attacking guam. we will have more on that throughout the hour here after this interview. to missouri now. he's the president and ceo of the federal reserve of st. louis. here is james bullard in conversation with my colleague, kathleen hays in st. louis. welcome to a very special edition of the hays advantage on bloomberg radio and bloomberg at the federal bank of st. louis for an exclusive interview with president jim bullard. >> great to have you here. thanks for coming to st. louis. kathleen: it's always fun. thanks to your team and staff. you have been saying lots of interesting things about the economy and monetary policy. just recently you said, do you think it's best now to leave rates where we are. earlier in the year you were more willing to say, maybe another rate hike, but now you say no, lowered unemployment will not you -- will not lead to higher inflation. jim, jobs keep growing. gdp has rebounded. it's above trend again. some people think it will stay there. it's one more rate hike a year this -- this year a problem? >> the fomc has been surprised by inflation coming into the downside into this ring here and not by just tiny amounts, really by a large amount compared to the progress we made through 2015 and 2016. if you look at the chart, we were creeping up towards 2%. in 2017, most of that progress has been undone. that's at least in my mind whetherto our story of our policy is leading inflation back towards target or not, so we will have to see how the data comes in the second half of the year on that. are you saying, let's just wait for the data and i would be in favor of a rate hike? james: of course we're always data dependent. i'm not too optimistic that we will have higher inflation measured on the year basis by the end of the year. if you look at the s&p, we're still predicting 1.6% for core inflation by the end of the year. so we would still be well below target and not too far from where we been in the last couple of years. i think we've got a ways to go here on inflation. kathleen: if inflation is not responding much at this point and is going to be normalized to move the rate of, what's the harm? will it bring the economy into recession? james: what we should be doing againstg preemptively future inflation by moving the policy rate. why you need to do that in this environment, you've got low inflation in the u.s., inflation expectations measured by markets below where you would like them to be. you have other countries a low -- with low inflation rates in the developed world. it doesn't seem like inflationary environment was going to get away from us and so i think you don't need to be preempted in the situation. kathleen: is there a risk that this undermines the economy? james: the low inflation? david: -- kathleen: if the fed does move preemptively as you would call it, goes ahead and says it want to get one more rate hike in this year and maybe even next year does some more -- what's the risk of that? does it hurt the economy? does it cause a recession? kathleen: -- james: there is some risk the economy that committee could be too aggressive in this situation and damage growth a little bit. i wouldn't say it's a huge risk at this point but it's something to consider. james: -- kathleen: inflation missed the fed's target for the last five years all but one month. if you look at the 20 years before, even then inflation was roughly targeted, moving around 2% if you look at five years average. so, it seems like things have changed. at this point, why is the fed broadly still on a rate hiking path? is this the right monetary path for now? should be fed be looking at this and saying, we need time to get ofof of it? james: we are in a low growth regime with low interest rates and low inflation. it's not just the u.s., really the g7. i just don't think in this environment that you have to really push hard to give back that get back to some level of interest rates that would have been appropriate in an earlier era but that's not the era we are in right now. i think we are in pretty good shape for rates right now. we can leave them where they are, and then see how the data develops. thateen: any thoughts people are seriously looking where you are an starting to reevaluate whether they should be talking about doing more rate hikes while inflation stays so low? james: i hope so. you can ask others on the ideattee, but i think the that there's a lot of growth just around the corner in the u.s. is probably not the right model to have in mind. i know there are attempts in washington to push up the growth rate. i applaud that, i think it's a good agenda to have. so far, not too much has been implemented. even if it was, it would take a while to have an effect probably, at the earliest now second half of 2018 going into 2019. monetary policy perspective, we're thinking in terms of 18 months or 2 years, we are probably not going to move to far off the 2% growth path during that timeframe. for that reason, i think it's wise just to stand pat on rates for now anyway. rates,n: stand pat on but full speed ahead on the balance sheet. you said september. we are still stimulative. then there is the presence of a big balance sheet. accommodations. i guess you could call it a tighter policy overtime. where you in favor of balance sheets, unwind reducing that stimulus, but against a rate hike,? if you recall -- i would've started reducing the balance sheet first and then raise interest rates later. and the committee didn't do tha t. get this year we managed to the discussion going and we've come up with a good plan for how to reduce the size of the balance sheet. it is so incremental and so slow initially that it's almost nothing, and you are starting from zero and then you are just rarely rolling forward over the next year or so. prudentthat's a very and i go about this, think it's also -- you can create some policy space on a balance sheet for the future, if you ever needed to go back to balance sheet policy in the future, you should be reducing the size of the balance sheet during relatively good times and allowing that policy space to develop going forward. i think it's a good approach, if we go ahead and do it in september, it will be almost negligible initially and then we will build up quite a bit of time. basically you're saying a little bit of tightening via the balance sheet, the economy can take it, that's fine. james: some of these estimates are 25 basis points over 2 years. that's 1 basis point per month. what does that compare to volatility and bond markets. kathleen: fair enough. remember when the feds said that about 100 basis points of rate hikes? is that an adequate rate buffer for starting the unwind at this point? i know it's going to be gradual and not disruptive, but what if everything doesn't go -- everything goes pear shaped, maybe 100 basis points, right? boom. comes down. you don't have an adequate buffer. that's what a lot of people might say. james: jerry allen gave a speech at jackson hole on this topic and talk about how the fed would react to a future recession, if undeveloped, there's no recession on the horizon today. that we did was have enough ammunition to handle a recession going forward. it would probably be to reduce the policy rate back down to zero and then consider quantitative easing at that point. for that reason, you would want to develop hollis he the terms of interest rates and in terms of the balance sheet so if you felt like you could make moves, if you had to at some point in the future. maybeen: you're saying 400 basis points on the fed funds rate, the once we get there we will do quantitative easing again. james: that's the reality of the era we are living in. kathleen: i want to ask you about -- do forwardan guidance and some of the other things -- kathleen: do you think forward guidance is effective? james: it's controversial but some of the studies say it was pretty effective. it's hard to say. if we got back into that situation, all those debates would ignite again. we are not really going in that direction again, we are going the other way right now. this has been contingency planning for the future. kathleen: is it possible the fed funds rate doesn't move much more from here for a long time? we're kind of almost where -- james: if you continue at 2% growth rate economy and you inflationt sub-2% rate and inflation expectations remain as low as they are, based on market managers, i would not see the policy rate moving very much up of where we are today. kathleen: dollar down 8% this year. economies have improved overseas. ecb,ook at it, the fed, bank of japan are all having the same problem. inflation is not cooperating and they are trying very hard to boost it and not getting it there. that is a commonality. does the weak dollar makes sense to you, you are expected to keep falling, what do you think of the dollar? james: it does make sense to me. mainly what happened in 2017 -- the dollar had a big run before that, beginning, middle of 2014. so this is only retracing some of the previous strength in the dollar. the other thing is that during 2017, this side of the atlantic we had the weak inflation numbers straight on the other side of the atlantic they had relatively good growth numbers and they are pretty happy about the growth prospects in europe compared to what they were expecting coming into 2017. so naturally, a stronger european economy, and recent inflation numbers in the u.s. leading to a stronger euro and dollar. kathleen: will that help inflation much? kathleen: -- james: i don't think it passes through all that much, at least not through direct trade channels. a bigen: this could have effect, president trump reviewing his choices for fed chair. for someone who's been in the federal reserve system for so long, what should the president be looking for? is it important to have a phd economist? someone with banking experience? some people say there's too many academics at the fed, so let's get the market people in there. what should president trump be looking for? james: is up to him to make the call. i like phd economist, i like research, that's the style i'm used to. but i also think a wide variety of voices on the fomc is beneficial. we've certainly benefited from having people with different backgrounds on the fomc. i think also because it's a big committee, you get a lot of stability through that process, because people are coming and going all the time, but he gives you a lot of continuity. you have some people that have served for quite a while, like committee,rs on the and that gives the institutional memory that you can carry forward. you also have a very good staff in the fed, both at the banks, like you just talk to, but also at the board, and it gives a lot of continuity as well. those are some of the considerations when you think about the fed versus other agenc ies. kathleen: ok, do you think that it is maybe time for something where we have more diversity in terms of people who know markets, people have experience with this? james: whoever it is and whatever background they come from, they will have to know monetary policy and spend a lot of time thinking about our start, all these issues. this is kind of inside the central bank and within financial markets. so, i think there's no getting away from that. ande are the core issues, the theories are not as good as you probably would like them to be, and for that reason we have to make decisions on the uncertainty about what the right model really is, and hopefully we can get good outcomes through that process. kathleen: jim bullard, sit tight. we will continue this conversation on bloomberg radio. i want to thank our bloomberg tv viewers for joining us. you can continue to follow this on your terminal, bloomberg radio. i'm kathleen hays life at the st. louis fed with president jim bullard. just to recap some of that conversation she had with jim bullard, the president, ceo of the st. louis fed, jubilant saying i think we have a ways to notefore we -- he said i optimistic we will have inflation high -- high inflation by the end of the year. that the balance sheet, as well as we have a plan from the federal reserve about unwinding that balance sheet. he said he wanted that to start before the fed began to raise rates. he said the plane and rates now is a good land, in his words called it a prudent, he called it so incremental and so moving it's almost nothing preachy asked him about dollar dynamics and also asked him about who might make a good fit share when janet yellen's tenure expires in february. he said he would favor a phd economist but emphasize this would be president trump's decision. president trump is on a working vacation in new jersey. that has not stopped him from working on filling key appointments in washington. the president poised to nominate a longtime antitrust attorney as chairman of the federal trade commission. bloomberg press reporter broke this story from bloomberg and joins me now from washington, d.c. what can you tell me about the man at the center of this story? joseph simmons, a partner with paul rice. role has he played in the private and public sector? ftc, was formally at the in a george w. bush administration, where he oversaw a merger investigation and any competitive conduct investigations. david: who is the acting chairman of the ftc? is this a job she would want to keep? >> yes, the acting chair is marine all house in, a republican. since 2012 and she is seen as campaigning for the job. she's been out writing a lot of speeches, campaigning a lot. ftc puttingt the too much costs on businesses and rolling back some of the regulations that they have been enforcing. so, this is a job she definitely wanted. this would be a disappointment for her if she didn't get it. david: ellis us understand the role the ftc is playing right now. certainly going to be looking at amazon, the amazon-whole foods deal. >> whole foods-amazon is a big merger at the moment, the biggest one-day have. there are other sort of main issues for the last two years, drug costs. they are very aggressive in terms of going after branded drug companies for reaching agreements that prevent generic drugs from entering the market. that's been a long time issue for theirs. on the other side of the ftc, that involves enforcing, taking enforcement action against companies that mislead consumers to that's been a big issue for tech companies like google, amazon, and facebook. david: let me ask you about where you stand in the process of nominating people to positions. how big a complement do we have, and how is the president doing naming nominations in regulation washington? >> many jobs seven months here into the administration are still vacant, at the ftc there are only 2 commissioners out of 5 and they are split between democrats and republicans. some people think that hampers the agency's ability to get things done. trump has three seats he needs to attempt -- a point and he's very much behind past presidents in terms of naming a chairman, compared to president obama and president george bush. kathleen: -- david: thank you very much greater still ahead, retired general wesley clark, the former nato supreme allied commander, to discuss a -- next the war of words between president trump and north korea. this is bloomberg. ♪ david: this is "bloomberg markets, the trump economy." the world continues to react to a strongly worded statement by donald trump towards north korea. trump: north korea best not make any more threats to the united states. they will be met with fire and fury like the world has never seen. david: north korea for its part threatened to attack guam. on his way to visit that territory, secretary tillerson tried to clarify comments made by the president. sec. tillerson: americans should sleep well tonight, have no concerns about this particular rhetoric of the last few days. david: retired general wesley clark joins us. he's now a senior fellow at ucla. let me ask you about the comments to secretary of state --secretary of state tillerson made. it sounds to me like he is saying the risk doesn't match the rhetoric. >> he saying let's not get everybody excited about something. korea wees, north deter north korean military adventurism. you look at what options are available, so much of the conversation centers on diplomatic solution. that aside, plans have to be underway for military options as well. gamedch of this has been out or thought about over the course of the decades we've been dealing with this issue? gen. clark: a lot of it has been it.d out and thought about if i knew the specifics i couldn't tell you. let's look at hypotheticals here. you could try to send in special forces teams to go into caves, find and disable missiles, and locate nuclear warheads. if we did that -- i'm just making up these numbers -- your military commanders would probably tell you they got an 80% chance of getting 70% or 80% of the warheads. so, once you initiate that action, and you would initiate it by disabling the north korean air defense system and command and control communications, if you could, do we think the north would just stand by and do nothing while we are rolling around their countryside, driving vehicles, flying helicopters, shooting guard's? i don't think so. you would trigger a general conflict on the korean peninsula. there are some 10,000 artillery pieces positioned to bring conventional fires and even biological fires on to the city of seoul, which is a major population center of the country, and he has other shorter range results with chemical and biological weapons. that's one military option. the other, take out the whole country. put in 100, 200 nuclear weapons on the country. site, useonceivable ground penetrating weapons. go in deep. they've had 70 years to harden their facilities in these mountain ridges and valleys in the north. could you get everything? probably not. but you would sure as heck make a hell of a mess. there is no good military option here. that is what has frustrated us for years. things arender how different now with new principles in place. how much has this changed since you were interacting with it when you were serving general? gen. clark: very well has changed in terms of the military situation. the north koreans have gotten more powerful, longer-range rockets. they've got a nuclear capabilities. the threat to the south korean population is it anything much worse. if you are the president of the united states, you can demand a military option but the military can only do what they can give you. we don't have perfect intelligence. we went into iraq thinking if we really knew about iraq -- we had done overflights for a decade, for all that time our armed forces had concentrated since 1991 on invading iraq and targeting iraq. we didn't find the nuclear weapons we thought were there. but we also realized we didn't even know where to look for a lot of the things. david: retired general wesley clark with me today. ucla'senior fellow at burkle center. the fbi searches a home that belong to paul manafort. this is bloomberg. ♪ david: this is "bloomberg markets: the trump economy." let's start with the first word news. administration has expanded u.s. sanctions freezingenezuela by assets of eight venezuelans as it seeks to raise pressure on the government of president nicolas maduro. some of those sanctions are current or former venezuelan government officials. the u.s. accuses them of supporting the creation of a constituent assembly that is charged with rewriting venezuela's constitution and has declared itself superior to all other government institutions in the country. today's action came as the u.s. seeks to coordinate international response and imposing penalties on the maduro regime for undermining democracy. arrestedlice shot and a man suspected of slamming a bmw into soldiers in a paris suburb today, injuring six of them in what officials say appeared to have been a carefully timed ambush. authorities check surveillance video of the area and police stopped numerous cars as they searched for the attacker. most people were released. highway near the english channel port of calais, police stopped what prime minister called the principal suspect in the attack. amnesty international is urging kenyan authorities not to use force unnecessarily when responding to protests and opposition claims of boat rigging with unnecessary for spreading the associated press reports at least three people have been shot during fighting between authorities and the demonstrators. amnesty's regional directors says force should only be used as a last resort. president trump is set to nominate a long-term antitrust attorney as chairman of the federal trade commission, bypassing its acting republican leaders in favor of an outside candidate. according to people familiar with the matter, the president possibly the choice for the post, his washington lawyer joseph simons. simons among a handful of candidates under consideration to fill 3 empty seats on the five-member commission. global news 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. i am mark crumpton. this is bloomberg. ♪ david: president donald trump in new jersey on a working vacation, trying to escape the c.midity of d. earlier today we learned the fbi searched the home that belong to paul manafort, who was candidate donald trump's campaign chairman. a spokesperson says mr. manafort has consistently cooperated with law enforcement consistently and did so as well on this occasion. bargain" -- "devil's hisain" is the title of book. paul manafort came onto this campaign and try to make donald trump more moderate and a way. you outlined that in the book, and it didn't go particularly well. blogroll is he playing in all of that? >> he came in after trump and essentially locked up the nomination and there is a great deal of fear that the republican establishment was trying to steal the nomination, and running conventions has been manafort's expertise since the 1970's. manafort's own personal and political problems, namely a "the new york times" story showing he had taken cash payments from a pro-russian party, made him radioactive. of howk tells the story he was fired by jared kushner, the president's son-in-law. but manafort and the problems he's had with russia have continued to dog the trump administration because this is now part of bob mueller's special counsel. what role is paul manafort playing in these investigations? >> we don't know for sure but it looks from the outside that he's playing a big role. manafort has well-documented ties to pro-russian politicians going back years and years, long before donald trump came on the scene, and there have been some pretty significant evidence of, if not collusion, then certainly contact between manafort and either agents of the russian government or people connected to russia in a way that is not considered kosher or appropriate for a campaign manager to be having in the midst of elections. david: we saw mr. manafort came in and tried to rein in candidate trump. now we have john kelly as chief thisaff, trying to make intractable administration work. is it a similar situation? do you foresee their being trouble with john kelly? >> is true. you had corey lewandowski, the wild man who let trump be trump followed by manafort who try to send off the rough edges followed by steve bannon who was more the wild man mode, and now you have kelly, who is certainly trying to, if not contain trump, then limit some of the collateral damage that comes from trump, for instance re-tweeting stories based on classified information or repeating perhaps baseless charges he hears on fox news. that seemed to be going well for a couple of days, but then of out with theseme bellicose statements on north korea and now everyone is scrambling to try to understand what that means. david: the rhetoric is very hot. what is your sense of the role steve bannon is playing now in governing or directing foreign policy in this administration? oft are we seeing reflective what steve bannon would like to see this administration do? >> north korea's statement trump made is not reflective of what steve bannon wants to do but there's a war going on in the white house and there has and since they won between aggressive, hawkish military mcmasters, and the more restrained, almost isolationist breed of advisor, cd bannon would fit into that amp and even though bannin was pushed out of his job, he's trying to exert influence on foreign policy throughout his tenure in the trump white house. i suspect the fact that steve bannon isn't out in -- acting as a counterweight, might be one reason why trump seems to have tilted in a very hawkish direction, at least with regards to north korea. david: i want to get your take on this bloomberg scope, the president trump is considering an outside candidate to head the ftc. there's a woman in place who has been the acting head of the ftc. what have you learned about how he picks, how he nominates candidates for these positions within the government? >> what i've learned is he doesn't give it a lot of thought to it and he often is persuaded by the last person he's booked to. oddly, it seems to me since republicans have full control of government, they've left quite a few very key positions unfilled and open. the fact that trump is turning to this now or seems to be turning to this now, i think is a signal that someone in his push this forward and has specific ideas about who it should be. writes for bloomberg businessweek. josh stay with me great in just a moment, walter schaub will join, me. this is bloomberg. ♪ david: welcome back to "bloomberg markets, the trump economy." .aytheon shares up 2% a world wars between president trump and the north korean government intensifies. oliver renick joins a with more on this story. a reaction you may have expected, perhaps not to this degree. oliver: i guess not a huge surprise in that sense, defense companies rallying again today. overall, this is a company that is good for investors, maybe not ningthe rest -- what's happe is a big move to a 52 week high that also happen to be an all-time high. it's also of course in raytheon. their fundamentals also looking pretty good right now. i think what's important to focus on, on the day today, whether doing in terms of reacting to some of the political dialogue that comes out but also the fundamental picture, it looks pretty good since we reported earnings about two weeks ago. david: how much is this company -- the work it has done changed? >> that's a big part of it. that's part of the thing investors and analysts are looking at right now. overall, if we jump into financial analysis, we can actually look at some of the elements, the segmentation for the revenue. let's just look. not a lot of companies have this description for the revenue segmentation. missile systems, space and airborne systems, integrated defense. stuff. good this makes me sleep better at night. at the end of the day, here's what. you're talking about with the intelligence and information it is seeing a bit of an increase in terms of the recent developments. this is a higher growth area for them, looking at intelligence, looking at cybersecurity. this will be something they will probably devote more resources to as they go forward and develop that part of the business. about 1/3 of the business still is going to be in missile systems, space and airborne systems. important to keep in mind is not just for the u.s. government and pentagon, this is an international company that sells to various places around the world, a lot of those defense contractors had a big deal when donald trump went --an important stock to watch here. david: oliver renick with our stock of the hour on bloomberg television. back now with the author of "devil's bargain." he's also my colleague here at bloomberg. there have been a lot of questions recently about the role of ethics in government, what needs to be disclosed, what constitutes a conflict of interest. on july 6, he resigned from that position, praising his colleagues in a letter to president donald trump, saying they're committed to protecting the principles of public trust. shot is now with the campaign legal center and he joins us now from our bureau in washington, d.c. let's begin with that phrase in italics, something you mentioned ed.the new york times" op how much do you think folks who work in government have lost sight of that? >> i don't think the people who traditionally work in government, or the vast majority of federal employees, have lost sight of that. it's deeply ingrained in the culture of the federal government. that language comes from an executive order the president george h w. bush issued in 1989, when he declared 14 core principles of the ethics program, and in fact oge incorporated those principles into its regulations. they are really part of the day-to-day life. it is steeped in the culture of every single employee in the who understands that's what it is supposed to be, with the possible exception of our president and some of his senior cabinet officials and white house staff. prepared was the ethics apparatus in washington, d.c. to deal with the arrival of this president given the complexities we've seen here in full cover over these last few months? with your department prepared to deal with that? walter: really one of the sad stories of this transition is that president trump had assembled a really good transition team, and we spent months working with them to prepare them for this transition. we coordinated with a number of other service providers within the government, and an outside group called the partnership for public service. things were really on track and going well. we had a great relationship with the campaigns for both candidates. in fact, they were in the rooms together and one thing the public might not have expected is they played nicely in the sandbox together while we were preparing. the day after the election, all the people we had trained for months disappeared and the president brought in the current counselor president instead, and things went off the rails in terms of the nominee program after that. is at bedminster, the golf course today. he has spent so much time golfing, so much time at his property, that there's actually no a website, trump golf count, that as of today says he has spent 45 days there at a cost of $57 million. is there anything stopping him from doing this? does he run into any legal or constitutional issue that is some point might prevent this kind of behavior? walter: the only constitutional check on the presidency is the fact to thed in conflict of interest rules and the standards of conduct don't literally apply to the president, although an ethical norm, the executive branch is that presidents would act as though they did. the real problem with him going to these properties is he's using these as marketing opportunities to increase the business of these properties. -- cost of the taxpayers pay there's obviously the secret service support and when they are overseas, diplomatic security folks. but you also have all of the other government officials who travel with him to have their meetings. so now we are paying for other white house officials and agency officials. there's a famous photo on the 9th that they lobbed those missiles at an airfield in syria, of all of those folks sitting around the table down in florida. one thing i noticed, there was one event where he was going and there to handle veterans event, and he was in the morning at a press conference, sitting next to the secretary of v.a. and said, will you be down there with me? secretary shall can just hand of shrugged and said, no. i found myself wondering if the v.a. chapel people said, we can't justify that kind of cost. the v.a. is under a lot of scrutiny right now. i wish other agencies and other travel offices would say no, we are not going to participate in advertising the president's properties and monetizing the presidency. david: i wonder if you think about the role of the oge and how it can be reformed, does it need to have more powers to be an investigative organization? does it need to have more power to discipline individuals who might cross boundaries? walter: this is sort of a nuanced point it's hard to get into on a short segment. i don't actually think oge itself should become an investigative body. there should be some additional investigative oversight, but it shouldn't be housed in oge, the 4500 agency ethics officials across the executive branch perform an incredibly important prevention mechanism. they work with officials in advance to prevent conflicts of interest and give them guidance on how the rules apply. well, no one is walking through the door asking an inspector general or some other enforcement officer for advice in advance. anhink if oge became investigative agency, you would be throwing out a prevention mechanism that served us well for 40 years. the real hotspot in washington, d.c. for reporters to hang around has been a trump international hotel. so many foreign businessmen, lobbyists, political leaders, anyone who wants to influence trump has set up camp there and is allegedly spending a lot of money. does that run afoul of any laws, ethical or otherwise, that could impede trump or stop the process of this government outside of government that seems to have cropped up in the lobby of trump 's hotel? that samees back to issue, if he decided not to divest his financial interest, and we were worried from the start that that would create a situation that we now have at the trump international hotel where people show up there, spend money and try to influence the president, or just simply gain access to the various administration officials who hang out there or at one point were living there. be specific laws on the books to prohibit this. is a lawsuit addressing the constitution. the ethics rules certainly don't apply directly to this. i been trying to help people understand that just because it's not illegal doesn't mean it's ok. every past president since the enactment of the ethics and government act for as long as oge has been around would have understood that this is the kind of situation that cap's out over government decision-making, and makes people question the integrity of the government's operations. the inability to point to a specific statute this violates doesn't mean it's not a significant departure from an ethical norm. i think we're seeing a lot of ethical norms, civic norms being departed from. that might sound like kind of a lightweight word, norms, but it's actually the glue that holds our society together. give me one simple example, except in neighborhoods where police have -- people are afraid of police, when people see a violent crime being committed, they call the police. that's a civic norm of our society. but it's not a law. you don't go to jail if you don't call the police when you witness a crime. contrary to the ending of the "seinfeld" series. david: thank you very much. senior director at the campaign legal center, the former director of the u.s. office of government ethics joining us in washington today. josh, the author of "devil's bargain," correspondent for bloomberg businessweek as well. this is bloomberg. ♪ david: i'm david gura. in washington and in congressional districts across the country, conversations about tax reform continue. a mix of considering temporary and permanent tax cuts and the looking at the way the president george w. bush push for and got changes to the tax code. the administration had always called a red team that handled major fights. we understand the trump administration is now taking a similar approach. we're joined by the vice president for tax policy at the u.s. chamber of commerce. we will get to tax policy in just a second. how big a departure is this? we've had a white house that put a lot into getting changes to health reform, health care reform made. now we see a consolidation among the ranks. >> can to change -- the white house did not have a policy or plan and the first deferred to paul ryan, then trump came storming and when he won it changes. then they fell back in the senate and deferred to mitch mcconnell. the fact that they are marshaling their own team, going in addressing these fights ahead of time instead of in real-time, is a sign that maybe they've learned from the failure of the health care bill. david: i want to get a sense from you of where we are in this conversation about tax reform. you praise that joint statement from the big six. how big a divide is there still between all the parties, all the principles involved in this process? >> we did praise the big six statement. i think we've seen that sort of development along the path. ,ou saw the director talk about we need a rates, maybe not at 15%, but certainly that is close , run 23%. you saw the senator on the sunday shows last week acknowledged we were not getting to 15%. you are starting to see them parse out their differences. human though they're not in the exact same place, they are in the same ballpark,. david: tom donahue said failure is not an option. i wonder what cost to its failure as we see the conversation shift to a mix of permanent and temporary. constitute failure, is the chamber's objective to get permanent tax reform implemented? comprehensive progress, tax reform, as feasible and we want it all right now. david: let me ask you how much this conversation has changed i mention, the willingness to accept temporary cuts here. >> initially the white house was looking at paul ryan's tax plan which would have funded tax with the so-called nationalists like steve bannon were for a much on board with this plan. essentially it was shut down an abandoned a couple weeks ago. that coupled with a failure of passing the health care bill to free up money for tax reform has awoken some people in the white house to the difficulty of doing tax reform, which would be difficult even with a more experienced president in the white house. david: caroline, how much optimism there is about getting this done in the calendar year -- does that timetable matter to you? does it matter to the chamber? >> ideally he wants to get it done this year. reality that it could flip, we acknowledge that. we think this is an important thing to move on. we think progrowth comprehensive tax reform is the best thing you can do to strengthen the economy. revenue neutrality, how big an issue will that be if this all plays out? >> at the end of the day, that goes to a lot of questions. things like that. ultimately appropriate tax reforms should generate revenue and grow the economy, that is what our focus is right now. green is with "bloomberg businessweek," the author of the book. congressman kevin brady, chairman of the house ways and means committee will join me tomorrow. -- tomorrow to give us the latest on tax reform. live picture here of the u.s. state department. moments from now, a spokesperson will give a briefing. this is bloomberg. ♪ ♪ track your pack. set a curfew, or two. make dinner-time device free. [ music stops ] [ music plays again ] a smarter way to wifi is awesome. introducing xfinity xfi. amazing speed, coverage and control. change the way you wifi. xfinity. the future of awesome. >> it is 2:00 p.m. in new york and 7:00 p.m. in london. >> welcome to "bloomberg markets." we are live over the next hour. here are the top stories we are covering. tensions between the u.s. and north korea after president trump threatened "fire and fury." the threat of a nuclear spat sending investors to safe havens. policy extending to a balance sheet. the san francisco fed president says the time to start slimming the balance sheet will be incremental. and disney is flipping the script on delivering content. the entertainment company outlines plans for an online service that sets the stage for a future without netflix or the big cable provider. u.s. markets closing in two hours. let's check stocks with julie hyman. there was selling in

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