July 1, 2025 • 52 mins
Watch Joe and Kailey LIVE every day on YouTube: http://bit.ly/3vTiACF.
The US Senate handed President Donald Trump a major political victory with its Tuesday passage of a sweeping domestic policy bill, bringing him one step closer to a signature legislative achievement in an administration that has largely governed through executive power.
The Senate’s narrow approval of the $3.3 trillion package, which likely has set the stage for the bill to be signed into law later this week, extends the tax breaks that were a centerpiece of Trump’s first administration while delivering on key 2024 campaign promises such as a no-tax-on-tips measure and funding for his border wall.
That the bill survived defections from only three senators — Susan Collins of Maine, Thom Tillis of North Carolina and Rand Paul of Kentucky — hints at the tight grip Trump continues to have on his party. It also offers some validation for his tactical gambit of pursuing one mega-bill as a vehicle for his agenda, rather than of a slate of smaller ones.
Bloomberg Washington Correspondents Joe Mathieu and Kailey Leinz deliver insight and analysis on the latest headlines from the White House and Capitol Hill, including conversations with influential lawmakers and key figures in politics and policy. On this edition, Joe and Kailey speak with:
- Bloomberg Washington Correspondent Tyler Kendall.
- Former Republican Congressman Charlie Dent.
- Bloomberg Politics Contributors Rick Davis and Jeanne Sheehan Zaino.
- Yale Budget Lab Economics Director Ernie Tedeschi.
- Bloomberg Tech Co-Host Ed Ludlow.
- Bloomberg New York City and State Reporter Laura Nahmias.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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Speaker 2 (00:25):
I bobviously got about one hundred very tired senators who
just finished a lengthy vote rama more than twenty four hours,
ultimately passing at least in the Senate. The President's one
Big Beautiful Bill, the tax package, of course, passed through
the budget reconciliation process. It was difficult, though it required
(00:45):
some deal making to get specifically Republican Senator Lisa Murkowski
of Alaska on board. As the majority leader, John Thune
lost three Republican votes. Ran Paul of Kentucky, Tom Tillis
of North Carolina, and Susan Collins of Maine all voted
no for this package, leaving the Vice President JD. Vance
to cast the tie breaking vote.
Speaker 3 (01:04):
On this vote, the Ya's are fifty, the na's are fifty,
the Senate being evenly divided, the Vice President votes, and
the affirmative the bill as amended is passed.
Speaker 4 (01:16):
There you have it, having spent a few hours in
the Capitol before, you have the occasion jd Vance on Twitter.
Massive tax cuts, especially no tax on tips and overtime,
he writes, and most importantly, big money for border security.
He calls it a big win for the American people.
Of course, this saga is not done yet. The bill
now goes back to the House, where there is some
(01:38):
consternation about changes that were made on the Senate side,
and we want to bring in Tyler Kendall Bloomberg Washington
correspondent who's live now on Capitol Hill, to explore some
of these changes. Tyler, what comes next?
Speaker 5 (01:51):
Yeah, hey Joe, Well, we are expecting the House Rules
Committee to take this up. It will likely advance out
of that, but then it advances to a full vote
on the House floor, and that's where we could run
into a little bit of difficulty. Now, keep in mind,
this bill was designed not to be tweaked. It's not
supposed to pingpong between the different chambers. But some of
these more fiscal hawks, these members of the House Freedom Caucus,
(02:12):
could potentially threaten to sink it, which would essentially mean
it goes back to conference and the Senate has to
get involved all over again, and it was actually interesting
to hear from Senator Lisa Murkowski you ended up voting
in favor of this package, saying that she would welcome
that if the House kicked it back over to the
Senate with changes, because at the end of the day,
there is pretty broad support about those key pillars of
the package that you mentioned when it comes to immigration priorities,
(02:35):
defense priorities, of course, extending the twenty seventeen tax cuts.
But where these Republicans really were divided, particularly on the
Senate side, was those changes to the spending cuts, and
we even saw that in the three members that ended
up dissenting and voting no on this bill. You had
members like Senator Tom Tillis, who basically staked not running
for reelection on his no vote for this package, as
(02:55):
well as Senator Susan Collins, who both had raised concerns
about what the changes to Medica could mean for their constituents.
But square that with Senator Ran Paul of Kentucky, you
voted no on this package because he wanted to see
deeper spending cuts and wasn't going to vote for any
sort of legislation that lifts the debt ceiling as much
as this plan ultimately does. And I bring this up
because it was interesting to see what sort of compromises
(03:17):
ended up having to be made by Senate Majority Leader
John Thune in order to get this bill over the
finish line. That includes doubling the rural hospital fund to
fifty million dollars, something that you would have thought got
would have gotten Susan Collins on board, but didn't appear
to be enough of a compromise. It also cuts a
controversial tax on solar and win energy projects and revises
(03:37):
a food aid carve out for Alaska, in particular with
Joe and Kelly. As you well know, helped to get
Senator Lisa Murkowski on board, even as she says she
would welcome some changes from the House, ultimately her vote
helped to put this over the finish line.
Speaker 2 (03:50):
Well, would we consider the political calculations that housemaker or
House lawmakers will now be considering as they decide whether
or not to vote for this package? Tyler, How would
a threat from Elon Musk to fund primary challenges to
any incumbent who vote to impact the deficit this much
factor in? Is he a voice at all? That anyone
(04:11):
is listening to, let alone President Trump himself.
Speaker 5 (04:16):
Well, considering that he was the largest US political donor
in the twenty twenty four campaign cycle, not just to
the White House, but also to those down ballot races,
to a tune of more than two hundred and ninety
million dollars, recording to FEC filings. I think it probably
does hold a little bit of weight around here on
Capitol Hill. But as you're describing, it really does put
some Republicans in a tough spot if they are between
(04:37):
President Trump and Elon Musk, because Elon Musk has threatened
to primary anyone that does support the legislation, in particular
when it comes to rolling back those electric vehicle tax credits.
And I'll give both of you a prime example that
I know you're closely watching, which is Thomas Massey in
the House, a Republican from Kentucky. We're not expecting him
to change his vote when it comes to the House package.
(04:57):
He's going to vote no. President Trump has already put
but some muscle already puts some money behind funding a
primary challenger against him with a super PAC. But then
we had Elon Musk, Joe and Keyley yesterday in a
post on X confirming that he intends to donate to
Thomas Massey's campaign in order to give him a little
bit of a funding boost against President Trump's operation.
Speaker 3 (05:16):
Yep.
Speaker 2 (05:16):
And of course President Trump now potentially suggesting having Doge
take a look at Elon Musk's companies and maybe even
looking at deporting Elon Musk though he's a US citizen.
We'll have more on that later in the show. Bloomberg's
Tyler Kendall live from Capitol Hill for us, Thank you
so much, and we want to add another voice to
the conversation now, someone who has had deep experience on
the Hill as a former seven term congressman from Pennsylvania.
(05:37):
A former Republican Congressman, Charlie Dent is with us. He
is now executive director of the Aspen Institute Congressional Program.
Welcome back to Bloomberg TV and Radio, sir. Obviously, with
this particular House of Representatives, which is where this bill
goes next, we have seen two things be true, one
being that the Speaker, Mike Johnson is not afraid to
allow things to fail on the floor, but the other
(05:59):
being that President Trump can twist some arms and usually
people who seem like their holdouts ultimately roll.
Speaker 6 (06:05):
How do you expect this.
Speaker 7 (06:06):
To go down?
Speaker 8 (06:09):
No doubt there will be a heavy whip operation. I'm
sure the President will try to bully and threaten some
members to voting for the Senate pass package. But those
threats tend to work better with Republican members in very
safe seats. I expect those folks in the safe seats
we're making some noise right now will melt under the
(06:30):
pressure from the President. The bigger question is the Medicaid
changes that are of concern to many of the more
swing district or more moderate members. Their problem is not
going to be a Republican primary. Their problem is going
to be losing, potentially losing to Democrats in the fall.
And so those are the folks I think they ought
(06:50):
to pay close attention to these Medicaid changes. That the
Senate went further than the House did on the Medicaid changes.
In many Republican House Republicans, we were a pretty clear
line in the sand on that issue. So I'm anxious
to see how they navigate Medicaid. I could see this
bill being changed once again and going back to the Senate.
(07:11):
You certainly have fiscal hawks on the right who are
screaming about this, but again they're more likely to be
pressured by the president successfully. But it's more modern members
Don Bacon, you know, he could be a no vote.
He's not running again. Tom Massey is an immovable object.
Speaker 9 (07:26):
He won't move.
Speaker 8 (07:27):
And I don't think the Republicans can lose more than
I think they could lose. Maybe two one more vote
and that's it. And so I'm anxious to see how
they do this lip operation.
Speaker 4 (07:37):
Well, it's really interesting to hear you speak about this, Congressman,
and welcome back. You seized immediately on the issue of Medicaid.
Donald Trump knows what an issue this is. He talked
about it on his way to the Alligator Alcatraz Detention
Center in Florida earlier today. Listen to how Donald Trump
put it.
Speaker 10 (07:53):
I think so, I think it's going to be the
greatest bill ever passed. No, no, we're not going to
be playing with Medican all the way million Americans. Yeah,
the Democrats haven't wrong. Yeah, waste, fraud and abuse. In fact,
if you look at what's gone on, we've gone way back.
We take care of Medicaid, we take care of Medicare.
They will blow Medicare and Medicaid because they have no
(08:15):
idea what they're doing, just like they don't have any
idea what they did on the border.
Speaker 4 (08:19):
They have no idea.
Speaker 10 (08:20):
Medicaid is in big trouble with the Democrats.
Speaker 4 (08:25):
Charlie Dn You hear the Republican talking points on this,
beginning with the president waste fraud abuse. No one's losing
their coverage is what we've been hearing, unless they deserve to,
unless they're able bodied adults who should be at work,
or the American people buying that argument.
Speaker 8 (08:41):
Well, the problem for the President is that the Congressional
Budget Office came out with a report saying that somewhere
between eight to I think eight to fourteen million people
or twelve million people excuse me, could be losing coverage
as a result to changes in Medicaid. And so that's
a major problem. You know, you can just say, hey,
it's all about ways fraud abuse, but we're talking about
(09:03):
people who are going to be uncovered because of the
work requirements and also because I think the Senate I'm
not sure exactly where the Senate fell down on the
so called provider taxes that states used to draw down
federal Medicaid dollars. But that's another issue. I mean, so
the President doesn't ever get into the policy details. I
had a big fight with him back in twenty seventeen
(09:25):
over this in the in the White House over at
that time proposed changes to Medicaid. Then we were talking
block rants. I told him it wasn't going to work,
and he got pretty upset with me because I didn't
vote for the bill. But that was going to cut
you over twenty million people from their health benefits at
that time from Medicaid. So that's the challenge that the
president has. He can talk all he wants, but as
(09:47):
long as the reports out there saying over eight million
people are going to lose health benefits, they need a
better argument.
Speaker 2 (09:56):
Well yeah, which gets us to the pulling around this bill,
which just that widely, no matter what pull you look at,
it is more unpopular than it is popular. If the
House ultimately is going to pass this and do so
by July fourth, have the President sign it into law,
knowing there will be roughly what sixteen months until the
midterms in twenty twenty six, how would the party need
(10:17):
to course correct to change that?
Speaker 8 (10:21):
Well, the party has done something here that I think,
I think this has been a miscalculation to put this
all in one big, beautiful bill. I mean, I think
that was always a mistake. The Senate always wanted to
break this in two. You may recall in twenty seventeen,
after the Obamacare repeal replace initiative failed, with John McCain
going like that, turning his thumb down. You know, then
(10:43):
Republicans moved on to tax reform or you know, the
tax changes, and they weren't dealing with spending cuts, just
tax policy. Now, that bill, you know, was enacted into law.
I supported it, but it really didn't help Republicans much
in the midterm election. This bill is different because you
are bing both what I could say are probably unpopular
cuts to Medicaid and to food stamps or snap benefits
(11:07):
and some other areas, and you're also extending those tax changes.
It largely benefit people on the hire income scale. And
so that's the toxic political mix that Republicans are confronting
right now. So I suspect between now in the midterm,
Republicans will be playing a lot of defense. You may
remember in the twenty eighteen midterms, Democrats used the healthcare
(11:29):
issue as a blunt, blund instrument against Republicans in those races.
I suspect Democrats will try to use healthcare and Medicaid
in particular as an instrument against Republicans and marginal swing
districts going forward.
Speaker 4 (11:45):
Well, so where are you on the next twenty four
hours here, Congressman? You seem to think that the House
needs to make changes. It goes back to the Senate.
That means we miss the fourth of July deadline. Does
Tom Emmer not have the votes as he sends out
the notice for lawmakers to report.
Speaker 8 (12:01):
Well, I bet today he does not have the votes.
That does not mean he will not have the votes
by July fourth. But there are I mean, look, I
think they're over a dozen members House members who've expressed
some pretty strong opposition to this bill. As I said previously,
I suspect those on the far right who are concerned
about deficits, they will melt under pressure from the President.
(12:23):
We've heard this before. They'll yell, they'll scream, there, they'll
bang the shoe on the table. But when the President
says support this or I'm I'm going to fund the
primary opponent against you, they tend to fall in line.
The problem will be for these members in these swing districts,
these members who are at great risk of losing their
seats to the Democrats. You know, look, they can either
displease the MAGA base, they can or displease their.
Speaker 4 (12:47):
Constituents written large.
Speaker 8 (12:50):
You know, if Trump is mad at them in funds
of primary, and Trump successful will get some more very
conservative person to replace that individual, that seat will probably
be gone in November anyway. So what's the calculation here?
I would be if I were the president running my
whip operation, I try to figure out a way to
communicate to those few people and listen to them. Because,
by the way, if the House flips, Donald Trump is
(13:11):
going to have a really rough time in his next
two years in office. I mean you're going to see
all kinds of oversight and hearings and people being subpoened.
So Donald Trump better be very careful how he handles
those members. Threats and intimidation tactics are not the way
to handle them at this moment.
Speaker 2 (13:30):
Well, in congressman, if you were sitting in one of
those swing states right now, knowing Elon Musk is threatening
to fund himself primary challenges to those who vote yes
for this bill, which he does not like. Would that
make you second guess your ultimate vote?
Speaker 8 (13:44):
Well, maybe some on the hard right will. But at
the end of the day, I think Donald Trump has
a lot more influence with Republican primary voters than does
Elon Musk. Now, Elon Musk obviously has a checkbook. But
at the end, but Donald Trump is able to rally
much of the base to support his chosen candidates. So
(14:05):
the Mosk threat is real. I suspect Musk could help
with Tom Massey, who will likely vote no. And there
might be some other Republicans who vote now, who are
now on the hard right, who could probably give Elan
a call and say, I'm going to need your help,
my friend. But right now, I'd say that Trump has
(14:25):
more more sway than Musk. But if I'm going to
vote no, I'm in a very conservative district. I think
that Elon Musk might be running to their rescue and
might be able to maybe save them.
Speaker 4 (14:38):
Fascinating. Charlie Dent. Great to have you back, so appreciate
the insights he's been there. As Kaylee mentioned, former Republican
congressman from Pennsylvania, member the House Appropriations Committee now executive
director of the Aspen Institute Congressional Program. We've got some
wood to chop here still, Kayley. As the bill heads
for the House, you wonder, though, if just the hope
to be home for the fourth of July is enough
(14:59):
to actually get the over the finish line.
Speaker 2 (15:00):
Well, we know Washington loves the smell of jet femes.
It can be a driving force. Also on this bill,
we should note it's no longer actually officially called the
One Big Beautiful Bill Act?
Speaker 4 (15:10):
Is that true?
Speaker 2 (15:10):
The Senate was able to call it, Chuck Schumer specifically
to procedurally strip it out. You just call it by
a number.
Speaker 4 (15:16):
Really right now?
Speaker 2 (15:17):
I wonder how that's sitting with pres.
Speaker 4 (15:19):
So no more build back better, no more Big Beautiful Bill.
Speaker 2 (15:22):
Getting rid of the bees at least for now, We'll
have more heat here. On Balance of Power on Bloomberg
TV and Radio.
Speaker 1 (15:30):
You're listening to the Bloomberg Balance of Power podcasts. Catch
us live weekdays at noon and five pm. E's durn
on Apple Cocklay 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 eleven thirty.
Speaker 4 (15:49):
From the majority with in the House. Yeah, Tom Emmer
says there will be a vote tomorrow in the House
following passage today in the Senate. If you're just as
they got it done in the upper chamber, I'm guessing
no one has slept yet. Remember the voter rama started
nine o'clock yesterday morning. It didn't really. They ended up
(16:09):
tooling around with procedural votes all day into the evening
when the voterama actually began, and just after twelve noon
on this vote, we got a tally.
Speaker 6 (16:20):
On this fot fifty.
Speaker 3 (16:22):
The nays are fifty, the Senate being evenly divided, the
Vice President votes, and the affirmative the bill as amended
is passed.
Speaker 4 (16:32):
That's the Vice President JD. Vance was required to make
it happen with a fifty to fifty vote here and
the tie breaker. If you're with us on YouTube, you
see some very sleepy people milling around. And so there
we have it. The big beautiful bill, or at least
the version it took over the course of last evening,
has now passed the Senate, and it goes back to
(16:55):
the House in a slightly different form, and there are
a lot of concerns about exactly how this is going
to work. If you ask members of the House Freedom Caucus,
they're deeply worried about this. It cuts one and a
half trillion dollars in exchange for four and a half
trillion dollars in tax cuts, which is five hundred billion
dollars short of the savings that some of the fiscal
(17:17):
hawks said they needed to see to get to a yes.
But now again Tom Emer says we're going for it tomorrow.
The next twenty four hours are going to be critical
if they want to meet the president's July fourth deadline.
And I think that Rick and Genie will both tell
you that doesn't need to happen. But the optics here
(17:37):
are important for this president, and so we should assemble
our political panel with us the day after Bloomberg Politics
contributors Genie Shanzano and Rick Davis. Genie is senior Democracy
Fellow with the Center for the Study of the Presidency
in Congress. Rick is partner at Stone Court Capital are
Republican strategist, And so I'll start with you, Rick John
Thune got it done. What does it say about the
(17:59):
leader and the way this all played out in the
last twenty four hours.
Speaker 11 (18:03):
Yeah, there were a lot of doubters last night at
about two o'clock in the morning as you were watching
it sounds like from your living room as to whether
or not they could get that one extra vote. I mean,
there was really a battle of deals that Thune was
trying to articulate between Susan Collins and Lisa Murkowski. Turns
out Lisa got a better deal. Susan didn't. She voted
(18:27):
against it because she feels like she's going to lose
four hospitals, five hospitals in her state. And Murkowski got
the snap provisions she wanted and wind up in. But
it was a horse trade, and then nobody really knew
for sure until this morning whether or not that deal
with Mkowski was going to stick. So no profiles encouraged
(18:47):
by these Republicans who thought that the trillion dollars in
Medicaid cuts were going to be a problem. So we'll
see now they move on to the House. House will
passed this, and they're going to have to campaign on
this in a year from now in midterms. It'll be
interesting to see how the public reacts.
Speaker 4 (19:05):
That's right. A lot of folks referred to Tom Tillis
actually as a profile and courage. Of course, he did
vote no, and it will mean the end of his
Senate career. Ginny, we just heard from Maya mcguinnis at
the Committee for a Responsible Federal Budget. She's going to
be with us on the late edition of Balance of Power.
Her note with the headline Senate jumps off a budget
(19:25):
cliff on reconciliation. Is that how you see it?
Speaker 9 (19:30):
It absolutely is. You know, as as Rick just described
waiting all night to see if Lisa Murkowski could get
bought off by a carve out for Aleasco, which she got,
and the other forty eight states because Hawaii goes with
Alaska as non contiguous, will have to pay for these
Medicaid cuts. So you've got, you know, seventeen eighteen million
(19:53):
people losing healthcare. You've got as Maya's talking about, an
enormous addition to debt and death as and this is
all to pay for tax cuts that skew to the
very wealthy. And so this is absolutely a perilous moment
for the health of the nation. It's a perilous moment
for the financial well being of the nation. And GOP
(20:17):
members know that they are absolutely aware of this. But
the poll of MAGA, the pull of trump Ism has
one out in the Senate, and it's likely to win
out again in the House because as much as the
House Freedom Caucus likes to cry fowl, they seem to
go along. And so you've got to give it to
Donald Trump. He's been able to pull out at least
(20:40):
in the Senate now and enormous victory. And so that
is a huge deal for him. And we have to
wait and see where it goes in the House. But
all that's our this thing gets through either you know,
before July fourth or in the next few hours afterwards.
Speaker 4 (20:55):
We all remember the corn Husker kickback, right, Ben Nelson,
back in the old I'm a caried debate. Rick, you
were working in the Senate back then, how would you
catalog this effort when it comes to backroom deals. Did
Americans wake up and say, well, what happened and who
voted on it?
Speaker 11 (21:14):
Yeah, we're a long way from those fiscal days of
you know, trying to put pressure on people not to
do these carve outs. You know, pork barrow is back,
and that's exactly Look, you always had to cut deals
in the Senate in the House to get votes, right.
That's as long as there's been those chambers, there have
(21:35):
been those deals. I would say that this is the
first time I can recall so many people having a
different version of the facts to work from. This idea
that you can call expiring tax cuts somehow policy and
not have it graded against you as you factor for
(21:57):
the deficits is nuts, because the deficits are the deficits.
And so we've just added a trillion dollars a year
in interest on the national debt. And I think all
of these guys there's no deal that can be cut
that's going to put that thing in the rear view mirror.
So I'm not surprised by the deals. It's obviously had
(22:20):
to get him because the underli like bill wasn't what
they wanted. But at the end of the day, what
I think everyone's going to remember from this is that
at a time when everyone agrees that we are spending
too much money in Washington, d C. We just spent
significantly amount more.
Speaker 4 (22:39):
Rick Davis says, pork Beryl is back, Jeanie. That's something
to say in the middle of this conversation. When this
was supposed to be an effort to cut government spending.
You know what Elon Musk says, if it's the last
thing he ever does on this earth, he says, he'll
be helping to pay for the primary challenges against Republicans
(23:00):
who voted for this bill. Before we get that farther,
we've got to go to the House. And there's no
guarantee this is going to pass tomorrow, is there.
Speaker 9 (23:10):
There's no guarantee it is likely that they are able
to keep this bill on track and pass it. We
don't know when you know, you just look at recent history.
Every time somebody like Chip Roy has gone out very
passionately and spoken out against the bill, he has caved.
And you know what's astonishing to me is I was
(23:32):
rereading Josh Hawley's off ed in the New York Times.
Speaker 6 (23:35):
What was it?
Speaker 9 (23:36):
We talked about it a couple months ago, saying these
medicaid provisions would destroy the party, and yet somehow he
found his way to vote yes. And that's what seems
to have happened in all of these cases. And another
really astonishing part of where we are today. You know,
you go back to George Washington telling Thomas Jefferson the
(23:57):
Senate cools the House. We've talked about that repeatedly. That
didn't happen here. The Senate heated things up, making it
harder for Mike Johnson as he takes this bill back.
Speaker 5 (24:08):
Right.
Speaker 9 (24:08):
I don't know what happened to George Washington's cooler Senate,
but it's no longer cooler, Joe. It is hotter, and
it's sending over a hotter bill. And yet in all
likelihood this thing goes through because Donald Trump is going
to be working these phones and his social media feed
and twisting these arms to keep people besides Tom Massey
(24:28):
and check Well.
Speaker 4 (24:30):
It's really interesting the way you put that, Genie, Ricky.
Maybe not so much the saucer that cools the tea
in this case. What's going to happen in the House.
Does Tom Emmer think he has the votes because there
has been a pattern of bringing bills to the floor
that fail.
Speaker 7 (24:46):
Yeah, I think.
Speaker 11 (24:47):
They'll they'll they'll get the votes. It's it's interesting how
they'll get him, though, because as Genie said, Tom Massey's
pretty pretty significantly opposed to this and obviously been paying
a big political price in a fight with the President
and over it. Nick Lolota, I mean Jeanie's neighbor in
New York is saying to everybody who listened to him that,
(25:07):
you know, this ALT provisions weren't good enough for him,
and he's going to vote against it. But of course
we heard that from all the SALT members until they
decided to change their mind without really getting much. So
I think that leadership will get what they want. And again,
I mean, Speaker Johnson deserves credit. He is the most
underrated speaker in history, I think, and yet he's getting
(25:31):
an enormous amount of Donald Trump's what I would call
questionable popularity policies through the House of Representatives and made
it the law. So kudos to him. I don't want
to jinx it for him, but I see this as
a signing ceremony in the Oval Office on the fourth
of July, Boom goes via fireworks.
Speaker 4 (25:52):
That's right. You know they're going to coincide that whole thing, Genie.
When I was on the daybreak feature on Bloomberg this morning,
on the terminal, the chart of the day showed the
cost of this bill on the lowest income Americans versus
the wealthiest. The Senate version of this bill that has
(26:14):
just passed of course, costs the bottom twenty percent of
taxpayers an average of five hundred and sixty dollars a year.
It will give an average boost of more than six
thousand dollars a year to those on the top end
if those numbers are correct. This analysis, coming from the
Budget Lab at Yale University, by the way, would suggest
(26:35):
Democrats have a pretty good story to tell for the midterms.
How do you frame this so people understand it?
Speaker 9 (26:42):
Yeah, the work that they have done at the lab,
and I know you and Kayley interviewed the head of
the lab yesterday, it's really worth looking at what they
have come with and it is objectively construed. It is
data that you can look at and all over yourself,
and it is very telling as to who the GOP
Trump Party is and what they are interested in. And
(27:05):
so for the Democrats it is going to be an
issue of can they tell this story? Can they tell
a story? And I think one area they need to
work on is to stop talking about this just as
cuts to Medicaid. Twenty five percent of Americans are on Medicaid.
That's a big number, but this bill impacts even people
(27:25):
who are ensured, as costs will rise. So you have
that story to tell. This is Donald Trump's Obamacare, This
is his healthcare bill, and it is going to increase
costs and remove about seventeen eighteen million people in a
decade from the healthcare roles. That's number one. Number two
is the impact on green energy. We've got all these
(27:46):
companies talking about building new AI platforms, et cetera. Our
energy bills will go up because we don't have the
energy we need going forward. And then you look at
the debt and deficit we're giving to our chill. It
is enormous. And the funny math they're using to say
this AD zero is laughable. And I heard Peters Gary
(28:08):
Peter Is saying this on the floor this morning when
he was talking about the fact. You just look at
the bill itself. If there is no added cost, why
are you raising the debt ceiling? And that tells you
everything you need to know.
Speaker 4 (28:20):
Jeanie Shanzo and Rick Davis taking a hard look at
the fine print as the bill clears the Senate and
heads back to the House.
Speaker 1 (28:30):
You're listening to the Bloomberg Balance of Power podcast. Catch
us live weekdays at noon and five pm Eastern on Apple,
Cocklay and Android Auto with the Bloomberg Business App, listen
on demand wherever you get your podcasts, or watch us
live on YouTube.
Speaker 4 (28:46):
The bill still needs to pass the House again, but
we can tell you if you're just joining us. The
President Trump's big, beautiful bill that extends the Trump tax
cuts and does a lot more has passed the Senate.
It was a fifty to fifty tie, broken by Vice
President jd Vance and Kaylee. I was struck this morning
by the chart of the day in Bloomberg Daybreak on
(29:07):
the terminal. The Senate versions of the bill that just
passed cost the bottom twenty percent of taxpayers an average
of five hundred and sixty dollars a year, well giving
an average boost of more than six thousand dollars to
those at the top end. That's courtesy economists at the
Budget Lab at Yale University, and it crystallizes the message
(29:27):
Democrats are going to take on the road from here.
Speaker 2 (29:29):
Yeah, in fact, they already have. And as we consider
that messaging in the math behind it, we turn to
someone from the Yale Budget Lab. Ernie Tdesky is with us.
He's director of economics. They are also former chief economist
at the White House Council of Economic Advisors. Welcome back
to Bloomberg TV and Radio, Ernie, as we consider how
Republicans are pitching this. Jd Vance, who cast the tie
(29:50):
breaking vote, the Vice President is Joe just mentioned, says
massive tax cuts, describing this on X Today as a
big win for the American people. How rich do you
have to be? How much do you have to earn
for this to actually be a win for you?
Speaker 7 (30:04):
Ernie, Well, you know, this is a four trillion dollar
bill over ten years, five trillion dollars if they make
the tax cuts permanent, and it's a massive transfer from
the bottom to the top. Because remember you are extending
the twenty seventeen tax cuts, which helped everyone, but we're
still skewed toward the top. There are add ons above
(30:25):
and beyond the twenty seventeen tax law that primarily helped
the top as well. And then to the extent that
they are trying to pay for this, and again they're
not fully paying for this by any means. But the
cuts to Medicaid and snap food stamps primarily hurt the poor.
So net net, like you were saying, this is, you know,
(30:47):
nearly seven hundred dollars if you look at the bottom
twenty percent of families, and then a thirty thousand dollars
benefit net net when you look at the top one percent,
And that's not even account for tariff revenue, you know,
which is not part of the bill formally, but which
the administration is framing as a payer. And those are
also quite regressive taxes.
Speaker 4 (31:11):
So I'm guessing you would not have voted for the
bill here, Ernie. The thing is, every time we spend
time talking with Republican lawmakers, the conversation immediately goes to
the CBO and how this non partisan operation that's been
part of the process here for generations has been politicized
(31:31):
and is looking at the wrong numbers, doing the math wrong.
How do you respond to these constant attacks on the
CBO and the suggestion that, you know what, Ernie, you're
also wrong because we're going to grow out of this debt,
you know.
Speaker 7 (31:47):
I would say, first of all, CBO, to anybody that's
worked with them, knows that they hold analytical rigor and nonpartisanship,
as you know, two of the highest schemes for the organization.
What's great about CBO is that they do things consistently
and for the most part transparently over time, so you
(32:09):
know that they are going to analyze a bill against
current law, against the law as it is currently stated.
That was not a That was not a surprise. As
a matter of fact, this you know, this Congress, particularly
the Senate right tried to come up with a different
way of looking at it because they knew exactly how
(32:30):
the CBO was going to look at it. You know,
it is perfectly fair to say that when you cut
taxes there is a little bit of a growth dynamic
effect that you know, somewhat mitigates the cost. But tax
cuts don't pay for themselves by far. Back when the
twenty seventeen tax cut was passed, you know, CBO found
(32:52):
that the dynamic effects of that tax cut offset about
twenty percent of the cost of that bill. And that
was when we had corporate tax cut as well. Those
corporate tax cuts were permanent, so they're not being extended
in this version of the bill. It's just the individual
tax cuts, which have much less bang for the buck,
and so the dynamic effects, the growth effects should be
even lower than they were back in twenty seventeen.
Speaker 2 (33:16):
Well, Ernie, that's an important point as we consider that
This is not a package mostly of tax cuts. It's
a tax extension of the rates that were set from
tax cuts eight years ago. So when we consider the
actual stimulative effect that this is likely to have, does
that basically negate it or should we be viewing this
more from the lens which is also a Republican argument here,
(33:38):
that it's avoiding those tax rates going higher, which could
have had a detrimental growth and consumption impact.
Speaker 7 (33:44):
I mean, the thing to remember is that this bill
goes above and beyond those twenty mere extension of those
twenty seventeen tax cuts. So even if you had thought
that those twenty seventeen tax cuts, the individual ones that
were expiring ought ought to be extended, this bill as
written is still about one hundred billion dollars more expensive
(34:08):
than just doing that. And if the expiring provisions in
this bill were made permanent, and if there's one lesson
we've learned over the last couple of decades, it's that
expiring tax cuts have a funny way of becoming permanent,
then this is a one trillion dollar bill. You know,
above and beyond just extending the TCJA, there will be
a little bit of fiscal impulse I think in twenty
(34:30):
twenty six, and I think that especially if you are
the FED or if you are a macro economist thinking
about your forecast, you know, that's an important factor that
will be somewhat offset by the effects of terrorists taking effect, right,
which is going to have a detrimental effect on the economy,
and so net you just you have to think about
all these things in tandem.
Speaker 4 (34:54):
So if you don't like this bill Ernie and you're
worried about debt and deficits, was extending the current baseline
the original sin?
Speaker 7 (35:03):
I mean, I look, I think that everybody, including markets,
assumed that the twenty seventeen tax cuts were going to
be extended, and in the short run, that was probably
not the wrong decision to make. You know, I do
have sympathy for the argument that if we had let
them expire, that would have been a massive tax increase
next year, and that would have created macroeconomic slowdown.
Speaker 4 (35:26):
That the thing is that they voted to use says
it costs nothing because we're extending it exactly, And I'm
still trying to get my head around how that works exactly.
Speaker 7 (35:36):
You know, the look the baseline tricks are funny. I
like to ignore baselines and just say, look, what does
the debt trajectory look like over the next ten years
with or without this bill? And with this bill, you know,
debt is growing faster than the economy. Still, it was
already you know, forecasts to grow faster than the economy
(35:59):
even if the tax had expired and we had raised
more revenue as a result. Now it's even worse as
a result of this. And so look, you know, we
can have arguments about whether it was correct at this
point in the business cycle to let the twenty seventeen
tax cuts expire completely, but the fact remains that our
(36:19):
debt trajectory is unsustainable and there needed to be a
better way, right of you know, making a you know
both better making a better tax code and for paying
for that in a way that would actually reduce the
debt trajectory.
Speaker 2 (36:35):
Well, so when we consider that debt trajectory and the
debt level, and then consider the level of interest rates
as we factor in the payments we have to make
on said debt, that's where you get to the argument
that President Trump is now making that this would all
work out for the better if the Federal Reserve were
just to lower interest rates and help bring down the
cost of that debt burden. If we were to see
(36:57):
a twenty five basis point cut by the Fed this
month or in the fall, if we if we see
multiple ernie, how quickly would that actually make a difference
as we consider the US's financial situation.
Speaker 7 (37:09):
I think a small cut by the Federal Reserve would
not make a huge difference. Remember, the Summary of Economic
Projections already has cuts baked in for this year. It's
just a question of when during the year we're going
to see of those cuts, and so I think that
that's probably priced into the long end of the curve already.
You would need a massive shot above and beyond what
(37:30):
is expected from the Fed, you know, to see movement
on the long end of the curve. And even then,
if investors perceive that the FED is politically captured, or
that the Fed is you know, taking is taking fiscal
policy into it, going beyond their dual mandate and taking
fiscal policy into account, right, then then further cuts by
(37:51):
the Federal Reserve may be less effective than they've been
in the past because investors, you know, may incorporate lower
polyL see rates into their long term yield forecast, but
then they may ch up their inflation expectations and their
term premium as a result. So this, you know, even
a FED that cuts rates may be much less helpful
(38:12):
to the argument the President is making than he thinks
right now.
Speaker 4 (38:17):
So is President Trump the real reason why the FED
can't cut rates?
Speaker 7 (38:22):
I mean, I think that the Fed's dual mandate is
very clear.
Speaker 5 (38:26):
Right.
Speaker 7 (38:27):
They are concerned about inflation, and they're concerned about employment,
and they are stuck in a potential stagflationary shock right
now or a worry of one. Right, So on the
one hand, they are waiting to see the effect that
not just tariffs but immigration action and fiscal impulse next
year will have on inflation, while at the same time
(38:50):
keeping a keen eye on how those shocks will also
weigh on the labor market. And and you know, the
effect is the opposite, right, So if there's inflationary pressure,
you want to raise rates or or not cut rates,
Whereas if the unemployment rate starts rising, you know, much
more than it has, then you want to start considering
rate cuts. And that's a very tough position for the
(39:12):
FED to be in. It is you know, I don't
think it is a simple matter of you know, the
FED needs to cut rates because other countries are already lower,
or because of something else.
Speaker 2 (39:24):
Well, Ernie, as we consider the kind of labor market
element of the Fed's dual mandate and the picture of
the US labor market overall. Getting back to this Reconciliation bill,
knowing it removes subsidies in a number of industries, including
those intended through the Inflation Reduction Act to invest in
clean energy, would you expect that to have a labor
market impact or at the very least mean that the
(39:46):
US cannot grow as many jobs as a result of
this legislation.
Speaker 7 (39:50):
I mean, I think so. I think that the energy
side of the legislation could potentially raise energy costs, right,
which is a supply side issue that the FED is
you know, famously concerned with. I mean, we we have had,
we have had, you know, inflationary shocks that have stemmed
from higher energy prices in the past. I would also
(40:11):
be concerned about the vulnerability of the of lower income
families as a result of both this bill and tariffs,
and how that flows through the labor market. I've always
been skeptical of the claims that you know, policy this
year would lead to a recession even when tariffs were
higher than they were than they are now, you know,
a couple of months ago. I'm not odds on on
(40:34):
a recession, but i do think that policy creates a
macroeconomic headwind for for the US, and uh, you know,
that's uh, that's something that's going to be a major
challenge for the Fed to navigate, you know, between that
and between the upward price pressure.
Speaker 4 (40:50):
Ernie, it's great to have you back. Ernie Tdsky with
his great analysis from the Economics Department. Yell budget Laub,
former Chief Economist, White House counsel of the Economic Advisor's
great to have you as part of our conversation.
Speaker 1 (41:05):
You're listening to the Bloomberg Balance of Power podcast. Catch
us live weekdays at noon and five pm Eastern on Apple,
Cocklay 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 played Bloomberg eleven thirty.
Speaker 4 (41:24):
Live from Washington. Thanks for joining us on the Tuesday edition.
If you're just coming along, we have big news. The
Senate passed the bill. It happened right after high noon
twelve oh three pm Washington Time, fifty to fifty, the
tiebreaker courtesy jd Vance, who made his way to the
Hill earlier today. So a little bit of change took
(41:44):
place in the vodama over the course of the night.
They did pull an all night or a twenty six
hour long affair. They got in there at nine o'clock
in the morning yesterday when we did our late edition
of Balance of Power last evening live from the US Senate,
that even started the voter rama. Yet two in the morning,
three in the morning, we saw updates over the course
(42:07):
of the evening that brought us here now with Lisa
Murkowski the last to turn in favor of the bill.
Now it goes to the House, of course, as we
continue the schoolhouse rock. Elon Musk not liking this whole show.
If you listen to this program, you know he's not
a fan of the bill, and that was the genesis
of his big breakup and then feud with President Trump,
(42:29):
which we kind of thought had died out. Seemed like
people were getting along until yesterday. This also happened last night.
Elon Musk vowing to make sure every member of Congress
who campaigned on a platform of reducing government spending be
voted out of office primary with his financial help quote,
(42:52):
they will lose their primary next year if it is
the last thing I do on this earth. Donald Trump,
of course, listening gets on truth social with a big warning,
he writes, Elon musk knew before he so strongly endorsed
me for president that I was strongly against the ev mandate.
There's the truth. If you're on YouTube, it's ridiculous, he says,
(43:14):
was always a major part of my campaign. Now it
gets tough as you scroll down here. Elon may get
more subsidy than any human being in history by far.
And without subsidies, he writes, Elon would probably have to
close up shop and head back to South Africa. No
more rocket launches, satellites are electric car production in our country,
he says, would save a fortune. Perhaps the Doge should
(43:39):
take a good hard look at this, he says, big
money to be saved, echoing these remarks as he made
his way out of town to Alligator Alcatraz in Florida.
Listen to Donald Trump, we.
Speaker 10 (43:50):
Might have to put doze on Elon. You know, you know,
doj Doji is the monster that that might have to
go back and eat Elon there. I think what's gonna
happen is those He's gonna look at Musk, and if
those looks at Musk, we're gonna save a fortune.
Speaker 4 (44:05):
Thank you very much, everybody.
Speaker 10 (44:07):
I don't think you should be playing that game with me.
Speaker 4 (44:11):
Thank you for your attention to this matter. Glad to
say Ed Ludlow is joining us. It's always a good
day when our friend Ed comes in from San Francisco,
and for good reason today the co host of Bloomberg
Tech and a friend of Balance of Power, Ed, are
we serious here? The monster is gonna come eat Elon?
What does he have to worry about? Is this real?
Speaker 5 (44:32):
So?
Speaker 12 (44:33):
I think what the president's referring to, and it's a
statement that he kind of said originally outside of the
White House and then reiterated in Florida is alluding to
across Elon Inc. Tesla SpaceX, and other parts of Elon's empire.
He has historically benefited from grants subsidies, but also directs
(44:53):
contracts with the federal government.
Speaker 6 (44:55):
You'll remember when you and I last discussed this issue.
You can quantify it.
Speaker 12 (44:58):
It's about twenty five billion dollars to forty billion dollars,
but it is across subsidies.
Speaker 6 (45:03):
Grants, and contracts.
Speaker 12 (45:05):
And I think what the president's kind of alluding to
here is saying, well, if DOGE, which review that. Remember
Elon Musk kind of was the founding one of the
founders of DOGE and has since departed after his term ended,
that's what would be reviewed. But I find the politics
that are interesting because it actually it all centers around
the bill, and actually what the President is saying direct
(45:26):
and indirector Musk on the issue of EV subsidy is
not what Elon Musk is saying back to him.
Speaker 6 (45:31):
Elon Musk is very worried about national debt.
Speaker 4 (45:36):
So you've got a nice rocket company. There be a
shamed of something happened to it is kind of the message.
What would this actually mean for Elon Musk? If the
DOGE did plug it into the hard drive, you're find
I guess, examples of waste, fraud and abuse. Are we
seriously talking about cutting contracts knowing how much the government
(45:57):
needs Elon.
Speaker 6 (45:57):
Musk, don't.
Speaker 12 (45:59):
I think it's important to be honest the audience don't
actually know the answer to that. What I would reflect
on is that and what we've reported is that lots
of the individuals inside of Doge are Elon Musk allies
and confidence they are people that he convinced to get
on board with the project. The other point is just
the reality operationally of what of what our domestic space
(46:21):
industry looks like. SpaceX dominates globally the vast majority about
eighty five to ninety percent of payload to orbit human
or otherwise. NASA is highly reliant on SpaceX to get
human beings to and from ISS. The Department of Defense
and the Pentagon are very reliant on SpaceX to put
(46:42):
defense apparatus in the form of satellites into orbit. And
so that's the reality. But I think that that's the
right interpretation that the presidents alluding to here, that Doge
would say, well, look at the value of these contracts.
Could we save money somewhere? Is there a corporate alternative
to SpaceX is probably the bigger next question.
Speaker 4 (47:03):
Wow, Tesla meantime stocks down fourteen bucks almost five percent.
Is Elon Musk really going to start his own political party?
I mean, how serious are we about the next chapter
for him? He's going to start giving money to Tom
Massey primary ing everybody Republican who votes for this bill?
Start the what is it the America Party? What does
(47:23):
he have planned? Well?
Speaker 12 (47:25):
In my career and experience of covering Elon Musk, which
includes the period prior to the November election and until
present day, that Elon Musk, you know, particularly in the
political domain, he has put his money where his mouth
is right. And this is why I brought up what
the two men are saying to each other. Mosqu's grievance
has been quite consistent. He's very worried about national debt
(47:47):
and he doesn't like the makeup of the bill. The
President has been saying that Musk's issue is EV subsidies,
but to his credit, Elon Musk has also been consistent
on this issue. He has argued and maintained for quite
some time that if America were do to do away
with direct consumer EV subsidies, in particular those that were
provided for in the Inflation Reduction Act, it would be
(48:10):
to Tesla's benefit because compared to other American automakers and companies,
Tesla's cost of doing business is much lower, it has
much more pricing power, and so if you got rid
of subsidies, it would still be ultra competitive. He has
been consistent on that, but on the political domain. Part
of his argument was in the run up to November,
he campaigned for the president on the idea that the
(48:31):
deficit and the national debt is something that this administration
would look at. And indeed, in several posts over recent months,
that idea has come back up, and that seems to
be what Marsk is upset about.
Speaker 4 (48:43):
Great to see you, Ed, and I appreciate your coming in,
Ed Ludlow. I know we're going to talk about this
against Let's stay close watch from on Bloomberg Tech or
Frankly all day at night on Bloomberg TV and Radio.
Tom Massey, Yeah, Matt reminds us Tom Massey drives a
Tesla and actually tweeted his off grid home runs on
a wrecked model S Tesla car battery that he repurposed.
(49:06):
I don't know, maybe this is just a big reunion
waiting for all these guys. Breaking news coming out of
New York today. I want to mention this before we
get to our panel this hour, because we have a
lot to dissect with Rick Davis and Genie Shanzano. The
final vote is in on the New York Democratic mayoral primary.
I know you're saying, Joe, we already did this. President
(49:29):
was just calling him a communist. This morning, let's bring
in Laura Namius Bloomberg, New York City and State reporter
who was all over this ranked choice election when we
talked about it, was this last week or the week earlier. Laura,
I'm starting to forget.
Speaker 13 (49:42):
It was last week when the first round of votes
in New York's ring choice primary came in, and today
we got to see with the rest.
Speaker 4 (49:49):
Of the batter one week, right, we thought this was
going to be what it was two weeks last time around.
So break it for us. The redhead on the terminal, Laura,
the same guy you already thought one is the winn.
Speaker 5 (50:00):
Right.
Speaker 13 (50:01):
So what we saw today is that zoron mom Donnie
significantly widened his lead over Andrew Cuomo in the final results,
which will be certified in a couple of weeks. But
he is now leading Andrew Cuomo by twelve points in
this primary. That is an absolutely decisive victory. We knew
that he was likely going to be the winner after
last week, when he was leading Cuomo by seven points,
(50:23):
a result that nobody expected. Everyone thought it might be close.
But there had only been one official poll showing Mom
Donnie winning. Turns out that this electorate was not captured
by polls, and Mom Donnie is the breakaway winner. For contrast,
in twenty twenty one, the first year that the city
used this kind of rank choice voting mechanism, Eric Adams
(50:43):
emerged victorious after eight rounds of voting by less than
one percentage point over Catherine Garcio came in second place.
Andrew Cuomo is losing by twelve points to zoron Mom Donnie.
Speaker 4 (50:55):
Amazing context, Cuomo is going to be on the ballot
still either way, right, So is he actually going to
run a campaign as an independent or something else.
Speaker 13 (51:04):
So we're talking to people within the Cuomo universe right
now trying to figure out what his plans are. He
has not decided whether or not to drop out of
the race. His campaign said last week that he would
be looking at the numbers to try to decide whether
or not he had a pathway forward. It's unclear what
these numbers are going to mean, but people close to
him are already pointing out that despite the fact that
(51:25):
he lost this race, he got more overall votes than
Eric Adams did. In twenty twenty one, so that might
give you a hint as to what they're thinking for
the general election in November.
Speaker 4 (51:36):
So, could we still have a four way man Donnie Cuomo, Adams.
Speaker 13 (51:41):
Sliwa, Yes, and another candidate, Jim Walden who's running as
an independent, are possibly looking at a five way general election?
Very competitive for the first time we cut.
Speaker 4 (51:52):
Out for you. Yeah, boy, I should say so, Laura,
Thank you so much for letting us know it's actually done.
It's a signed, sealed, delivered Here is New York City
State reporter of Flora Namias. Yes, Mamdani wins the Democratic primary.
Thanks for listening to the Balance of Power podcast. Make
sure to subscribe if you haven't already, at Apple, Spotify,
(52:15):
or wherever you get your podcasts, and you can find
us live every weekday from Washington, DC at noontime Eastern
at Bloomberg dot com.
Bloomberg Audio Studios, podcasts, radio news. You're listening to the
Bloomberg Balance of Power podcast. Catch us live weekdays at
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Auto with the Bloomberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 2 (00:25):
I bobviously got about one hundred very tired senators who
just finished a lengthy vote rama more than twenty four hours,
ultimately passing at least in the Senate. The President's one
Big Beautiful Bill, the tax package, of course, passed through
the budget reconciliation process. It was difficult, though it required
(00:45):
some deal making to get specifically Republican Senator Lisa Murkowski
of Alaska on board. As the majority leader, John Thune
lost three Republican votes. Ran Paul of Kentucky, Tom Tillis
of North Carolina, and Susan Collins of Maine all voted
no for this package, leaving the Vice President JD. Vance
to cast the tie breaking vote.
Speaker 3 (01:04):
On this vote, the Ya's are fifty, the na's are fifty,
the Senate being evenly divided, the Vice President votes, and
the affirmative the bill as amended is passed.
Speaker 4 (01:16):
There you have it, having spent a few hours in
the Capitol before, you have the occasion jd Vance on Twitter.
Massive tax cuts, especially no tax on tips and overtime,
he writes, and most importantly, big money for border security.
He calls it a big win for the American people.
Of course, this saga is not done yet. The bill
now goes back to the House, where there is some
(01:38):
consternation about changes that were made on the Senate side,
and we want to bring in Tyler Kendall Bloomberg Washington
correspondent who's live now on Capitol Hill, to explore some
of these changes. Tyler, what comes next?
Speaker 5 (01:51):
Yeah, hey Joe, Well, we are expecting the House Rules
Committee to take this up. It will likely advance out
of that, but then it advances to a full vote
on the House floor, and that's where we could run
into a little bit of difficulty. Now, keep in mind,
this bill was designed not to be tweaked. It's not
supposed to pingpong between the different chambers. But some of
these more fiscal hawks, these members of the House Freedom Caucus,
(02:12):
could potentially threaten to sink it, which would essentially mean
it goes back to conference and the Senate has to
get involved all over again, and it was actually interesting
to hear from Senator Lisa Murkowski you ended up voting
in favor of this package, saying that she would welcome
that if the House kicked it back over to the
Senate with changes, because at the end of the day,
there is pretty broad support about those key pillars of
the package that you mentioned when it comes to immigration priorities,
(02:35):
defense priorities, of course, extending the twenty seventeen tax cuts.
But where these Republicans really were divided, particularly on the
Senate side, was those changes to the spending cuts, and
we even saw that in the three members that ended
up dissenting and voting no on this bill. You had
members like Senator Tom Tillis, who basically staked not running
for reelection on his no vote for this package, as
(02:55):
well as Senator Susan Collins, who both had raised concerns
about what the changes to Medica could mean for their constituents.
But square that with Senator Ran Paul of Kentucky, you
voted no on this package because he wanted to see
deeper spending cuts and wasn't going to vote for any
sort of legislation that lifts the debt ceiling as much
as this plan ultimately does. And I bring this up
because it was interesting to see what sort of compromises
(03:17):
ended up having to be made by Senate Majority Leader
John Thune in order to get this bill over the
finish line. That includes doubling the rural hospital fund to
fifty million dollars, something that you would have thought got
would have gotten Susan Collins on board, but didn't appear
to be enough of a compromise. It also cuts a
controversial tax on solar and win energy projects and revises
(03:37):
a food aid carve out for Alaska, in particular with
Joe and Kelly. As you well know, helped to get
Senator Lisa Murkowski on board, even as she says she
would welcome some changes from the House, ultimately her vote
helped to put this over the finish line.
Speaker 2 (03:50):
Well, would we consider the political calculations that housemaker or
House lawmakers will now be considering as they decide whether
or not to vote for this package? Tyler, How would
a threat from Elon Musk to fund primary challenges to
any incumbent who vote to impact the deficit this much
factor in? Is he a voice at all? That anyone
(04:11):
is listening to, let alone President Trump himself.
Speaker 5 (04:16):
Well, considering that he was the largest US political donor
in the twenty twenty four campaign cycle, not just to
the White House, but also to those down ballot races,
to a tune of more than two hundred and ninety
million dollars, recording to FEC filings. I think it probably
does hold a little bit of weight around here on
Capitol Hill. But as you're describing, it really does put
some Republicans in a tough spot if they are between
(04:37):
President Trump and Elon Musk, because Elon Musk has threatened
to primary anyone that does support the legislation, in particular
when it comes to rolling back those electric vehicle tax credits.
And I'll give both of you a prime example that
I know you're closely watching, which is Thomas Massey in
the House, a Republican from Kentucky. We're not expecting him
to change his vote when it comes to the House package.
(04:57):
He's going to vote no. President Trump has already put
but some muscle already puts some money behind funding a
primary challenger against him with a super PAC. But then
we had Elon Musk, Joe and Keyley yesterday in a
post on X confirming that he intends to donate to
Thomas Massey's campaign in order to give him a little
bit of a funding boost against President Trump's operation.
Speaker 3 (05:16):
Yep.
Speaker 2 (05:16):
And of course President Trump now potentially suggesting having Doge
take a look at Elon Musk's companies and maybe even
looking at deporting Elon Musk though he's a US citizen.
We'll have more on that later in the show. Bloomberg's
Tyler Kendall live from Capitol Hill for us, Thank you
so much, and we want to add another voice to
the conversation now, someone who has had deep experience on
the Hill as a former seven term congressman from Pennsylvania.
(05:37):
A former Republican Congressman, Charlie Dent is with us. He
is now executive director of the Aspen Institute Congressional Program.
Welcome back to Bloomberg TV and Radio, sir. Obviously, with
this particular House of Representatives, which is where this bill
goes next, we have seen two things be true, one
being that the Speaker, Mike Johnson is not afraid to
allow things to fail on the floor, but the other
(05:59):
being that President Trump can twist some arms and usually
people who seem like their holdouts ultimately roll.
Speaker 6 (06:05):
How do you expect this.
Speaker 7 (06:06):
To go down?
Speaker 8 (06:09):
No doubt there will be a heavy whip operation. I'm
sure the President will try to bully and threaten some
members to voting for the Senate pass package. But those
threats tend to work better with Republican members in very
safe seats. I expect those folks in the safe seats
we're making some noise right now will melt under the
(06:30):
pressure from the President. The bigger question is the Medicaid
changes that are of concern to many of the more
swing district or more moderate members. Their problem is not
going to be a Republican primary. Their problem is going
to be losing, potentially losing to Democrats in the fall.
And so those are the folks I think they ought
(06:50):
to pay close attention to these Medicaid changes. That the
Senate went further than the House did on the Medicaid changes.
In many Republican House Republicans, we were a pretty clear
line in the sand on that issue. So I'm anxious
to see how they navigate Medicaid. I could see this
bill being changed once again and going back to the Senate.
(07:11):
You certainly have fiscal hawks on the right who are
screaming about this, but again they're more likely to be
pressured by the president successfully. But it's more modern members
Don Bacon, you know, he could be a no vote.
He's not running again. Tom Massey is an immovable object.
Speaker 9 (07:26):
He won't move.
Speaker 8 (07:27):
And I don't think the Republicans can lose more than
I think they could lose. Maybe two one more vote
and that's it. And so I'm anxious to see how
they do this lip operation.
Speaker 4 (07:37):
Well, it's really interesting to hear you speak about this, Congressman,
and welcome back. You seized immediately on the issue of Medicaid.
Donald Trump knows what an issue this is. He talked
about it on his way to the Alligator Alcatraz Detention
Center in Florida earlier today. Listen to how Donald Trump
put it.
Speaker 10 (07:53):
I think so, I think it's going to be the
greatest bill ever passed. No, no, we're not going to
be playing with Medican all the way million Americans. Yeah,
the Democrats haven't wrong. Yeah, waste, fraud and abuse. In fact,
if you look at what's gone on, we've gone way back.
We take care of Medicaid, we take care of Medicare.
They will blow Medicare and Medicaid because they have no
(08:15):
idea what they're doing, just like they don't have any
idea what they did on the border.
Speaker 4 (08:19):
They have no idea.
Speaker 10 (08:20):
Medicaid is in big trouble with the Democrats.
Speaker 4 (08:25):
Charlie Dn You hear the Republican talking points on this,
beginning with the president waste fraud abuse. No one's losing
their coverage is what we've been hearing, unless they deserve to,
unless they're able bodied adults who should be at work,
or the American people buying that argument.
Speaker 8 (08:41):
Well, the problem for the President is that the Congressional
Budget Office came out with a report saying that somewhere
between eight to I think eight to fourteen million people
or twelve million people excuse me, could be losing coverage
as a result to changes in Medicaid. And so that's
a major problem. You know, you can just say, hey,
it's all about ways fraud abuse, but we're talking about
(09:03):
people who are going to be uncovered because of the
work requirements and also because I think the Senate I'm
not sure exactly where the Senate fell down on the
so called provider taxes that states used to draw down
federal Medicaid dollars. But that's another issue. I mean, so
the President doesn't ever get into the policy details. I
had a big fight with him back in twenty seventeen
(09:25):
over this in the in the White House over at
that time proposed changes to Medicaid. Then we were talking
block rants. I told him it wasn't going to work,
and he got pretty upset with me because I didn't
vote for the bill. But that was going to cut
you over twenty million people from their health benefits at
that time from Medicaid. So that's the challenge that the
president has. He can talk all he wants, but as
(09:47):
long as the reports out there saying over eight million
people are going to lose health benefits, they need a
better argument.
Speaker 2 (09:56):
Well yeah, which gets us to the pulling around this bill,
which just that widely, no matter what pull you look at,
it is more unpopular than it is popular. If the
House ultimately is going to pass this and do so
by July fourth, have the President sign it into law,
knowing there will be roughly what sixteen months until the
midterms in twenty twenty six, how would the party need
(10:17):
to course correct to change that?
Speaker 8 (10:21):
Well, the party has done something here that I think,
I think this has been a miscalculation to put this
all in one big, beautiful bill. I mean, I think
that was always a mistake. The Senate always wanted to
break this in two. You may recall in twenty seventeen,
after the Obamacare repeal replace initiative failed, with John McCain
going like that, turning his thumb down. You know, then
(10:43):
Republicans moved on to tax reform or you know, the
tax changes, and they weren't dealing with spending cuts, just
tax policy. Now, that bill, you know, was enacted into law.
I supported it, but it really didn't help Republicans much
in the midterm election. This bill is different because you
are bing both what I could say are probably unpopular
cuts to Medicaid and to food stamps or snap benefits
(11:07):
and some other areas, and you're also extending those tax changes.
It largely benefit people on the hire income scale. And
so that's the toxic political mix that Republicans are confronting
right now. So I suspect between now in the midterm,
Republicans will be playing a lot of defense. You may
remember in the twenty eighteen midterms, Democrats used the healthcare
(11:29):
issue as a blunt, blund instrument against Republicans in those races.
I suspect Democrats will try to use healthcare and Medicaid
in particular as an instrument against Republicans and marginal swing
districts going forward.
Speaker 4 (11:45):
Well, so where are you on the next twenty four
hours here, Congressman? You seem to think that the House
needs to make changes. It goes back to the Senate.
That means we miss the fourth of July deadline. Does
Tom Emmer not have the votes as he sends out
the notice for lawmakers to report.
Speaker 8 (12:01):
Well, I bet today he does not have the votes.
That does not mean he will not have the votes
by July fourth. But there are I mean, look, I
think they're over a dozen members House members who've expressed
some pretty strong opposition to this bill. As I said previously,
I suspect those on the far right who are concerned
about deficits, they will melt under pressure from the President.
(12:23):
We've heard this before. They'll yell, they'll scream, there, they'll
bang the shoe on the table. But when the President
says support this or I'm I'm going to fund the
primary opponent against you, they tend to fall in line.
The problem will be for these members in these swing districts,
these members who are at great risk of losing their
seats to the Democrats. You know, look, they can either
displease the MAGA base, they can or displease their.
Speaker 4 (12:47):
Constituents written large.
Speaker 8 (12:50):
You know, if Trump is mad at them in funds
of primary, and Trump successful will get some more very
conservative person to replace that individual, that seat will probably
be gone in November anyway. So what's the calculation here?
I would be if I were the president running my
whip operation, I try to figure out a way to
communicate to those few people and listen to them. Because,
by the way, if the House flips, Donald Trump is
(13:11):
going to have a really rough time in his next
two years in office. I mean you're going to see
all kinds of oversight and hearings and people being subpoened.
So Donald Trump better be very careful how he handles
those members. Threats and intimidation tactics are not the way
to handle them at this moment.
Speaker 2 (13:30):
Well, in congressman, if you were sitting in one of
those swing states right now, knowing Elon Musk is threatening
to fund himself primary challenges to those who vote yes
for this bill, which he does not like. Would that
make you second guess your ultimate vote?
Speaker 8 (13:44):
Well, maybe some on the hard right will. But at
the end of the day, I think Donald Trump has
a lot more influence with Republican primary voters than does
Elon Musk. Now, Elon Musk obviously has a checkbook. But
at the end, but Donald Trump is able to rally
much of the base to support his chosen candidates. So
(14:05):
the Mosk threat is real. I suspect Musk could help
with Tom Massey, who will likely vote no. And there
might be some other Republicans who vote now, who are
now on the hard right, who could probably give Elan
a call and say, I'm going to need your help,
my friend. But right now, I'd say that Trump has
(14:25):
more more sway than Musk. But if I'm going to
vote no, I'm in a very conservative district. I think
that Elon Musk might be running to their rescue and
might be able to maybe save them.
Speaker 4 (14:38):
Fascinating. Charlie Dent. Great to have you back, so appreciate
the insights he's been there. As Kaylee mentioned, former Republican
congressman from Pennsylvania, member the House Appropriations Committee now executive
director of the Aspen Institute Congressional Program. We've got some
wood to chop here still, Kayley. As the bill heads
for the House, you wonder, though, if just the hope
to be home for the fourth of July is enough
(14:59):
to actually get the over the finish line.
Speaker 2 (15:00):
Well, we know Washington loves the smell of jet femes.
It can be a driving force. Also on this bill,
we should note it's no longer actually officially called the
One Big Beautiful Bill Act?
Speaker 4 (15:10):
Is that true?
Speaker 2 (15:10):
The Senate was able to call it, Chuck Schumer specifically
to procedurally strip it out. You just call it by
a number.
Speaker 4 (15:16):
Really right now?
Speaker 2 (15:17):
I wonder how that's sitting with pres.
Speaker 4 (15:19):
So no more build back better, no more Big Beautiful Bill.
Speaker 2 (15:22):
Getting rid of the bees at least for now, We'll
have more heat here. On Balance of Power on Bloomberg
TV and Radio.
Speaker 1 (15:30):
You're listening to the Bloomberg Balance of Power podcasts. Catch
us live weekdays at noon and five pm. E's durn
on Apple Cocklay 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 eleven thirty.
Speaker 4 (15:49):
From the majority with in the House. Yeah, Tom Emmer
says there will be a vote tomorrow in the House
following passage today in the Senate. If you're just as
they got it done in the upper chamber, I'm guessing
no one has slept yet. Remember the voter rama started
nine o'clock yesterday morning. It didn't really. They ended up
(16:09):
tooling around with procedural votes all day into the evening
when the voterama actually began, and just after twelve noon
on this vote, we got a tally.
Speaker 6 (16:20):
On this fot fifty.
Speaker 3 (16:22):
The nays are fifty, the Senate being evenly divided, the
Vice President votes, and the affirmative the bill as amended
is passed.
Speaker 4 (16:32):
That's the Vice President JD. Vance was required to make
it happen with a fifty to fifty vote here and
the tie breaker. If you're with us on YouTube, you
see some very sleepy people milling around. And so there
we have it. The big beautiful bill, or at least
the version it took over the course of last evening,
has now passed the Senate, and it goes back to
(16:55):
the House in a slightly different form, and there are
a lot of concerns about exactly how this is going
to work. If you ask members of the House Freedom Caucus,
they're deeply worried about this. It cuts one and a
half trillion dollars in exchange for four and a half
trillion dollars in tax cuts, which is five hundred billion
dollars short of the savings that some of the fiscal
(17:17):
hawks said they needed to see to get to a yes.
But now again Tom Emer says we're going for it tomorrow.
The next twenty four hours are going to be critical
if they want to meet the president's July fourth deadline.
And I think that Rick and Genie will both tell
you that doesn't need to happen. But the optics here
(17:37):
are important for this president, and so we should assemble
our political panel with us the day after Bloomberg Politics
contributors Genie Shanzano and Rick Davis. Genie is senior Democracy
Fellow with the Center for the Study of the Presidency
in Congress. Rick is partner at Stone Court Capital are
Republican strategist, And so I'll start with you, Rick John
Thune got it done. What does it say about the
(17:59):
leader and the way this all played out in the
last twenty four hours.
Speaker 11 (18:03):
Yeah, there were a lot of doubters last night at
about two o'clock in the morning as you were watching
it sounds like from your living room as to whether
or not they could get that one extra vote. I mean,
there was really a battle of deals that Thune was
trying to articulate between Susan Collins and Lisa Murkowski. Turns
out Lisa got a better deal. Susan didn't. She voted
(18:27):
against it because she feels like she's going to lose
four hospitals, five hospitals in her state. And Murkowski got
the snap provisions she wanted and wind up in. But
it was a horse trade, and then nobody really knew
for sure until this morning whether or not that deal
with Mkowski was going to stick. So no profiles encouraged
(18:47):
by these Republicans who thought that the trillion dollars in
Medicaid cuts were going to be a problem. So we'll
see now they move on to the House. House will
passed this, and they're going to have to campaign on
this in a year from now in midterms. It'll be
interesting to see how the public reacts.
Speaker 4 (19:05):
That's right. A lot of folks referred to Tom Tillis
actually as a profile and courage. Of course, he did
vote no, and it will mean the end of his
Senate career. Ginny, we just heard from Maya mcguinnis at
the Committee for a Responsible Federal Budget. She's going to
be with us on the late edition of Balance of Power.
Her note with the headline Senate jumps off a budget
(19:25):
cliff on reconciliation. Is that how you see it?
Speaker 9 (19:30):
It absolutely is. You know, as as Rick just described
waiting all night to see if Lisa Murkowski could get
bought off by a carve out for Aleasco, which she got,
and the other forty eight states because Hawaii goes with
Alaska as non contiguous, will have to pay for these
Medicaid cuts. So you've got, you know, seventeen eighteen million
(19:53):
people losing healthcare. You've got as Maya's talking about, an
enormous addition to debt and death as and this is
all to pay for tax cuts that skew to the
very wealthy. And so this is absolutely a perilous moment
for the health of the nation. It's a perilous moment
for the financial well being of the nation. And GOP
(20:17):
members know that they are absolutely aware of this. But
the poll of MAGA, the pull of trump Ism has
one out in the Senate, and it's likely to win
out again in the House because as much as the
House Freedom Caucus likes to cry fowl, they seem to
go along. And so you've got to give it to
Donald Trump. He's been able to pull out at least
(20:40):
in the Senate now and enormous victory. And so that
is a huge deal for him. And we have to
wait and see where it goes in the House. But
all that's our this thing gets through either you know,
before July fourth or in the next few hours afterwards.
Speaker 4 (20:55):
We all remember the corn Husker kickback, right, Ben Nelson,
back in the old I'm a caried debate. Rick, you
were working in the Senate back then, how would you
catalog this effort when it comes to backroom deals. Did
Americans wake up and say, well, what happened and who
voted on it?
Speaker 11 (21:14):
Yeah, we're a long way from those fiscal days of
you know, trying to put pressure on people not to
do these carve outs. You know, pork barrow is back,
and that's exactly Look, you always had to cut deals
in the Senate in the House to get votes, right.
That's as long as there's been those chambers, there have
(21:35):
been those deals. I would say that this is the
first time I can recall so many people having a
different version of the facts to work from. This idea
that you can call expiring tax cuts somehow policy and
not have it graded against you as you factor for
(21:57):
the deficits is nuts, because the deficits are the deficits.
And so we've just added a trillion dollars a year
in interest on the national debt. And I think all
of these guys there's no deal that can be cut
that's going to put that thing in the rear view mirror.
So I'm not surprised by the deals. It's obviously had
(22:20):
to get him because the underli like bill wasn't what
they wanted. But at the end of the day, what
I think everyone's going to remember from this is that
at a time when everyone agrees that we are spending
too much money in Washington, d C. We just spent
significantly amount more.
Speaker 4 (22:39):
Rick Davis says, pork Beryl is back, Jeanie. That's something
to say in the middle of this conversation. When this
was supposed to be an effort to cut government spending.
You know what Elon Musk says, if it's the last
thing he ever does on this earth, he says, he'll
be helping to pay for the primary challenges against Republicans
(23:00):
who voted for this bill. Before we get that farther,
we've got to go to the House. And there's no
guarantee this is going to pass tomorrow, is there.
Speaker 9 (23:10):
There's no guarantee it is likely that they are able
to keep this bill on track and pass it. We
don't know when you know, you just look at recent history.
Every time somebody like Chip Roy has gone out very
passionately and spoken out against the bill, he has caved.
And you know what's astonishing to me is I was
(23:32):
rereading Josh Hawley's off ed in the New York Times.
Speaker 6 (23:35):
What was it?
Speaker 9 (23:36):
We talked about it a couple months ago, saying these
medicaid provisions would destroy the party, and yet somehow he
found his way to vote yes. And that's what seems
to have happened in all of these cases. And another
really astonishing part of where we are today. You know,
you go back to George Washington telling Thomas Jefferson the
(23:57):
Senate cools the House. We've talked about that repeatedly. That
didn't happen here. The Senate heated things up, making it
harder for Mike Johnson as he takes this bill back.
Speaker 5 (24:08):
Right.
Speaker 9 (24:08):
I don't know what happened to George Washington's cooler Senate,
but it's no longer cooler, Joe. It is hotter, and
it's sending over a hotter bill. And yet in all
likelihood this thing goes through because Donald Trump is going
to be working these phones and his social media feed
and twisting these arms to keep people besides Tom Massey
(24:28):
and check Well.
Speaker 4 (24:30):
It's really interesting the way you put that, Genie, Ricky.
Maybe not so much the saucer that cools the tea
in this case. What's going to happen in the House.
Does Tom Emmer think he has the votes because there
has been a pattern of bringing bills to the floor
that fail.
Speaker 7 (24:46):
Yeah, I think.
Speaker 11 (24:47):
They'll they'll they'll get the votes. It's it's interesting how
they'll get him, though, because as Genie said, Tom Massey's
pretty pretty significantly opposed to this and obviously been paying
a big political price in a fight with the President
and over it. Nick Lolota, I mean Jeanie's neighbor in
New York is saying to everybody who listened to him that,
(25:07):
you know, this ALT provisions weren't good enough for him,
and he's going to vote against it. But of course
we heard that from all the SALT members until they
decided to change their mind without really getting much. So
I think that leadership will get what they want. And again,
I mean, Speaker Johnson deserves credit. He is the most
underrated speaker in history, I think, and yet he's getting
(25:31):
an enormous amount of Donald Trump's what I would call
questionable popularity policies through the House of Representatives and made
it the law. So kudos to him. I don't want
to jinx it for him, but I see this as
a signing ceremony in the Oval Office on the fourth
of July, Boom goes via fireworks.
Speaker 4 (25:52):
That's right. You know they're going to coincide that whole thing, Genie.
When I was on the daybreak feature on Bloomberg this morning,
on the terminal, the chart of the day showed the
cost of this bill on the lowest income Americans versus
the wealthiest. The Senate version of this bill that has
(26:14):
just passed of course, costs the bottom twenty percent of
taxpayers an average of five hundred and sixty dollars a year.
It will give an average boost of more than six
thousand dollars a year to those on the top end
if those numbers are correct. This analysis, coming from the
Budget Lab at Yale University, by the way, would suggest
(26:35):
Democrats have a pretty good story to tell for the midterms.
How do you frame this so people understand it?
Speaker 9 (26:42):
Yeah, the work that they have done at the lab,
and I know you and Kayley interviewed the head of
the lab yesterday, it's really worth looking at what they
have come with and it is objectively construed. It is
data that you can look at and all over yourself,
and it is very telling as to who the GOP
Trump Party is and what they are interested in. And
(27:05):
so for the Democrats it is going to be an
issue of can they tell this story? Can they tell
a story? And I think one area they need to
work on is to stop talking about this just as
cuts to Medicaid. Twenty five percent of Americans are on Medicaid.
That's a big number, but this bill impacts even people
(27:25):
who are ensured, as costs will rise. So you have
that story to tell. This is Donald Trump's Obamacare, This
is his healthcare bill, and it is going to increase
costs and remove about seventeen eighteen million people in a
decade from the healthcare roles. That's number one. Number two
is the impact on green energy. We've got all these
(27:46):
companies talking about building new AI platforms, et cetera. Our
energy bills will go up because we don't have the
energy we need going forward. And then you look at
the debt and deficit we're giving to our chill. It
is enormous. And the funny math they're using to say
this AD zero is laughable. And I heard Peters Gary
(28:08):
Peter Is saying this on the floor this morning when
he was talking about the fact. You just look at
the bill itself. If there is no added cost, why
are you raising the debt ceiling? And that tells you
everything you need to know.
Speaker 4 (28:20):
Jeanie Shanzo and Rick Davis taking a hard look at
the fine print as the bill clears the Senate and
heads back to the House.
Speaker 1 (28:30):
You're listening to the Bloomberg Balance of Power podcast. Catch
us live weekdays at noon and five pm Eastern on Apple,
Cocklay and Android Auto with the Bloomberg Business App, listen
on demand wherever you get your podcasts, or watch us
live on YouTube.
Speaker 4 (28:46):
The bill still needs to pass the House again, but
we can tell you if you're just joining us. The
President Trump's big, beautiful bill that extends the Trump tax
cuts and does a lot more has passed the Senate.
It was a fifty to fifty tie, broken by Vice
President jd Vance and Kaylee. I was struck this morning
by the chart of the day in Bloomberg Daybreak on
(29:07):
the terminal. The Senate versions of the bill that just
passed cost the bottom twenty percent of taxpayers an average
of five hundred and sixty dollars a year, well giving
an average boost of more than six thousand dollars to
those at the top end. That's courtesy economists at the
Budget Lab at Yale University, and it crystallizes the message
(29:27):
Democrats are going to take on the road from here.
Speaker 2 (29:29):
Yeah, in fact, they already have. And as we consider
that messaging in the math behind it, we turn to
someone from the Yale Budget Lab. Ernie Tdesky is with us.
He's director of economics. They are also former chief economist
at the White House Council of Economic Advisors. Welcome back
to Bloomberg TV and Radio, Ernie, as we consider how
Republicans are pitching this. Jd Vance, who cast the tie
(29:50):
breaking vote, the Vice President is Joe just mentioned, says
massive tax cuts, describing this on X Today as a
big win for the American people. How rich do you
have to be? How much do you have to earn
for this to actually be a win for you?
Speaker 7 (30:04):
Ernie, Well, you know, this is a four trillion dollar
bill over ten years, five trillion dollars if they make
the tax cuts permanent, and it's a massive transfer from
the bottom to the top. Because remember you are extending
the twenty seventeen tax cuts, which helped everyone, but we're
still skewed toward the top. There are add ons above
(30:25):
and beyond the twenty seventeen tax law that primarily helped
the top as well. And then to the extent that
they are trying to pay for this, and again they're
not fully paying for this by any means. But the
cuts to Medicaid and snap food stamps primarily hurt the poor.
So net net, like you were saying, this is, you know,
(30:47):
nearly seven hundred dollars if you look at the bottom
twenty percent of families, and then a thirty thousand dollars
benefit net net when you look at the top one percent,
And that's not even account for tariff revenue, you know,
which is not part of the bill formally, but which
the administration is framing as a payer. And those are
also quite regressive taxes.
Speaker 4 (31:11):
So I'm guessing you would not have voted for the
bill here, Ernie. The thing is, every time we spend
time talking with Republican lawmakers, the conversation immediately goes to
the CBO and how this non partisan operation that's been
part of the process here for generations has been politicized
(31:31):
and is looking at the wrong numbers, doing the math wrong.
How do you respond to these constant attacks on the
CBO and the suggestion that, you know what, Ernie, you're
also wrong because we're going to grow out of this debt,
you know.
Speaker 7 (31:47):
I would say, first of all, CBO, to anybody that's
worked with them, knows that they hold analytical rigor and nonpartisanship,
as you know, two of the highest schemes for the organization.
What's great about CBO is that they do things consistently
and for the most part transparently over time, so you
(32:09):
know that they are going to analyze a bill against
current law, against the law as it is currently stated.
That was not a That was not a surprise. As
a matter of fact, this you know, this Congress, particularly
the Senate right tried to come up with a different
way of looking at it because they knew exactly how
(32:30):
the CBO was going to look at it. You know,
it is perfectly fair to say that when you cut
taxes there is a little bit of a growth dynamic
effect that you know, somewhat mitigates the cost. But tax
cuts don't pay for themselves by far. Back when the
twenty seventeen tax cut was passed, you know, CBO found
(32:52):
that the dynamic effects of that tax cut offset about
twenty percent of the cost of that bill. And that
was when we had corporate tax cut as well. Those
corporate tax cuts were permanent, so they're not being extended
in this version of the bill. It's just the individual
tax cuts, which have much less bang for the buck,
and so the dynamic effects, the growth effects should be
even lower than they were back in twenty seventeen.
Speaker 2 (33:16):
Well, Ernie, that's an important point as we consider that
This is not a package mostly of tax cuts. It's
a tax extension of the rates that were set from
tax cuts eight years ago. So when we consider the
actual stimulative effect that this is likely to have, does
that basically negate it or should we be viewing this
more from the lens which is also a Republican argument here,
(33:38):
that it's avoiding those tax rates going higher, which could
have had a detrimental growth and consumption impact.
Speaker 7 (33:44):
I mean, the thing to remember is that this bill
goes above and beyond those twenty mere extension of those
twenty seventeen tax cuts. So even if you had thought
that those twenty seventeen tax cuts, the individual ones that
were expiring ought ought to be extended, this bill as
written is still about one hundred billion dollars more expensive
(34:08):
than just doing that. And if the expiring provisions in
this bill were made permanent, and if there's one lesson
we've learned over the last couple of decades, it's that
expiring tax cuts have a funny way of becoming permanent,
then this is a one trillion dollar bill. You know,
above and beyond just extending the TCJA, there will be
a little bit of fiscal impulse I think in twenty
(34:30):
twenty six, and I think that especially if you are
the FED or if you are a macro economist thinking
about your forecast, you know, that's an important factor that
will be somewhat offset by the effects of terrorists taking effect, right,
which is going to have a detrimental effect on the economy,
and so net you just you have to think about
all these things in tandem.
Speaker 4 (34:54):
So if you don't like this bill Ernie and you're
worried about debt and deficits, was extending the current baseline
the original sin?
Speaker 7 (35:03):
I mean, I look, I think that everybody, including markets,
assumed that the twenty seventeen tax cuts were going to
be extended, and in the short run, that was probably
not the wrong decision to make. You know, I do
have sympathy for the argument that if we had let
them expire, that would have been a massive tax increase
next year, and that would have created macroeconomic slowdown.
Speaker 4 (35:26):
That the thing is that they voted to use says
it costs nothing because we're extending it exactly, And I'm
still trying to get my head around how that works exactly.
Speaker 7 (35:36):
You know, the look the baseline tricks are funny. I
like to ignore baselines and just say, look, what does
the debt trajectory look like over the next ten years
with or without this bill? And with this bill, you know,
debt is growing faster than the economy. Still, it was
already you know, forecasts to grow faster than the economy
(35:59):
even if the tax had expired and we had raised
more revenue as a result. Now it's even worse as
a result of this. And so look, you know, we
can have arguments about whether it was correct at this
point in the business cycle to let the twenty seventeen
tax cuts expire completely, but the fact remains that our
(36:19):
debt trajectory is unsustainable and there needed to be a
better way, right of you know, making a you know
both better making a better tax code and for paying
for that in a way that would actually reduce the
debt trajectory.
Speaker 2 (36:35):
Well, so when we consider that debt trajectory and the
debt level, and then consider the level of interest rates
as we factor in the payments we have to make
on said debt, that's where you get to the argument
that President Trump is now making that this would all
work out for the better if the Federal Reserve were
just to lower interest rates and help bring down the
cost of that debt burden. If we were to see
(36:57):
a twenty five basis point cut by the Fed this
month or in the fall, if we if we see
multiple ernie, how quickly would that actually make a difference
as we consider the US's financial situation.
Speaker 7 (37:09):
I think a small cut by the Federal Reserve would
not make a huge difference. Remember, the Summary of Economic
Projections already has cuts baked in for this year. It's
just a question of when during the year we're going
to see of those cuts, and so I think that
that's probably priced into the long end of the curve already.
You would need a massive shot above and beyond what
(37:30):
is expected from the Fed, you know, to see movement
on the long end of the curve. And even then,
if investors perceive that the FED is politically captured, or
that the Fed is you know, taking is taking fiscal
policy into it, going beyond their dual mandate and taking
fiscal policy into account, right, then then further cuts by
(37:51):
the Federal Reserve may be less effective than they've been
in the past because investors, you know, may incorporate lower
polyL see rates into their long term yield forecast, but
then they may ch up their inflation expectations and their
term premium as a result. So this, you know, even
a FED that cuts rates may be much less helpful
(38:12):
to the argument the President is making than he thinks
right now.
Speaker 4 (38:17):
So is President Trump the real reason why the FED
can't cut rates?
Speaker 7 (38:22):
I mean, I think that the Fed's dual mandate is
very clear.
Speaker 5 (38:26):
Right.
Speaker 7 (38:27):
They are concerned about inflation, and they're concerned about employment,
and they are stuck in a potential stagflationary shock right
now or a worry of one. Right, So on the
one hand, they are waiting to see the effect that
not just tariffs but immigration action and fiscal impulse next
year will have on inflation, while at the same time
(38:50):
keeping a keen eye on how those shocks will also
weigh on the labor market. And and you know, the
effect is the opposite, right, So if there's inflationary pressure,
you want to raise rates or or not cut rates,
Whereas if the unemployment rate starts rising, you know, much
more than it has, then you want to start considering
rate cuts. And that's a very tough position for the
(39:12):
FED to be in. It is you know, I don't
think it is a simple matter of you know, the
FED needs to cut rates because other countries are already lower,
or because of something else.
Speaker 2 (39:24):
Well, Ernie, as we consider the kind of labor market
element of the Fed's dual mandate and the picture of
the US labor market overall. Getting back to this Reconciliation bill,
knowing it removes subsidies in a number of industries, including
those intended through the Inflation Reduction Act to invest in
clean energy, would you expect that to have a labor
market impact or at the very least mean that the
(39:46):
US cannot grow as many jobs as a result of
this legislation.
Speaker 7 (39:50):
I mean, I think so. I think that the energy
side of the legislation could potentially raise energy costs, right,
which is a supply side issue that the FED is
you know, famously concerned with. I mean, we we have had,
we have had, you know, inflationary shocks that have stemmed
from higher energy prices in the past. I would also
(40:11):
be concerned about the vulnerability of the of lower income
families as a result of both this bill and tariffs,
and how that flows through the labor market. I've always
been skeptical of the claims that you know, policy this
year would lead to a recession even when tariffs were
higher than they were than they are now, you know,
a couple of months ago. I'm not odds on on
(40:34):
a recession, but i do think that policy creates a
macroeconomic headwind for for the US, and uh, you know,
that's uh, that's something that's going to be a major
challenge for the Fed to navigate, you know, between that
and between the upward price pressure.
Speaker 4 (40:50):
Ernie, it's great to have you back. Ernie Tdsky with
his great analysis from the Economics Department. Yell budget Laub,
former Chief Economist, White House counsel of the Economic Advisor's
great to have you as part of our conversation.
Speaker 1 (41:05):
You're listening to the Bloomberg Balance of Power podcast. Catch
us live weekdays at noon and five pm Eastern on Apple,
Cocklay 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 played Bloomberg eleven thirty.
Speaker 4 (41:24):
Live from Washington. Thanks for joining us on the Tuesday edition.
If you're just coming along, we have big news. The
Senate passed the bill. It happened right after high noon
twelve oh three pm Washington Time, fifty to fifty, the
tiebreaker courtesy jd Vance, who made his way to the
Hill earlier today. So a little bit of change took
(41:44):
place in the vodama over the course of the night.
They did pull an all night or a twenty six
hour long affair. They got in there at nine o'clock
in the morning yesterday when we did our late edition
of Balance of Power last evening live from the US Senate,
that even started the voter rama. Yet two in the morning,
three in the morning, we saw updates over the course
(42:07):
of the evening that brought us here now with Lisa
Murkowski the last to turn in favor of the bill.
Now it goes to the House, of course, as we
continue the schoolhouse rock. Elon Musk not liking this whole show.
If you listen to this program, you know he's not
a fan of the bill, and that was the genesis
of his big breakup and then feud with President Trump,
(42:29):
which we kind of thought had died out. Seemed like
people were getting along until yesterday. This also happened last night.
Elon Musk vowing to make sure every member of Congress
who campaigned on a platform of reducing government spending be
voted out of office primary with his financial help quote,
(42:52):
they will lose their primary next year if it is
the last thing I do on this earth. Donald Trump,
of course, listening gets on truth social with a big warning,
he writes, Elon musk knew before he so strongly endorsed
me for president that I was strongly against the ev mandate.
There's the truth. If you're on YouTube, it's ridiculous, he says,
(43:14):
was always a major part of my campaign. Now it
gets tough as you scroll down here. Elon may get
more subsidy than any human being in history by far.
And without subsidies, he writes, Elon would probably have to
close up shop and head back to South Africa. No
more rocket launches, satellites are electric car production in our country,
he says, would save a fortune. Perhaps the Doge should
(43:39):
take a good hard look at this, he says, big
money to be saved, echoing these remarks as he made
his way out of town to Alligator Alcatraz in Florida.
Listen to Donald Trump, we.
Speaker 10 (43:50):
Might have to put doze on Elon. You know, you know,
doj Doji is the monster that that might have to
go back and eat Elon there. I think what's gonna
happen is those He's gonna look at Musk, and if
those looks at Musk, we're gonna save a fortune.
Speaker 4 (44:05):
Thank you very much, everybody.
Speaker 10 (44:07):
I don't think you should be playing that game with me.
Speaker 4 (44:11):
Thank you for your attention to this matter. Glad to
say Ed Ludlow is joining us. It's always a good
day when our friend Ed comes in from San Francisco,
and for good reason today the co host of Bloomberg
Tech and a friend of Balance of Power, Ed, are
we serious here? The monster is gonna come eat Elon?
What does he have to worry about? Is this real?
Speaker 5 (44:32):
So?
Speaker 12 (44:33):
I think what the president's referring to, and it's a
statement that he kind of said originally outside of the
White House and then reiterated in Florida is alluding to
across Elon Inc. Tesla SpaceX, and other parts of Elon's empire.
He has historically benefited from grants subsidies, but also directs
(44:53):
contracts with the federal government.
Speaker 6 (44:55):
You'll remember when you and I last discussed this issue.
You can quantify it.
Speaker 12 (44:58):
It's about twenty five billion dollars to forty billion dollars,
but it is across subsidies.
Speaker 6 (45:03):
Grants, and contracts.
Speaker 12 (45:05):
And I think what the president's kind of alluding to
here is saying, well, if DOGE, which review that. Remember
Elon Musk kind of was the founding one of the
founders of DOGE and has since departed after his term ended,
that's what would be reviewed. But I find the politics
that are interesting because it actually it all centers around
the bill, and actually what the President is saying direct
(45:26):
and indirector Musk on the issue of EV subsidy is
not what Elon Musk is saying back to him.
Speaker 6 (45:31):
Elon Musk is very worried about national debt.
Speaker 4 (45:36):
So you've got a nice rocket company. There be a
shamed of something happened to it is kind of the message.
What would this actually mean for Elon Musk? If the
DOGE did plug it into the hard drive, you're find
I guess, examples of waste, fraud and abuse. Are we
seriously talking about cutting contracts knowing how much the government
(45:57):
needs Elon.
Speaker 6 (45:57):
Musk, don't.
Speaker 12 (45:59):
I think it's important to be honest the audience don't
actually know the answer to that. What I would reflect
on is that and what we've reported is that lots
of the individuals inside of Doge are Elon Musk allies
and confidence they are people that he convinced to get
on board with the project. The other point is just
the reality operationally of what of what our domestic space
(46:21):
industry looks like. SpaceX dominates globally the vast majority about
eighty five to ninety percent of payload to orbit human
or otherwise. NASA is highly reliant on SpaceX to get
human beings to and from ISS. The Department of Defense
and the Pentagon are very reliant on SpaceX to put
(46:42):
defense apparatus in the form of satellites into orbit. And
so that's the reality. But I think that that's the
right interpretation that the presidents alluding to here, that Doge
would say, well, look at the value of these contracts.
Could we save money somewhere? Is there a corporate alternative
to SpaceX is probably the bigger next question.
Speaker 4 (47:03):
Wow, Tesla meantime stocks down fourteen bucks almost five percent.
Is Elon Musk really going to start his own political party?
I mean, how serious are we about the next chapter
for him? He's going to start giving money to Tom
Massey primary ing everybody Republican who votes for this bill?
Start the what is it the America Party? What does
(47:23):
he have planned? Well?
Speaker 12 (47:25):
In my career and experience of covering Elon Musk, which
includes the period prior to the November election and until
present day, that Elon Musk, you know, particularly in the
political domain, he has put his money where his mouth
is right. And this is why I brought up what
the two men are saying to each other. Mosqu's grievance
has been quite consistent. He's very worried about national debt
(47:47):
and he doesn't like the makeup of the bill. The
President has been saying that Musk's issue is EV subsidies,
but to his credit, Elon Musk has also been consistent
on this issue. He has argued and maintained for quite
some time that if America were do to do away
with direct consumer EV subsidies, in particular those that were
provided for in the Inflation Reduction Act, it would be
(48:10):
to Tesla's benefit because compared to other American automakers and companies,
Tesla's cost of doing business is much lower, it has
much more pricing power, and so if you got rid
of subsidies, it would still be ultra competitive. He has
been consistent on that, but on the political domain. Part
of his argument was in the run up to November,
he campaigned for the president on the idea that the
(48:31):
deficit and the national debt is something that this administration
would look at. And indeed, in several posts over recent months,
that idea has come back up, and that seems to
be what Marsk is upset about.
Speaker 4 (48:43):
Great to see you, Ed, and I appreciate your coming in,
Ed Ludlow. I know we're going to talk about this
against Let's stay close watch from on Bloomberg Tech or
Frankly all day at night on Bloomberg TV and Radio.
Tom Massey, Yeah, Matt reminds us Tom Massey drives a
Tesla and actually tweeted his off grid home runs on
a wrecked model S Tesla car battery that he repurposed.
(49:06):
I don't know, maybe this is just a big reunion
waiting for all these guys. Breaking news coming out of
New York today. I want to mention this before we
get to our panel this hour, because we have a
lot to dissect with Rick Davis and Genie Shanzano. The
final vote is in on the New York Democratic mayoral primary.
I know you're saying, Joe, we already did this. President
(49:29):
was just calling him a communist. This morning, let's bring
in Laura Namius Bloomberg, New York City and State reporter
who was all over this ranked choice election when we
talked about it, was this last week or the week earlier. Laura,
I'm starting to forget.
Speaker 13 (49:42):
It was last week when the first round of votes
in New York's ring choice primary came in, and today
we got to see with the rest.
Speaker 4 (49:49):
Of the batter one week, right, we thought this was
going to be what it was two weeks last time around.
So break it for us. The redhead on the terminal, Laura,
the same guy you already thought one is the winn.
Speaker 5 (50:00):
Right.
Speaker 13 (50:01):
So what we saw today is that zoron mom Donnie
significantly widened his lead over Andrew Cuomo in the final results,
which will be certified in a couple of weeks. But
he is now leading Andrew Cuomo by twelve points in
this primary. That is an absolutely decisive victory. We knew
that he was likely going to be the winner after
last week, when he was leading Cuomo by seven points,
(50:23):
a result that nobody expected. Everyone thought it might be close.
But there had only been one official poll showing Mom
Donnie winning. Turns out that this electorate was not captured
by polls, and Mom Donnie is the breakaway winner. For contrast,
in twenty twenty one, the first year that the city
used this kind of rank choice voting mechanism, Eric Adams
(50:43):
emerged victorious after eight rounds of voting by less than
one percentage point over Catherine Garcio came in second place.
Andrew Cuomo is losing by twelve points to zoron Mom Donnie.
Speaker 4 (50:55):
Amazing context, Cuomo is going to be on the ballot
still either way, right, So is he actually going to
run a campaign as an independent or something else.
Speaker 13 (51:04):
So we're talking to people within the Cuomo universe right
now trying to figure out what his plans are. He
has not decided whether or not to drop out of
the race. His campaign said last week that he would
be looking at the numbers to try to decide whether
or not he had a pathway forward. It's unclear what
these numbers are going to mean, but people close to
him are already pointing out that despite the fact that
(51:25):
he lost this race, he got more overall votes than
Eric Adams did. In twenty twenty one, so that might
give you a hint as to what they're thinking for
the general election in November.
Speaker 4 (51:36):
So, could we still have a four way man Donnie Cuomo, Adams.
Speaker 13 (51:41):
Sliwa, Yes, and another candidate, Jim Walden who's running as
an independent, are possibly looking at a five way general election?
Very competitive for the first time we cut.
Speaker 4 (51:52):
Out for you. Yeah, boy, I should say so, Laura,
Thank you so much for letting us know it's actually done.
It's a signed, sealed, delivered Here is New York City
State reporter of Flora Namias. Yes, Mamdani wins the Democratic primary.
Thanks for listening to the Balance of Power podcast. Make
sure to subscribe if you haven't already, at Apple, Spotify,
(52:15):
or wherever you get your podcasts, and you can find
us live every weekday from Washington, DC at noontime Eastern
at Bloomberg dot com.
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