tax code, it does provide a neutral arbiter. Sometimes. The downside to that approach is that you end up funding through the tax code more enterprises and certain enterprises that you wouldn't otherwise fund. So there are trade offs when you make decisions about how you administer your industrial policy. That would be point one. Point two about establishing market discipline is very important. If you look at semiconductors, that market is incredibly distributed and ramified all across the world. We will see for any given semiconductor, it going across international borders dozens and dozens of times before it becomes assembled component. In the case of ships, of course, you're going to have components going in and out of the country some, but it's less distributed. And it will be the job, in the main of our diplomats and of our private enterprises to sell our ships into other markets. We need to open up other markets through trade policy, something I'm also an advocate of and will continue to argue for, in part. And this is a rarely mentioned dimension of trade policy. But one of the reasons we want to trade with the rest of the world is to enforce a certain efficiency and discipline on our own economy so that we will see a deployment of resources efficiently and we can grow faster and all become more wealthy. So, I mean, that's how this will be accomplished. But what we have right now is we have a more concentrated shipbuilding industry in particular countries because they see not only the commercial, also the national security upside to excelling in shipbuilding. And it will take some work from our government to open up foreign markets for our ships down the road. So we're not there yet. We can't wait for that. However, I mean, we own 3% of the global commercial fleet right now. China owns roughly one fifth of the world's fleet. And they will, through their bulk carriers, move a far larger proportion of American goods into the United States. So they've got us at the end of a barrel, frankly. And there is some urgency to us beginning this exercise now, especially in light of many of our national security community's predictions about Chinese misbehavior vis a vis Taiwan or South China Sea, which will require a maritime response from the United States. And at this point in time, we just cannot move enough materiel and enough of our soldiers, sailors and airmen to win a fight. And that ought to send a shiver down the spine of most Americans.
- [29:51]
Tracy Alloway
Since you brought up the broader trade landscape, would you expect retaliation from China for this act? I think it's fair to say at the moment, the relationship between the US And China is pretty frayed given the ongoing trade war. And one of the things this act proposes is creating a commercial cargo preference so that in 15 years, 10% of all cargo that's imported into the US from China will need to be imported on US flagged vessels. And I imagine that China might not like that. Right. We talked earlier about how they've been supporting their own domestic shipbuilding industry. So clearly this is important to them. Could they potentially respond in Kind with their own restrictions.
- [30:38]
Todd Young
Well, they could always do that, Tracy. But when you think about 10% is pretty modest. You know, we're building our capacity. We're going to require, you know, certain cargo to be carried on US flag ships under, you know, this act. But we can't be making industrial policy decisions based on what we think the response from China is going to be. You know, if they respond, we'll figure out a way forward and figure out how do we, you know, counter a response if it's unfair. But right now, when you just consider the capacity that China has in this industry, 5,500 ocean going merchant vessels and we have 80, we've got to turn this around. Like semiconductors. We didn't get into the details of why the semiconductor industry is so important, but the best semiconductors are made in Taiwan. Company called tsmc. And if we lose access to those. This is part of the discussion we had today with or yesterday with Admiral Paparo. If we lose access to semiconductor chips from Taiwan, we could very quickly lose 5 to 10% of our GDP. Unemployment could go up 10% in the United States rather rapidly. So that's one of the reasons we wanted to onshore this capability. And Todd was the author of the bill that I worked on with him. So, yeah, I think it's always possible we could see a response from the Chinese, but that doesn't mean we shouldn't do this.
- [32:16]
Mark Kelly
Yeah, Tracy, we have to assume that the Chinese will be upset. But what they aim to do, and it's an intelligent thing to do, is by threatening a response because our economies remain interwoven. By threatening a response, they want to deter us from making our own economy more resilient. And as long as we remain vulnerable to their provocative threats and activities, then our policymakers will have to think about the economic cost and sometimes even military costs they'll impose on our country. We have to get ourselves out of this predicament. And why not do so by being consistent with something we've told the Chinese and the rest of the world for generations, which is the United States of America will be the world's best friend and at times your best enemy. But all we ask to ensure we remain friends is a measure of reciprocity. It's a fundamental trading principle. And the Chinese favor their own commercial vessels. The Chinese offer extensive subsidies not only for their shipbuilding industry, but across the board for industries they regard as strategic. So we're following through with a long standing philosophy. And a key here is that when we make these sorts of actions. We do so in coordination with partners and allies. In this case, in the last administration, the Secretary of the Navy and the administration were able to unlock a significant investment which I understand may be forthcoming in our Philadelphia Naval shipyard from South Korea. So that's an illustration of how if we start to get some buy in from other economies and businesses and countries to our own shipbuilding exercise because they too have a vested interest in our economic and military strength, we can mitigate any blowback from China.
- [34:28]
Joe Weisenthal
You sort of anticipated my next question because one way that you can sort of balance the goals for efficiency and dynamic market economies alongside the national security concerns is working with allies and countries that we trust and countries in similar positions and et cetera, in your law, in your proposed bill. What is the role for foreign companies either building directly here or US Investment elsewhere, but among friends, so to speak, in revitalizing this capacity? How are our allies treated?
- [35:07]
Todd Young
Well, we want our allies to work with us here in the United States. There are foreign shipbuilders that could build capacity here in shipyards and be our partners. You know, that's built into the legislation. So this could benefit our allies. And that's one of our strategic strengths, is we actually have allies. China doesn't have that. So when we develop this sort of policy, it's important that we keep our allies in mind. And this legislation does that.
- [35:57]
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- [36:56]
Jill Wiesenthal
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- [37:55]
Tracy Alloway
Other things I'm sure people will be curious about is the ultimate impact on cargo costs. And as you mentioned, during the pandemic, we all experience the frustration of not being able to buy toilet paper or electronic goods or whatever because of empty shelves. And with this act, on the one hand, you're trying to expand capacity with additional ships, which would presumably bring costs down, but on the other hand, there are people out there, I'm thinking specifically of Lars Jensen, a shipping expert, who argue that the act as currently designed, would increase shipping costs for US importers and exporters. And yeah, as we learned during the pandemic, the cost of transporting goods is pretty important to broader inflation. It feeds into almost everything, at least when it comes to goods. How do you sort of balance, I guess, the additional costs of transitioning to this new system versus ultimately trying to bring down prices?
- [38:54]
Mark Kelly
Well, let me address that from an economic standpoint. What you want to establish is certainty in your economy and at the consumer level and the business level. You don't want big spikes and then valleys and prices. That does not lend itself to stability or confidence in the markets. It makes it very difficult at the household level to plan your expenditures. We, I think all experienced a measure of that during the pandemic where some things were shooting up and then other things were on discount. And it became kind of an alternative universe. And the way we aim to address prices, and you alluded to it, Tracy, was by making sure we have more control under a key uncertainty in the value chain. And that value chain is the shipping of your products across an ocean. And that's at the export and import level. And so we have control over, over that. Does that in the near term, prior to a crisis, lead to marginal premium on, on certain products? It could, it could lead to a marginal increase, but net net, you're not going to be experiencing those highs and, and lows and most importantly, you will not experience the incredible cost of losing sovereignty, losing the ability to make your own economic policies because of economic coercion, a key tactic of the Chinese Communist Party, or to be able to defend your way of life through military force, because you can't move the men and women to where they need to go and the material and difficult circumstances. So, you know, as with other construction efforts, we build military jets here. For example, there wasn't a robust enough consumer market in the United States to build fighter jets, so we asked the taxpayers to front some investments so we'd have the capacity to build it for our military. There's a dimension of that here as well.
- [41:15]
Joe Weisenthal
I mean, I think this is a really important point, and it gets to this very sort of deep tension. Everyone likes the idea of spare capacity, especially in the moment, like a March 2020 or a pandemic or a theoretical war. On the other hand, you know, in times of peace or in times of health, when there isn't a pandemic, you know, it is a cost. And it's very hard to quantify or sort of perhaps intuit the price that you're paying for this sort of, you know, potential black swan event. Just real quickly, because we didn't touch on this, how much are you envisioning this would cost to get to your goals? How much would be actually allocated, and what are the funding mechanisms? I think you mentioned some sort of trust fund. But just talk us through the dollars aspect.
- [42:03]
Todd Young
Well, this bill is paid for. I mean, it's paid for within fees that are generated within our maritime industry. So there's not a significant amount of, like, direct funding. I don't think we have a score on it yet.
- [42:17]
Joe Weisenthal
Okay.
- [42:18]
Todd Young
Tax credits are paid for by fees that shipping companies will be paying as they bring cargo into the United States, tonnage fees and other programs like that. So in some ways, I'd say it's different than the Chips and Science act in that regard and how these things are paid for.
- [42:38]
Tracy Alloway
How confident are you of pushing this proposal through? Because on the one hand, it has bipartisan support and there aren't a lot of things you can say that nowadays. But on the other hand, a lot of the focus of the new administration seems to be on dismantling various things or making things more efficient versus actually building new stuff.
- [43:01]
Mark Kelly
Well, I can. As a Republican, I can tell you that President Trump likes to build things. He likes beautiful things. He likes to create jobs, manufacturing jobs. He especially likes the opportunity to create more manufacturing jobs in the industrial Midwest. A place that loves President Trump. And there will be components of these ships, if not additional shipyards, brought to bear on this national and economic security challenge. And he's enlisted the help already and his national security team of key individuals who are fully supportive of this effort. One being a friend of Mark Kelly's, Mike Waltz, who is now the national Security advisor. He's bought into this vision in the past as a member of Congress. Another is Jerry Hendricks, who Mark also knows happens to be from my state. Jerry is a supply chain expert with particular expertise in shipbuilding and spent a career in the Navy, and he's bought into this sort of vision. So we have some key allies and surrogates who can help us make the case. It's never easy during times like these, when we Republicans, I think, are rightly focused on fiscal responsibility, which I don't want to suggest. Mark doesn't care about either. He does. But we are warm to making our military more effective, and this is an important way to do so.
- [44:42]
Todd Young
And, Tracy, I think there's going to be a tremendous amount of enthusiasm for this legislation. It's the kind of thing that works on both sides of the aisle. We all realize that China is an adversary. President Xi, the Chinese president, has said things that are rather aggressive in the past. We've got to rebuild this industry. We are a maritime nation. We've got water on both sides. The Chinese have this vision of being a worldwide naval and maritime power. They're building more naval ships than we are. Every single year, they're building more submarines. We've got to get this back on track. And this legislation is going to be a part of the thing that we need to do, a big part, actually, to turn this. Well, since I'm a Navy guy, to turn this aircraft carrier around, take some time. This is a big part of this. But unfortunately, I've got to go. So I want to wrap this up here with you. I appreciate your interest in this. You know, Todd and I have been working on this for some time. Todd mentioned Mike Waltz originally. When this started, it was because we had a common interest in this topic. He's now the President's National Security advisor. So we know, at least in his office, there's a lot of interest in getting this done. So I'm incredibly excited about getting this across the finish line. We're going to reintroduce this soon in this Congress, and. And then Todd and I in the Senate and Representative Kelly in the House and Representative Garamondi, we're all going to work together. To get more co sponsors to go through the process of getting this across the finish line.
- [46:20]
Joe Weisenthal
Senators Mark Kelly and Todd Young, thank you so much for coming on. Odd Lodge, that was fantastic.
- [46:26]
Mark Kelly
Thanks for having us.
- [46:27]
Todd Young
Enjoy.
- [46:40]
Joe Weisenthal
Tracy. A, I really enjoyed that conversation. B, you're gonna make fun of me because of how boomer I'm getting. Like when, like when I just want.
- [46:48]
Tracy Alloway
To build the big.
- [46:49]
Joe Weisenthal
Yeah, like Senator Kelly starts talking, oh, Virginia class submarines and stuff like that. I get the hair on my arm picks up. You know, I get excited about stuff like that.
- [46:57]
Tracy Alloway
They are cool things. You know what, I was re watching Pretty Woman the other day and I realized I had an epiphany. It's actually, it's all about ship building. Yeah, right. That one guy wants to build ships and Richard Gere ultimately has a come to Jesus moment and decides to build them with him rather than dismantling the company. So, you know, shipbuilding is part of the American dream.
- [47:19]
Joe Weisenthal
I mean it literally. It literally is. And you know, I actually really like this conversation for many reasons. But one, it's sort of like gets down to some core economic philosophical questions. And I remember, I think it was spring of last year we did that conversation with Christian Parenti about Alexander Hamilton's treaty or treatise on Manufactures. And this idea that I think there's two things. A, that a country that can't build things is a country whose sovereignty is really in doubt, I think is a really just like core idea. And it's interesting to hear them articulate this and then this idea that, yeah, the U.S. economy is largely governed, so to speak, by the profit principle and maximum efficiency. And it's cheaper to ship goods on foreign owned ships, particularly if foreign governments are subsidizing those ships, which means it's a de facto subsidy to American consumers. But then the idea of, okay, well, if that ultimately long term puts us in a position where our sovereignty is threatened, it's not just ships, it's obviously things like semiconductors and really many other things. Then you have to think about what is the price you're going to pay for avoiding some tail risk, which is really hard to measure down the road.
- [48:38]
Tracy Alloway
There is certainly a tension there.
- [48:40]
Joe Weisenthal
Yeah.
- [48:40]
Tracy Alloway
The other thing I would say is it's interesting to me how much this lines up with very traditional Keynesian economics. Right. In the sense that Keynes argued that there's a role for government to smooth economic cycles. And we're talking about an extremely cyclical industry that's famous for boom bust periods. And so, you know, coming at it from that perspective the idea of the government being a sort of like, smooth the cycle actor makes some sense.
- [49:11]
Joe Weisenthal
Well, this is interesting. I was, I've been, you know, trying to read more about defense history and about defense procurement, and this is one of the arguments that the big defense giants have always made in the past, which is, you know, you can't just have their argument. And I find it. There's some logic behind it. You know, you can't just have big orders come in during war and then all the orders go away, you know, after the war is over. And then, you know, everyone gets a different job and the factories are dismantled and stuff, because then you, you know, you lose that institutional memory that you're having.
- [49:45]
Tracy Alloway
This is how the Jones act happened. So after the first World War, we had a surplus of ships, and so everyone was like, well, we'll just restrict it to US Owned ships and everything will be fine. And then, you know, fast forward like 100 years and we don't have that surplus anymore.
- [50:02]
Joe Weisenthal
This is a really good topic for us. We should do more on this.
- [50:05]
Tracy Alloway
Do you like how I brought it full circle to the Jones Act?
- [50:08]
Joe Weisenthal
Well done.
- [50:09]
Tracy Alloway
Yeah. Thank you.
- [50:09]
Joe Weisenthal
And one day we're gonna do a Jones act episode. We will the long recurring joke that we've never done a Jones act episode.
- [50:16]
Tracy Alloway
All right, shall we leave it there?
- [50:18]
Joe Weisenthal
Let's leave it there.
- [50:18]
Tracy Alloway
This has been another episode of the All Thoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.
- [50:25]
Joe Weisenthal
And I'm Joe Weisenthal. You can follow me at the stalwart. Follow our guests Indiana Senator Todd Young. He's at send Todd Young. Follow Senator Mark Kelly at Sen. Mark Kelly. Follow our producers Kerman Rodriguez at Kerman Erman Dashiell Bennett at Dashbot. From Kell Brooks to Kell brooks. For more Oddlauds content go to bloomberg.com oddlods where we have transcripts, a blog and a newsletter and you can chat about all of these topics 24. 7 In our Discord Discord, GG Oddlauds.
- [50:54]
Tracy Alloway
And if you enjoy listening to odd lots, if you like Joe get goosebumps when we talk about building big ships, then please leave us a positive review on your favorite podcast platform. And remember, remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.
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