Transcripts For BLOOMBERG Bloomberg Markets Balance Of Power 20180105

Them. Cohen told bloomberg tv that the federal government have to figure out some way to select their revenue the matter what states try to do. I understand with their child to do for their cities and their states and their taxpayers. We have the federal government still have to collect revenue. We have to evaluate what decisions they make in terms of what it does for overall collections at the federal level in the federal tax system. David we want to welcome now Kevin Cirilli and Marty Schenker could cap and ask the unfair question what is he talking about . Kevin it is kind of a surprise. I thought it was a great interview earlier today by our colleagues because i think as this gets implemented, the republicans, particular those in states that are impacted by the state local Tax Deduction issue, states like new jersey and new york, there are republicans and there and have a lot of concerns about this. Privately to the sources of talked to on capitol hill leading up to the tax vote, this was very tense amongst a lot of these republicans who were very much against it. Be a is pointing to Economic Indicators and confidence from the jobs report as well as the stock market, but when this ultimately takes impact next year for many americans, that could potentially be a time when they want to have some peace to tweaks to it. Went to that tweaks to it . En houseme wenh Speaker Paul Ryan gets his way. Shery if they are checked again the tax system, theyre just going to increase the deficit. Marty that could be one consequence coul. This tax bill was conducted with such beat and lack of transparency that no one really knows what the impacts going to be. Irs. Ildcard here is the they have regulations on how they implement this tax bill and of states try to get around it, the irs stop them in their tracks. David we have seen a precursor that already went new york and new jersey said you can pay your taxes are your early and the irs said that doesnt work. Statesif it looks like like california and new york are trying to set up these payroll tax schemes, they could issue a ruling saying thats not kosher and they could just make it go away. Shery all this coming out of time when were facing a funding crunch on june we 19th. 19. Ary there will be a crucial meeting at camp david. Kevin the president will be huddling together try to map out a strategy. Earlier this week, that meeting with republicans on the issue of dr. Anaca and emigration. And how about the daca willing and able the republicans are in terms of cohesiveness. The source of the base does not want what they view as amnesty for dreamers. That is very much against what moderate republicans think, what the majority of the country thinks, and democrats think as a whole. And businesses. We always forget the business angle for the daca issue and Silicon Valley what they are been pressing for come out in force. The possibility of a Government Shutdown is very real. Up on capitol hill, theyre still moving full speed ahead trying to over that. This immigration issues the first time President Trump has had to deal with congress. River the executive order at the calendar year. Remember the executive order at the calendar year. This is needed to get something done on the issue of immigration. David this meeting at camp david is an important one as their setting out their agenda for 2018. Momentumo they had with this tax law and now theres a book by Michael Wolff. Marty i dont think steve bannon is going to be at camp david. David at the same time, Michael Wolff was asked if hes backing off anything coul this i. This is what he said on the today show. Ofive written millions books and millions of words and i stand by every correction. You stand by everything . Everything. David will this situation with Michael Wolff take away from the momentum . Marty is to soon to say its too soon to say and to Michael Wolffs comments, he stands five what was said of the book, but a lot of its interpretation of things. I think there is a mindset out there that if stuff really isnt accurate, it should be. They wish it would be. Trumpt think that donald is going to be deterred from his plants and certainly mcconnell and ryan wont be so they will come away with a set of priorities. Its up to donald trump to stop the narrative about this book, but he does not want to seem to do that. Shery the things pretty clear is that not many people under President Trump are very loyal to him or have a high opinion of him not just because of the book , but because of what we are hearing in the past year. Gary cohn one of those people complaining in the book whether this was true or not. He was asked if he was going to stay on the job . Andays he is there today will be there next week, but theres going to be high turnover the white house this year for sure. Marty their traditionally is after one year and theres been lots of talk about tillerson and cohn and others, but they are all there. Until someone highprofile you shouldont think necessarily expect an exit odus. David Kevin Cirilli and marty Marty Schenker, they could both for being with us. Shery Abigail Doolittle with the latest. Abigail the rally continues not just across the globe but the u. S. As you just mentioned. We have the major averages nicely higher for the fourth in a row. We have a new set of record highs for the dow and s p 500 and the nasdaq. The s p 500 and the nasdaq on pace for their best weekly gains. I just read something very interestingly on the idea that perhaps this has to do with relief that the tax reform bill did actually go through and as expected to stimulate the economy. As for some of the top percentage performance for the s p 500, were looking at cvs up 4 as shares were upgraded to overweight. The firm sees the stock up as much a 61 in a bold case after the at the deal once it goes through. News corp. Up 3 after a discovery and offshore guyana. The department of labors guidance is a positive. 2. 6 asparts company up it started with a new by at longbow. Lets take a look at two of the cryptocurrencies. The of gains for bitcoin come up 10 . , upe have gains for bitcoin 10 , but ripple down. Thats based off reports that the Cryptocurrency Exchange will not lift ripple so investors perhaps going toward bitcoin. It will be interesting to see how the cryptocurrency craze does work out. As for bitcoin, unless it goes above 60,500, the sellers may push it down toward moving averages. This is the u. S. Dollar on a weekly basis with g btv 3596 and starting the new year with a decline in the bloomberg dollar 6 10 of 1 . 610 o what makes it interesting is decent economic rais data and rates rising. Perhaps it has to deal with the euro. Shery thank you so much for that. Coming up, the gop split over their legislative agenda, but can they get on the same page for the midterm . Larry will be here with his crystal ball next. This is bloomberg. Shery this is Bloomberg Markets balance of power. Im shery ahn. David im david westin. Lets check in on the bloomberg first word news this afternoon. Mark crumpton is here. Mark more fallout over Steve Bannons comments in a behindthescenes book about the trump white house. Steve bannons Main Financial backer, Rebekah Mercer, cut ties with the former white house strategist after speaking on the phone with President Trump. Thats according to people familiar with the matter. Sayiple Media Outlets the fbi is taking a fresh look at the foundation. The New York Times reports that agents have interviewed people connected to the foundation about whether any donations were made in exchange for political favors while Hillary Clinton was secretary of state thousand nine to 2013. President trump and Congressional Republicans have made repeated calls for an investigation. British defense secretary is warning that dangers from the Islamic State are far from over despite its defeat in iraq. Speaking in baghdad, he said the fight now enters a new phase and he expressed his governments commitment to continue working with the u. S. Led coalition to hunt down remaining Islamic State fighters in syria and elsewhere. Is Trump Administration imposing sanctions on for Venezuelan Military officials linked to corruption and oppression. Freezesactions fo assets that have under u. S. First action. Americans are banned from doing business with the. M. Global news 24 hours a day powered by 2700 journalists and analysts in over 120 countries, i mark crumpton. This is bloomberg. Shery mark, thank you. President trump will soon depart for camp david with the meeting for republican for a meeting with republican congressional leaders. The party was counting on a boost with their successful tax overhaul, but has all their momentum gone up in flames of fire and fury from Michael Wolff explosive new book . For damage assessment, we welcome larry sabato from charlottesville. Great to have you back. How much has this book taken away from President Trumps tax bill . Larry it is completely wiped the tax bill out of the headlines. Exley President Trump had already done that with the other controversies prior to the release of this book. With donald trump, you cant depend on having even a positive accomplishment be the focus of the news for more than a day or two. He is simply going to move on to other things. As the book suggests, he doesnt have a long attention span. David im glad you mentioned that because that doesnt come to a huge surprise to a lot of people. I wonder how much we actually learned from the book and if there is damage to the Republican Party, and i suspect its too soon to tell, is it a splintering of the base with steve bannon not aligned with the president and the people he really commands not supporting him in the midterms . Larry i think thats possible. We will see what steve bannon does in terms of endorsing candidates to oppose incumbent republican senators and house members. He has threatened to do that and has been talking with candidates in key states. That is one concrete way that steve bannon could hurt the republican chances in november. We will wait on that, but look, on this book, i dont think the key part of it is trump versus bannon. Everyone is talking about that. The real picture that emerges from this book, and frankly as you note, we have all heard this before from white house sources and others that this president doesnt have a long attention span. Its difficult to get his attention focused on important issues. I personally have been told that phrase its like working with the child. I know that part of the book is true because ive heard the same phrase and i know others have. Shery we live in a world of the kardashians. This is a guilty pleasure. Other than just being a guilty pleasure, does this have really Material Impact given that everybody sort of knew all this anyway . Larry some people are suggesting that the damaging part of this book may actually be about some of the financial andings of the trump family using the president ial candidacy and run presumably that includes the white house to advance their own interest. That may be the part that mr. Mueller and his team of investigators eventually focus on. David the president himself has said more or less the financial dealings are third rail. That is the thing that makes it really upset. Is there a possible beneficial affect . Mitch mcconnell think since a good result that mr. Bannon is no longer in a position of influence. Is ittive that probable that the president was to the mainstream of the Republican Party . Larry is there anything consistent about donald trump . Suppose he moves to the mainstream one day. Do you think a week later he will still be there . That is one thing that friend and foe discusses with respect to donald trump his inconstancy. As far as Mitch Mcconnell is concerned, of course this is a great result. He hates bannon. Bannon hates him. Steve bannon has almost selfdestructed, at least in terms of influence on those who are already elected. This is great news for Mitch Mcconnell and his staff. Immediately jumped on it and tweeted out a little video of Mitch Mcconnell smiling. There was no text. Everybody knew what the subtext was. Shery expanding on this idea of the populist movement, we now hear from powerful gop donors that they are not going to finance Steve Bannons projects anymore. Can the revolution still happen without bannon . Abigaillarry thats a very good question. Dan and has other sources. The verses were among his top financial angels, but he has other sources and he clearly has the support of that wing of the party. They are forced to choose between trump and bannon, they will choose trump. Bannon is a name still recognized in the political world instantly. David as to whether this has effects of the real world, we are talking about a camp david meeting taking place later today where Republican Leadership gets together to talk about the 2018 agenda. Is this book have any affect on their ability to get it through . Larry here is one possibility. If the truths on either the right or the freedom caucus, theyre not really moderate republicans left. That they need to define themselves as being antitrump or to put some distance between themselves and the trump agenda, it will make it much tougher for mitch and paul ryan to put together majorities in their respective houses. David very interesting. , thanks so much for coming to us from charlottesville today. Shery still ahead, new questions are being raised about attorney general Jeff Sessions and his recusal from the russia probe. We will have the latest next. This is bloomberg. David this is Bloomberg Markets balance of power. Im david westin. Shery im shery ahn. The details are emerging about Jeff Sessions recusal from the russia probe and possible interference by the white house. We welcome alex went from washington. There was some lobbying of Jeff Sessions to stay. Alex donald trump directed his white House Counsel to lobby Jeff Sessions not to recuse himself from the russian investigation. This was after it was revealed that sessions had held an undisclosed meeting with the Russian Ambassador during the campaign. Democrats in congress were urging sessions to recuse himself and despite the lobbying, he did. That led to the appointment of the special counsel. David explain what this is an important story. He didnt order sessions not to recuse himself and did change what happened anyway, shape, or form. Doesnt the president have the right to lobby people . Alex interesting question. Im not sure a law was broken here for example. Is a question of appropriateness perhaps. There are certainly democrats like jerry nadler of new york saying that this was an appropriate and possibly could be evidence of attraction of justice by the president. Was inappropriate and possibly could be evidence of obstruction of justice by the president. That something they could be looking at. L began be asked to head to congress intensify . Alex thats a possibility, but its unlikely that he would appear. He does enjoy executive privilege. I dont think the white house would let him testify in an open hearing certainly. I doubt they would let him talk to congressional investigators. Lawyerdoes have a representing him and rollers investigation in muellers investigation. We have yet to know what hes been interviewed by mueller however. David in washington politically, its a question of does it change any republicans months . Inds . Democrats are not favorable to the president in the first place. Does it change any republican minds on capitol hill . Alex i dont see a change in dynamic today. I dont think this story is the kind of story thats going to affect the dynamic on capitol hill. I think republicans would need a lot more and a lot clear evidence that donald trump did indeed try to abstract this investigation before what were talking about is impeachment before they would convene any hearings about impeachment. Shery your point is that despite the revelation, this was not opening any new avenues to the Mueller Investigation . Alex i dont believe so. He may have been unaware that mcgann had asked sessions not to recuse himself and that donald trump directed him to take that action. I dont know if that changes the direction of his investigation in part because frankly we know very little about what Robert Mueller is looking into these days. He is very tightlipped about where he is headed with this. David finally and briefly if you would, what about the other allegation that mr. Bennett has said quite specifically about the meeting that donald trump, jr. Had with the russians was really wrong . That really is the focus. Alex treason and unpatriotic is what bannon said. I dont think Robert Mueller is going to change the trajectory of his investigation based on what steve bannon says in the book. We believe i dont think we know for sure that the special counsel has been looking at that , at that meeting. Shery alex wayne joining us from washington. David up next, the latest picture of the u. S. Labor market. We will take a look at how the economy is very under President Trumps first year in office. This is bloomberg. David this is Bloomberg Markets balance of power. Shery the dow is up for 10 sub 1 . The s p 500 index it is up for 10 sub 1 . One sector down is energy. Oil is falling from its threeyear high. You was in diesel were up. The nasdaq has gained for a fourth consecutive session. When it comes to u. S. Payroll gains, slowing more than predicted. We will dissect those numbers in a few minutes. David lets go to the first word headlines with mark crumpton. Rk President Trump told a lawyer to get attorney general Jeff Sessions not to recuse himself last spring from the investigation into Russian Election meddling. The president told white house to hold sessions against a refusal. The efforts failed and special namedl Robert Mueller was to conduct the investigation. The United Nations Security Council will hold an emergency meeting about i ran this afternoon. He was Ambassador Nikki Haley has praised the demonstrators, saying the u. N. Must speak out on their behalf. Russia has warned against external interference into what internals irans affairs. 21 people have been killed and hundreds have been arrested in a week of antigovernment protests. A conservative party in the u k is looking for a second referendum to brexit. Opinion polls suggest later this year that 80 of the u. K. Thinks brexit is a mistake, which may be a reason to take a second vote. Austrias new chancellor says the country should keep postpolitical economic and even military ties with Great Britain after brexit. The chancellor spoke to reporters alongside the vice chancellor. The conservative Peoples Party and the Freedom Party have taken a hard line against immigration. Global news 24 hours a day, powered by more than 2,700 journalists and analysts in over 120 countries. I am mark crumpton. This is bloomberg. David weve learned the United States added about 148,000 jobs in december, less than expected, but enough for the economy to Gain Momentum in the new year. Wages are up 2. 5 over the last year, but remain lower than expected, even that we only have a 4. 1 unemployment level. Garynnolly addressed cohn address that issue. Unemployment rate is still 4. 1 . We are going to see real wage pressure here. Wages our next guest says may not be growing faster, because the over 65 demographic continues to add workers. We welcome constance hunter, the kpmg. Economist of constance we are seeing this low Unemployment Rate and not seeing Participation Rates increase. Is it because there is more slack in the markets than we thought . We are looking at what is happening with labor force precipitation across a variety of factors. Weve had the working age population growth rate slow. Ages 1664. 6569, thatt Participation Rate is 30 . If we look at the 7074, it is almost 20 . Over 75, it falls to 8 . Those rates have been rising steadily over the last two decades. Now have over the next year, we are expected to see as many net boomers, with the additions of how many people are entering the labor force of people over 65 as people within working age. Shery what does this mean for Economic Growth . President trump wants that thirdquarter gdp growth of more than 30 . Thisance i dont think will move the needle on the Third Quarter or fourthquarter growth. Cake. S already baked as a but the aging population is becoming a bigger and bigger part of the total population if we see higher Participation Rates in those demographics as people live longer and healthier, that is very positive for the economy. Jobsoked at all of the that were lost or in the and added back the normal population growth and look at the over 65 population. To count back those people that were still in the labor force during that time. Below a. 7 million jobs socalled breakeven level. That is one of the reasons you dont see as much wage pressure as you would otherwise. Globalization, many factors that impact this. This is one a lot of people havent really looked at. Workers onmore the other hand, limited productivity is a bad thing for growth. Percent is the suppression of wages responsible for the lack of growth productivity . Get workers pretty cheap, they dont have to buy more to become more productive. Constance once we are having productivity growth, reporters are willing to pay more for workers. Productivity growth, you tend to see higher wage gains. They are not going to be paid more if they are not getting more out of their workers. About were talking deploying capital or labor, we see some evidence that when labor becomes expensive, that gets a closer look. Employers decide to employ capital instead of labor. It also depends on what is going on technologically. We are about to see dividends from a lot of the technological advances seen over the last decade. That what are the chances this year, Economic Growth will be big enough that the fed will hike four times instead of three, and it will take the economy in a different direction . Inflation demand pull causes the fed to raise rates. Wherealso see a situation there arent enough workers, the fed will be raising rates because of the costpush inflation, not positive for the economy as when you have demand pull. Better situation where you es might see break rate hikes is that one. David will tax cuts give us increased wages . What is the potential of the tax bill on wages . Constance this is a longterm effect. If you Companies Says they will give wage increases, we can do crosscountry studies on this. The tax rate is one of the things that affects wages. Labor market flexibility of affects wages much more. How flexible is the labor market , how expensive is it to lay people off, how many people these are much bigger determining factors than a taxcut. The taxcut definitely has an i dont want to say it doesnt. I would like to see more investment, which is much more likely to get us to a higher productivity level, which allows us to grow at a faster rate that allows inflation and allows wages to go up in a noninflationary way. David thank you so much for being here, constance hunter. Shery President Trump is seeking a quick fix to the u. S. Free trade agreement with south korea. But north korea is casting a shadow on the talks. This is bloomberg. Shery this is Bloomberg Markets balance of power. David it is time for our stock of the hour. Trans ocean. It is writing riding a the president s plan to promote more offshore drilling. We have all the details. We saw a draft proposal from the u. S. Interior department to open almost all u. S. Coastal borders for offshore drilling. Rom sea to shining sea. That plan from the interior department is padded out. The interior department knows this will get whittled down over time. That is why we are seeing a number of drillers falling today. People are coming out and saying, we dont want you drilling off the coast of our sea. David we talked to the global shery we talked to the global head of commodities about this. He said it Wont Affect Oil Prices at all. There has been tough competition already. Mma Susan Collins has been a thorn in the side of the Trump Administration. She said she is opposed to any drilling off the coast of maine. We also heard from rick scott, who joined a number of politicians in saying this is not something we support. In thishe big surprises new offshore plan proposal would be the gulf. Rick scott and others are saying, we want to protect floridas beaches. Rick scott will be challenging a democratic senator in 2018 as well. These projects take a long time, a lot of investment. Twoyears ago, oil was 25 a barrel. David a different worlds than it was five years ago, with shale. Korea and u. S. Trade negotiators are meeting today to renegotiate a free trade agreement. About thea is wary political ramifications of a folding to washington demands. Leader of the team Economic Policy from washington. This was supposed to be the inndard bearer of most ftas the future, but President Trump to completely change this. It is going to be a quick fix, rather than a complete overhaul. Sarah trumps deficit of deficitaverse. The trade deficit has actually inbled with south korea 2012. The u. S. Initiated the process to redoingto look in the steel, or modifying it. Deal, or modifying it. We are at the first round of official talks, to see how they are going to modify this deal. Like what would it look if they got everything they wanted out of it . The Trump Administration has not notified congress that they will have to join the trade authority, which involves congress, and is a much bigger deal in rectifying these trade agreements. What we think will be on the table might be some changes to auto and agriculture. The u. S. Wants to make sure there is more production in america so they can export more and open up the free market more. How is this fta for the u. S. Compared to other deals . A is one of theorea biggest trading partners for the United States. The relationships the United States has with south Korean Foreign policy, north korea is a neighbor. It is a bit of an imminent issue. This trade deal needs to be done at one level because the Trump Administration wants to tackle trade deficits, but there is a wider factor at play. The north korean situation which complicates that. Can we look to what the United States is doing with south korea as an indicator of broader trade policy . Or is this a oneoff . Trump came into office saying we are going to crack down on chinas unfair trade practices. We have not seen that come to fruition yet. China is a another big trading partner. If you look at comparison at with canada and mexico, they dont have that same relationship right now were they are looking at foreign policy. The u. S. Is asking for huge changes to that deal. There could be some tradeoffs on foreignpolicy issues with the south korean deal. When it comes to the procedural aspect, is President Trump going to use this Fast Track Authority . What would be deadline before where this trade deal goes f or where this trade deal goes . Sarah the u. S. Has not used the fasttrack authority so far. It wouldve had to give Congress Notice and involve them in this process. There would be a robust deal for the tradeoff, where congress would either vote yes or no. If no, the deal could not be amended. At what changes the u. S. Could potentially make to the deal that would require congress by law to have to change things. From deals do have changes year to year that dont involve congress at all. Show,this will be a big but in the end, there wont be a huge impact on the deal. We will have to see if there is more logistics to come out of it. Sarah mcgregor, bloombergs team leader for u. S. Economic policy, thank you. Coming up, Rebekah Mercer cut ties with steve bannon. Meansl tell you what that for the populist revolution regarding President Trump and his former stop top strategist. This is bloomberg. Shery this is. Bloomberg markets balance of power. Are seeing u. S. Stocks gaining ground again for the fourth consecutive session. 4 10 of 1 . P health care and tax are leading the gains. Ech are leading the gains. The s p 500 index is up as much as 4 10 of 1 . We have some data. U. S. Payroll gains are flowing more than forecast expected in december. The nasdaq also has record highs, up 7 10 of 1 . The Federal Reserve president talked about talk to mike mckee earlier. Issue, i amx cut less of a person that thinks a lot of deficit spending has a lot of impact on the economy. If it does, it is temporary. The interesting part about the tax cut is whether it will drive productivity higher in the United States. If it does, we could get some gains out of that, because it will move up the trend growth rate for the u. S. Economy. That would be good if we could get that. For now, it would be wait and see, as far as Monetary Policy is concerned. Of marching gdp from quarter to quarter, a couple of temps does not really register. Disentangleard to whether you are targeting getting a couple of temps out of the trend growth rate or not. It will be hard to disentangle from the data. Regime. Ve the lower we will keep an eye open. James there is some possibility this could light a fire under investments and try for of higher. I would take note of that and it just policy appropriately. Mik but that banks the question mike your projected growth is for 2018 . James it looks like it is going to come in at 3 . This is good. Forecast,l thing, the is that you slow down from here, but we could get a little bit coming out from the tax bill. We could be slowing down the trend as we go forward in 2018. Ke we going to get any significant inflation, acceleration, that would create a need for the fed to move faster . James we are below target. We have made no progress in the last two years for the inflation target. Less energies, 1. 5 year over year. That is a low number, the same as it was in 2015. Below 5 in went the fall of 2015. We have not made any progress at all. We are not getting the kind of shortterm effects people so emphasize. You have the natural rate of unemployment sitting at 5. 5 . We are now at 4. 1 . We have not seen any inflation out of that jobs report coming out this morning. Modified story about the curve is either nonexistent, or very small. Janet yellen and jay powell said, maybe we need to look at our models of inflation dynamics. You think something would lead the fed to change the way it looks and making policy . Used a graph yesterday about the disappearing phillips curve. This has been going toward the zeros ever since 1980. I think there is widespread agreement about the appearance of this. The phillips curve is very flat and there might be no relationship at all at this point. The president of the Federal Reserve bank of st. Louis, speaking with our colleague mike mckee about inflation. Live from new york, this is bloomberg. Scarlet its 2 00 p. M. In new york, 11 00 in san fransisco, and 7 00 p. M. In london on this friday. Im scarlet fu. Julia and im julia chatterley, welcome to Bloomberg Markets. Scarlet were live at bloomberg World Headquarters in new york over the next hour. Here are the top stories we are covering on the bloomberg and from around the world. A big week for the markets, with u. S. Stocks rising to record highs for the Third Straight day. Synchronized Global Growth story continues to win over investors. In the u. S. Payrolls rising december by 148,000, fewer than what analysts had anticipated. What it could signal for gdp in the year ahead. And white house economic adviser gary warns high tax states like new york and california that the Trump Administration will i any workarounds fight any workarounds that will allow residents to keep their higher reductions. But get a check on where stocks are trading with Abigail Doolittle. I kind of gave everything away