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00:00Mario, we've got the shutdown as well that we're balancing just as we have for the past now 13 days.
00:05The House is out. The Senate is out. The Senate will be back tomorrow, but it probably won't matter.
00:11Yes, absolutely. And so to go to some of the scheduling that we're seeing coming out of the Middle East,
00:16obviously the president has priorities in pressing matters to go back stateside as well.
00:21With this shutdown going into its 13th day, nearly two weeks now,
00:26the president has floated trying to make sure that National Guard members, military members are made whole as well.
00:34That's a very interesting sticking point that could be pivotal for some of the negotiations.
00:40It is.
00:41Not pivotal in a other way.
00:42This just was Saturday this rolled out because on the 15th, as we keep hearing members of the military go without a paycheck,
00:49and that was supposed to create its own inflection point.
00:51The president's saying he will use his, quote, authority as commander in chief to direct our secretary of war,
00:56Pete Hegseth, to use all available funds to get our troops paid on October 15th.
01:01Apparently, we're going to be using repurposing money that that had a whole other purpose in terms of research and development
01:08that will keep the troops paid that will also be extended to Coast Guard.
01:13Civilian federal employees are another matter.
01:15Yes, absolutely.
01:16And to be clear, it's unclear, rather, or uncertain whether or not the president actually has these powers.
01:22And can do this?
01:23And can do this.
01:24But one feature that we've seen, of course, with this presidency is that Republicans have largely fallen in line with the president,
01:31whether or not he has the constitutional authority to do something.
01:34A Pentagon official said in a statement that $8 billion is the number we're looking at here in unobligated funds from the prior fiscal year will be used to pay the troops.
01:46And by the way, I don't know if that's one pay cycle.
01:48I don't know how long this goes for, but they've got $8 billion, I guess, to play with here as we extend our conversation with the help of Nathan Dean.
01:56Now, you know that when Nathan comes to join us without the fleece vest, the government is clearly closed, and he's with us right now.
02:04Bloomberg Intelligence Senior U.S. Policy Analyst, it's great to see you.
02:08First of all, congrats on the big win this weekend.
02:11Secondly, nothing has changed since we last spoke, has it?
02:14No.
02:15In fact, we got a client who called in this morning and said, when is the government shutdown going to end?
02:19And my answer to him was, I don't think it's going to end anytime soon.
02:22I see no reason why both sides will come into Congress, come into Washington this week and say, I feel like I need to negotiate.
02:30President Trump just had a really big win.
02:32He's going to fly back to Washington.
02:33He's going to feel really good about his position.
02:35The Democrats, they're going to look at the polling that came out over the weekend that also says that independents slightly blaming Republicans for this.
02:42So they're going to feel good.
02:43So when we talk about when is the government going to shut down or end, we should also talk about pressure points.
02:48President Trump just took away the biggest pressure point by saying he's going to pay these military members.
02:53The next biggest pressure point, in our view, is this idea of SNAP benefits running out in November, at the beginning of November, because the White House has said that they have enough money for October.
03:03October has been allocated.
03:04But there's questions of whether or not they will be able to have sufficient funds for the 24 million Americans that get SNAP benefits.
03:12That could be something that really pushes Congress to come back and say, we need to make a deal.
03:16And Nathan, speaking of some of those inflection points, besides the SNAP benefits, the Democrats have also made this argument about health care, ACA notices, et cetera.
03:26That should be on the horizon, too, within the next few days, a couple of weeks max as well, right?
03:31Absolutely.
03:31I mean, when these letters go out and they say your premium is going from X dollars to three times what you're paying right now, we've seen it.
03:39Representative Marjorie Taylor Greene has already said that her family members are impacted.
03:43And so there's going to be a lot of folks who are going to go into these holiday seasons going, OK, how am I going to pay for health care next year?
03:49And when these premiums are going up such an amount, that's going to put a lot of pressure on both moderates and think of these purple districts.
03:57But also, I think you're going to see a lot of pressure in places that you don't anticipate.
04:00There's going to be a lot of Trump supporters that are ultimately going to be impacted by this.
04:04And we're just going to have to see.
04:06In fact, when Speaker Johnson gave his press conference this morning, it was the first time that he sort of insinuated, to my recollection, that Obamacare may actually stick around for a little bit.
04:16Normally, they say we're going to get rid of Obamacare.
04:18But it was this idea that maybe Obamacare is just here to stay because he said, and I'm paraphrasing here, the way it was designed is extremely difficult.
04:24Because as he gives these subsidies out, if people get used to them, it's really difficult to cost subsidies back.
04:30Smithsonian closed.
04:32I know you were telling people to get to the museums before they shut down.
04:35This is like sort of the gas prices of a shutdown, at least in the early phases, right?
04:39It's something that's right in front of people, makes a good picture on the front of the paper, makes a good lead in the newscast, see the chains across the monuments.
04:47Or the Smiths, they go to the zoo and they cry.
04:49The kids cry when they can't get in.
04:50You can't log on to the panda cam.
04:53I'll confirm that in a minute.
04:54Does that move constituents?
04:56Well, the panda cam is off.
04:57Did you confirm that?
04:59All right.
05:00But, you know, I think this is news.
05:01We're starting to enter the unintended consequences portion of the shutdown.
05:05First week of shutdown is fine.
05:07I mean, obviously, we don't want to go to the zoo and all that other stuff.
05:10But like, for example, Bailey Lipschultz had a great piece this morning about how there are a lot of IPOs ready to get SEC blessing and the SEC can't bless it.
05:20And so there are unintended consequences that are coming from a government shutdown.
05:23Data, we haven't even talked about, like, what the Federal Reserve is going to be looking at or the Bureau of Labor Statistics because everybody's used to, okay, what's happening?
05:31If we're going to miss one report, we probably have good estimations of what that's going to look like.
05:35You're going to miss two reports.
05:36You're going to miss three reports.
05:37We've got a problem.
05:37Then things start to get a little bit.
05:38So we're entering now the unintended consequences, and we haven't even talked about air traffic controllers because anecdotally there's been reporting that Chicago, Nashville, Washington, D.C., slight delays.
05:49But if we get into a situation where we're getting closer into the holiday season and you start to see air traffic controllers start calling in sick and mass, then things are going to change.
05:57So pressure points are coming.
05:59And believe me, I do think this shutdown, I don't think it's going to last until Thanksgiving or, you know, I don't.
06:04I mean, I think it could.
06:05I mean, look, Thanksgiving is a long time away, and there's lots of time between now and then.
06:09Yeah.
06:09Because these unintended consequences and these pressure points are just going to continue to multiply over and over and over.
06:15But, again, I don't see any reason why both sides should be negotiating right now.
06:19Wow.
06:20And both sides feel like they have a good field position, right?
06:23We had Johnson earlier today.
06:25King Jeffries also saying that he had some signs of optimism also.
06:29Yeah.
06:29I mean, when both sides go home – and look, the House Republicans are still home – when both sides go home, they're looking at the same data.
06:36They're looking at the same talking points, and they're coming out with the same position that we're good.
06:40When the Democrats go home, they look at the – you know, what I referred to earlier, where the independents slightly favor the Republicans more in terms of blaming Republicans for this.
06:48Republicans go home, they see data in polling that suggests that 85% or 9% of their caucus is really happy with their strategy.
06:55And so there's really no reason for either side to come back.
06:58The Republicans continue to say they should come back to Washington.
07:01But I'm saying, like, there's no reason why they shouldn't negotiate because the Republicans are looking at this idea that we've already passed the clean CR.
07:08We've done what we need to do.
07:10They have the government open.
07:11Senator Lindsey Graham even said that yesterday, that he just said, I don't see any reason why I should talk to Democrats at this point because I've done what I need to do to keep the government open.
07:22Democrats are coming back, and they're saying Obamacare subsidies, Obamacare subsidies.
07:25And both sides go home.
07:27They talk to their constituents.
07:29And this polarization of Congress is ultimately what I think is extending the shutdown right now because neither side sees reason to negotiate.
07:38It's called a panda cam, says offline, red circle with a line through it.
07:44Kids are crying everywhere.
07:46Hakeem Jeffries calling the members back this week just to show up and be seen, right, to be caught in the act and do interviews, by the way.
07:55You'll probably see a lot of them on Bloomberg later in the week.
07:57And the two leaders were out over the weekend doing Sunday morning television to illustrate what these two gentlemen are talking about.
08:03Listen to Hakeem Jeffries and Mike Johnson from Sunday morning.
08:08The Republicans have already said we were going to have thoughtful conversations, deliberation, and debate about continuing the COVID era Obamacare subsidies because they don't expire until December 31st.
08:19They're trying to pretend like that's a September issue.
08:21It never was.
08:22My friends on the other side of the aisle, they seem to believe that health care is an extraneous issue.
08:26We don't believe it's an extraneous issue.
08:28It's a central issue.
08:29From Fox News Sunday, you weren't on the power panel this weekend, were you?
08:34I wasn't.
08:34I always look to see if you were.
08:36So what amazes me is that the talking points haven't really evolved at all.
08:42We're having the same conversation we were having before the shutdown started.
08:46Yeah.
08:46What does that tell you about this in terms of its relation with other shutdowns?
08:50Usually we're finding new levers to pull and different arguments as we get our way through it.
08:54Presidents going up to the hill to convince people.
08:56We're just all sitting here having the same conversation three weeks later.
08:59Well, if you think about how shutdowns end in the stages of a shutdown, the shutdown immediately happens, and then both sides go to their talking points.
09:06And their talking points is the same talking point.
09:09That person over there needs to come over and negotiate with me.
09:11In fact, I think anecdotally, there was a scene where Senator Thune and Senator Schumer were in the same hallway saying the same point.
09:17And one of the reporters said, well, he's just right there.
09:20We want to go talk to him.
09:20And they didn't.
09:21So they have to get it out of their system.
09:23And as they are going through these talking points, that's when the pressure points come in.
09:27But as we've seen with the shutdown, pressure points really aren't there.
09:31The markets don't care.
09:33I mean, I had a client just last week said, look, I appreciate you telling me about the shutdown, but I just don't care.
09:39In fact, Abby McCloskey put out a piece just this morning on Bloomberg Opinion saying that Americans are getting used to shutdowns.
09:46And I would argue that's probably what's happening here.
09:48Because, you know, if we go back to 2018, 2019, we had a 35-day shutdown.
09:52It was partial.
09:54It was also over the holiday season.
09:55So people had other things to focus on.
09:57But this shutdown comes in an era where partisanship is always expected.
10:02And so as we get into the shutdown, they're going through the talking points.
10:05And I think it just lengthens out the time which they can get from their talking points to the pressure points to ultimately having a solution.
10:13Mario mentioned Obamacare subsidies.
10:15That's going to be a pressure point.
10:16Because when those letters come out, there are going to be members of both sides of the aisle who are going to get questions from their constituents saying, I want you to go fix this.
10:24When we get to the SNAP benefits, 42 million Americans are going to call up their congressperson and say, I want you to fix this.
10:30If there's air traffic controllers that are calling you sick, I want you to go fix this.
10:34But right now, nobody's saying, I want you to go fix this.
10:38But, Nathan, going back to the markets question, right, why don't markets care?
10:42I mean, that's a lot of people who are probably holding on to their money, given that they won't be getting a paycheck anytime soon.
10:48Is it just a small sliver of the economy that that's the reason that markets aren't worried about these people kind of pulling back?
10:54So we need to talk about the markets at a macro level, and we also need to talk about specific sectors.
10:58So, like, with the SNAP benefits I talked about, grocery stores exposed there.
11:02When you talk about large defense contractors, they're usually paid on a two- to three-year contracting scale.
11:07So right now, they're in a point where they can just live through the government shutdown.
11:11It really doesn't impact all that much.
11:13Small contractors, completely different store.
11:15A vacuum of data, though.
11:16Exactly.
11:17So the traders obviously don't like the fact that the data doesn't exist.
11:20But, like, we have alternative data at WSLALTEGO.
11:23Wow.
11:24You know, we have alternative data.
11:25We've put it in the terminal.
11:26There are other options that at least get you through the mindset or through the couple weeks.
11:31But when it comes to the macro level, back in 2018, back in 2019, there was always this discussion of what's the debt ceiling versus what's the government shutdown?
11:39Because the debt ceiling scares markets, scares the fixed income markets, scares the markets.
11:44The government shutdown, on the other hand, there's not a lot of mechanisms that go from government decisions that will flow into the economy that ultimately then says, you know, this is going to impact this equity or this stock.
11:55Like, you know, Anna Wong over Bloomberg Economics has said that, you know, for every week that there's a government shutdown, you're shaving off about 0.2% of GDP.
12:03And she said in one of the recent calls that we just had is that it wouldn't really come up in the unemployment data until you get to mid-November.
12:09And so even if you're talking about the lack of consumer spending, we probably still have another two to three, four weeks until that flows into the economy.
12:15Because at the end of the day, if Congress can resolve this, it's fixed.
12:22Wow.
12:23Put the fleece back on when we reopened?
12:25Absolutely.
12:26OK.
12:26That's Nathan Dean for you.
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