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00:00> > FROM THE WORLD OF POLITICS TO THE WORLD OF BUSINESS, THIS IS "BALANCE OF POWER" WITH DAVID WESTIN. ♪ DAVID: FROM BLOOMBERG'S WORLD HEADQUARTERS IN NEW YORK TO OUR TV AND RADIO AUDIENCES WORLDWIDE, WELCOME TO "BALANCE OF POWER." WE BEGIN AT THE WHITE HOUSE, WHERE PRESIDENT BIDEN IS TURNING FROM CELEBRATION OVER THE PASSAGE OF THE INFRASTRUCTURE BUILT LATE IN THE NIGHT ON FRIDAY TO SELLING THE PLAN TO THE AMERICAN PEOPLE. WE WELCOME WASHINGTON CORRESPONDENT JOE MATHIEU, HOST OF "SOUND ON" WEEKDAYS ON BLOOMBERG RADIO. TELL US ABOUT THE SALES JOB THE PRESIDENT IS SETTING UP FOR HIMSELF. JOE: YOU CAN THINK OF IT AS TWO DIFFERENT SALES JOBS. ONE IS REMINDING PEOPLE WHAT HAPPENED FRIDAY NIGHT. PASSING THE BIGGEST INVESTMENT EVER IN AMERICAN INFRASTRUCTURE. NOT THE KIND OF THING YOU WANT TO HIDE ON FRIDAY AT MIDNIGHT. HE ALSO NEEDS TO BE GETTING THE CASE CLOSING THE DEAL ON HIS SOCIAL SPENDING PLAN, THE $1.75 TRILLION PLAN THEY HAVE PROMISED IN THE HOUSE TO VOTE NEXT WEEK. I WILL NOTE WE HAVE NOT RECEIVED A DAILY SCHEDULE FOR THE PRESIDENT THAT OFTEN GOES OUT SUNDAY EVENING. THERE MAY STILL BE EVENT PLANNING IN THE WORKS FOR THIS WEEK. THE PRESIDENT IS EXPECTED TO START MAKING THE CASE FOR WHAT HAS ALREADY HAPPENED AT THE $17 BILLION INSIDE THE BILL FOR IMPROVING PORTS. -- JOE BIDEN ALSO CONTINUES THE ARGUMENT FOR THE RECONCILIATION PLAN. THIS WHITE HOUSE SEE THAT AS IMPERATIVE IN LIFTING PRESIDENT BIDEN'S POLL NUMBERS. YESTERDAY WE GOT THE LATEST APPROVAL RATING FROM SUFFOLK UNIVERSITY, SHOWING 38% APPROVAL RATING FOR JOE BIDEN, THAT IS ONLY ONE POINT ABOVE THE LOW WE SAW IN OCTOBER LEADING INTO THE ELECTION. THE PRESIDENT HAS SOME WORK TO DO TO GET THAT NUMBER HIGHER. DAVID: THE PRESIDENT HAD A ROUGH DAY ON TUESDAY WITH THOSE ELECTIONS STOP ON FRIDAY HE HAD A HECK OF A DAY FOR BECAUSE HE STARTED OUT WITH STRONG JOBS NUMBERS AND ENDED UP JUST BEFORE MIDNIGHT WITH THIS HISTORIC INFRASTRUCTURE BILL. IS THERE THEORY AT THE WHITE HOUSE FOR HOW THEY START TO GET CREDIT FOR WHAT HAPPENED ON FRIDAY INSTEAD OF BLAME FOR TUESDAY? JOE: THE PRESIDENT IS ACUTELY AWARE -- THE MIDTERMS ARE OFFICIALLY ON. WE HAVE ANOTHER YEAR OF HAVING THIS DEBATE. THE PRESIDENT WANTS TO SHOW PEOPLE DEMOCRATS CAN GET SOMETHING DONE. DAVID: I'M TOLD ONE YEAR FROM TODAY WE WILL HAVE THE MIDTERMS. THANK YOU SO MUCH TO SOUND ON HOST JOE MATHIEU. IN WASHINGTON, THE NEWS IS ABOUT THE HISTORIC INFRASTRUCTURE BILL. IN BEIJING THEY ARE CELEBRATING A DIFFERENT CHAPTER. GIVING PRESIDENT XI AN HISTORIC THIRD TERM IS ON THE AGENDA. WE WELCOME WENDY CUTLER, VICE PRESIDENT OF THE ASIAN SOCIETY, WHERE SHE IS MANAGING DIRECTOR OF THE WASHINGTON OFFICE. WHY DON'T YOU SET THE STAGE ON THIS AND WHY IS IT PARTICULARLY IMPORTANT? WENDY: THIS IS THE BEGINNING OF THE PROCESS FOR XI JINPING TO CONSOLIDATE HIS POWER AND TO BE ELECTED FOR AN UNPRECEDENTED THIRD TERM AS LEADER OF THE COMMUNIST PARTY AND LEADER OF CHINA. HE IS CONVENING 300 SENIOR PARTY OFFICIALS. THEY WILL REWRITE THE PAST 100 YEARS OF COMMUNIST PARTY HISTORY AND MAKE IT SEEM LIKE A LOT OF ACCOMPLISHMENT WERE OBTAINED AND START LAYING OUT HIS VISION FOR HIS TENURE GOING FORWARD. DAVID: ONE OF THE THINGS WE CARE ABOUT IT BLOOMBERG IS THE ECONOMY AND BUSINESS IN CHINA. WHAT WOULD A THIRD TERM MEAN FOR THE CHINESE ECONOMY AND GLOBAL GROWTH? WENDY: ONE AREA OF CONCERN IS THAT AS XI CONSOLIDATES HIS POWER HE HAS MORE CONTROL OVER THE ECONOMY AND ALL DECISIONS ARE TRUMPED DOWN. THAT COULD STIFLE INNOVATION, DISCOURAGE BUREAUCRATS FROM APPROVING LICENSES, PROVING MERGERS FOR U.S. AND OTHER FOREIGN COUNTRIES, AND IT COULD LAUNCH A PERIOD WHERE BUREAUCRATS ARE SO CAUTIOUS AND CHOOSE TO DO VERY LITTLE, NOT WANTING TO STICK OUT OR SOMEHOW DERAIL THEIR CAREERS. DAVID: WE HAVE A SENSE, AND WILL WE GET A BETTER SENSE ABOUT HOW PRESIDENT XI IS GOING ABOUT BALANCING, MAKING SURE HE HAS FIRM CONTROL. HE HAS MADE IT CLEAR THE COMMUNIST PARTY SHOULD HAVE A LOT TO SAY ABOUT PRIVATE ENTERPRISE. THAT KEEPS THE GROWTH GOING. IT SEEMS TO BE TRAILING OFF A BIT RIGHT NOW. WENDY: IT DOES. THAT IS HIS DILEMMA. THE MORE CONTROL, THE MORE LESS ENTREPRENEURSHIP AND POTENTIALLY LESS ECONOMIC GROWTH. TODAY WE DID SEE THE OCTOBER TRADE NUMBERS IN FOR CHINA. EXPORTS ARE UP. ANALYSTS HAVE BEEN SUGGESTING THEY HAVE TO GO DOWN AT SOME POINT, BUT THEY ARE STRONG IN HELPING DRIVE THE ECONOMY RIGHT NOW. WENDY: WHAT ABOUT AMERICAN BUSINESSES AND THEIR WILLINGNESS TO DO BUSINESS WITH CHINA? WENDY: THERE IS A CHILLING EFFECT. WHEN YOU LOOK AT SURVEYS OF U.S. BUSINESSES IN CHINA, THEY ARE STILL OPTIMISTIC. THEY ARE MAKING MONEY AND THEY SAY A GROWING MIDDLE CLASS AND ECONOMIC GROWTH AND INNOVATION. THEY ARE WILLING TO PUT UP WITH A LOT OF THESE SETBACKS AND NEW LEGISLATION REGULATIONS THAT ARE BEING PUT INTO PLACE. FOR CERTAIN SECTORS, EASIER THAN OTHERS. -- CHINA RELAXES ITS EQUITY RESTRICTIONS. DAVID: I SUPPOSE THE BIDEN POLICY IS EVOLVING. DOES A STRONGER PRESIDENT XI TALKING ABOUT THE FIRST WEEK OF COP 26, PRESIDENT XI WAS NOT THERE. PRESIDENT BIDEN MADE A POINT SAYING IT IS A SHAME HE IS NOT THERE. DOES PRESIDENT XI FEEL ANY OBLIGATION TO STEP UP TO THE PLATE ON COP 26? WENDY: PRESIDENT XI IS SO FOCUSED ON HIS INTERNAL SITUATION. IT WAS NOT A SURPRISE HE DID NOT GO TO COP 26. HE KNOWS CLIMATE IS AN IMPORTANT ISSUE. HE MADE SOME ANNOUNCEMENTS IN THE LEAD UP TO ANNOUNCEMENTS IN THE LEAD UP TO COP 26. HE DID NOT GO FAR ENOUGH FOR MOST PEOPLE BUT WE WILL SEE HOW THIS UNFOLDED. DAVID: IS PRESIDENT XI FEELING SOME INTERNAL POLITICAL PRESSURE TO MAKE SOME PROGRESS ON CLIMATE , COP 26 OR KNOW? WENDY: YES, BUT HE FACES A DILEMMA. MANUFACTURING WILL GO DOWN IN CHINA AND WE ARE ALREADY SEEING ENERGY SOURCES THAT ARE AFFECTING THE MANUFACTURING SECTOR. THIS IS A BALANCING ACT FOR PRESIDENT XI GOING FORWARD. DAVID: WHAT ABOUT THE ENERGY SHORTAGES? WE HAVE HEARD TALK ABOUT PLANTS SHUTTING DOWN BUT IT IS PUTTING PRESSURE ON THINGS LIKE MANUFACTURING. WENDY: EXACTLY. RIGHT NOW IT SEEMS THAT THE BALANCE IS TILTING TOWARDS ALLOWING WHOLE -- ALLOWING COAL AND OTHER FOSSIL FUELS TO BE USED AT THE EXPENSE OF RENEWABLES. DAVID: TAKE A LOOK AT THAT VIRTUAL MEETING, ASSUMING IT DOES HAPPEN BETWEEN PRESIDENT BIDEN AND PRESIDENT XI. WHAT WOULD BE THE THING YOU WOULD MOST HOPE TO SEE COME OUT OF THAT? WENDY: A CONSTRUCTIVE DEVELOPMENT WOULD BE FOR OFFICIALS FROM VARIOUS MINISTRIES TO BE GIVEN THE GREEN LIGHT TO START ENGAGING IN MEETINGS AND WORK ON SPECIFIC PROBLEMS AND CHALLENGES FACING BOTH COUNTRIES. I AM NOT EXPECTING ANY BREAKTHROUGHS. WE NEED TO KEEP EXPECTATIONS LOW. MORE ENGAGEMENT IS POSITIVE. DAVID: WHAT ABOUT THE SITUATION WITH TAIWAN? DO YOU EXPECT THE LEADERS WILL TALK ABOUT THAT AT A VIRTUAL MEETING? WENDY: I AM SURE THEY WILL BUT THEY WILL TALK PAST EACH OTHER. DAVID: EXACTLY. PRESIDENT XI HAS MADE HIS POSITION VERY CLEAR. WENDY: SO HAS PRESIDENT BIDEN. DAVID: THAT IS WENDY CUTLER OF THE ASIA SOCIETY. COMING UP WE HAVE A STRONG -- WE HAVE A HISTORIC INFRASTRUCTURE PACKAGE. DAVID: THIS IS "BALANCE OF POWER" ON BLOOMBERG TELEVISION AND RADIO. FOR FIRST WORD NEWS WE GO TO MARK CRUMPTON. MARK: THE UNITED STATES IS LIFTING ENTRY RESTRICTIONS FROM MORE THAN 30 COUNTRIES, ALLOWING FULLY VACCINATED TRAVELERS TO FLY FROM PLACES INCLUDING EUROPE, CHINA, AND INDIA. IT WILL REVIVE SOME OF THE WORLD'S MOST LUCRATIVE ROUTES FOR AIRLINES. ANALYSTS EXPECT LOWER DEMAND AS SERVICES RESUMES FOR FLIGHTS LIMITED TO THE FULLY VACCINATED. ISRAEL SAID TO ALLOW GROUPS OF TOURISTS TO ENTER THE COUNTRY, EVEN IF THEY HAVE NOT HAD BOOSTER SHOTS. TESTING WILL BE REQUIRED. EACH WILL REMAIN IN THE SO-CALLED CAPSULE AND BE KEPT AWAY FROM CROWDED AREAS. INDONESIA IS IN TALKS TO PROCURE PFIZER'S COVID-19 PILL. THE GOVERNMENT OFFICIAL SAYS INDONESIA WANTS THE DRUGMAKERS TO INVEST IN A FACILITY OR PARTNER WITH A DEVIATION COMPANY -- WITH AN INDONESIAN COMPANY TO MAKE THE PILLS ON SHORE. U.S. FEDERAL RESERVE GOVERNOR RANDAL QUARLES WILL STEP DOWN FROM THE CENTRAL BANK IN THE LAST WEEK OF DECEMBER ACCORDING TO A STATEMENT FROM THE FED. THAT FREES UP ANOTHER VACANCY FOR PRESIDENT BIDEN TO PHIL AS HE CONSIDERS NEW LEADERS FOR THE CENTRAL BANK. THE PRESIDENT ALSO HAS AN OPPORTUNITY TO PICK A NEW CHAIR AS JEROME POWELL'S TENURE EXPIRES IN FEBRUARY. GLOBAL NEWS 24 HOURS A DAY, ON AIR AND ON QUICKTAKE BY BLOOMBERG, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES. I AM MARK CRUMPTON. THIS IS BLOOMBERG. DAVID: LATE FRIDAY NIGHT, THE HOUSE PASSED A BIPARTISAN INFRASTRUCTURE BILL WITH $550 BILLION IN NEW MONEY. ABOUT THE PROCESS THERE WAS TALK OF HOW WE WERE GOING TO PAY FOR IT. TO TAKE US THROUGH IT HOW -- TO TAKE US THROUGH HOW IT ENDED UP WE WELCOME ROHIT KUMAR. EARLIER HE SERVED AS DEPUTY CHIEF OF STAFF TO SENATOR MITCH MCCONNELL. THANK YOU FOR BEING WITH US. STAYING ON INFRASTRUCTURE, HOW WILL THEY PAY FOR IT. ONE OF THE THINGS I'M NOT SURE I FIGURED OUT IS MOST OF THE MONEY HAS ALREADY BEEN APPROPRIATED. ROHIT: THE FUNDING FOR THE INFRASTRUCTURE BILL COMES FROM A COUPLE OF DIFFERENT PLACES. THE SINGLE LARGEST SOURCE OF ROAD AND BRIDGE MONEY COMES FROM THE GAS TAX. THIS IS WHERE EVERYONE PAYS WHEN THEY BUY GAS AT THE PUMP. THE GAS TAX THE LONGER SUPPORTING A LEVEL OF FUNDING REQUIRED TO KEEP OUR ROADS AND BRIDGES IN GOOD CONDITION, LET ALONE THE OTHER INFRASTRUCTURE SPENDING ON THE ELECTRICAL GRID AND WATER SYSTEM, IN PART BECAUSE PARTS ARE GETTING MORE EFFICIENT. YOU HAVE ELECTRIC VEHICLES, EVEN HYBRIDS. THEY HAVE TO HIT THE MARK ON THE AMOUNT OF INFRASTRUCTURE DESIRED. THIS WAS A BIPARTISAN BILL IN THE SENATE, IT GOT 69 VOTES IN THE SENATE, INCLUDING MY FORMER BOSS MITCH MCCONNELL COMMENT A LITTLE LESS BIPARTISAN IN THE HOUSE BECAUSE IT MORE CLOSELY TIED TO THE RECONCILIATION BILL. YOU GOT HIGHWAY TRUST FUND MONEY. YOU HAVE COVID RELIEF MONEY REALLOCATED BECAUSE IT WAS CLEAR THE $1.9 TRILLION BILL IN MARCH BARBERSHOP THE MARK. REALLOCATION OF MONEY. NEW REPORTING REQUIREMENTS ON CRYPTOCURRENCY. NOT A LOT OF NEW TAXES, VERY FEW, THIS WAS BIPARTISAN AND REPUBLICANS ARE NOT VOTING FOR TAX INCREASES, BUT THERE WAS AN EXCISE TAX ON CHEMICAL COMPANIES THAT WAS PART OF THE PACKAGE THAT GOT A LITTLE BIT OF ATTENTION. BY AND LARGE, IT IS EXISTING TAXES, REALLOCATION OF SPENDING, AND DEFICIT FINANCING. THE RHETORIC WAS IT WILL BE FULLY PAID FOR BUT IF YOU LOOK AT THE HARD NUMBERS THERE IS DEFICIT FINANCING. A LOT OF ECONOMISTS WILL TELL YOU IF YOU WILL DEFICIT FINANCE FOR ANYTHING, HARD INFRASTRUCTURE INVESTMENTS ARE PROBABLY THE PLACE AND MAKES THE MOST SENSE TO DO SO. THESE ARE REAL INVESTMENTS IN THE ECONOMY THAT CAN PROMOTE ECONOMIC GROWTH. YOU DO NOT NEED TO PAY FOR THEM ALL IMMEDIATELY. THESE ARE ASSETS THAT WILL HAVE 20, 30, 40 YEAR LIFESPANS. DAVID: SHOULD WE BELIEVE THE NUMBERS? ROHIT: THE NUMBERS YOU GET FROM THE CONGRESSIONAL BUDGET OFFICE, THOSE NUMBERS ARE AS GOOD AS IT IS GOING TO GET. THEY ARE ESTIMATES. THEY ARE BOUND TO BE WRONG. THE ONLY QUESTION IS IN WHICH DIRECTION. IT IS PERFECT SCIENCE TO SAY THE LEAST, AND I HAVE A LOT OF SYMPATHY FOR THE ESTIMATORS, BUT THEY HAVE TO MAKE BIG ASSUMPTIONS ABOUT THE ECONOMY, GROWTH, REVENUES, AND THE LIKE. THAT IS CHALLENGING. THOSE NUMBERS, HERE'S WHAT I WILL SAY. THOSE BOOKS ARE NOT COOKED. THERE'S A LEGITIMATE NUMBERS IN GOOD FAITH ASSUMPTIONS IN THE BEST WE HAVE TO GO ON. DAVID: YOU MENTIONED WHAT COMES NEXT, THE SO-CALLED RECONCILIATION PACKAGE, THE BUILD BACK BETTER, WHICH UNDER THE CURRENT VERSION DOES INCLUDE PRETTY HEFTY TAX INCREASES. WHAT ARE THE ONES THAT ARE MOST TROUBLESOME? ROHIT: ON THE BUSINESS SIDE, ABOUT $800 BILLION IN TAX INCREASES ON THE CORPORATE SIDE OF THE LEDGER, THE BIGGEST AND NEWEST ENTRANT INTO THE EQUATION IS THE SO-CALLED MINIMUM TAX BASED OFF BOOK INCOME. THIS WOULD REQUIRE COMPANIES TO PAY THE GREATER OF THE REGULAR TAX LIABILITY, OR 50% OF THEIR BOOK INCOME, THE TAX LIABILITY ASSOCIATED WITH THE 15% RATE AGAINST THEIR BOOK INCOME OR TAXABLE INCOME. THIS IS CREDITED WITH RAISING 300 BILLION DOLLARS OF REVENUE OVER THE NEXT 10 YEAR, THAT IS THE EQUIVALENT OF A THREE POINT INCREASE IN HEADLINE CORPORATE RATE. MY GUT INSTINCT TELLS ME THIS IS LIKELY TO SURVIVE. NOT BECAUSE PEOPLE THINK IT IS A GOOD IDEA, BUT FOR THE MOST NUMBER OF COMPANIES IT IS THE LEAST BAD OF THE BAD IDEAS AVAILABLE. IT DOES HAVE ROUGH EDGES THAT NEED TO BE DEALT WITH. THE TREATMENT OF PENSION LIABILITIES IS TRICKY. PENSION LIABILITIES ARE MARKET TO MARKET AT THE END OF THE YEAR. A CHANGING INTEREST RATE ENVIRONMENT -- THEY DID NOT DO ANYTHING WRONG, THEY DID NOT ENGAGE IN ANY PLANNING. IT IS THE WAY THE PENSION IS MARKETED FOR BOOK PURPOSES. I THINK THINGS LIKE THAT HAVE A CHANCE OF BEING DEALT WITH. BY AND LARGE THE $300 BILLION TAX INCREASE, A SIGNIFICANT SHOP IS LIKELY TO SURVIVE. DAVID: IS THAT IT IS THE LEAST BAD OF BAD ALTERNATIVES. WHY IS IT BAD AT ALL? PRESIDENT BIDEN HAS MADE THE POINT YOU HAVE LARGE CORPORATIONS THAT MAKE A LOT OF MONEY THAT PAY NO TAXES. THAT DOES NOT SEEM QUITE RIGHT. ROHIT: I GET THAT IT DOES NOT SEEM RIGHT AND IT IS VERY POLITICALLY APPEALING WHICH IS WHY IS LIKELY TO SURVIVE. IF YOU LOOK UNDER THE HOOD AND THE FACTS OF THE INDIVIDUAL COMPANIES, THEY ARE NOT DOING ANYTHING WRONG. THEY ARE ENGAGING IN A LOT OF R & D, THEY ARE MAKING SIGNIFICANT CAPITAL INVESTMENTS AND GETTING COST RECOVERY FOR CAPITAL INVESTMENTS. THEY ARE ENGAGING IN ECONOMIC BEHAVIOR THAT CONGRESS HAS SOUGHT TO REWARD. THE TAX IS A BACKDOOR WAY FOR CONGRESS TO CLIP THE VARIOUS INCENTIVES. A MORE STRAIGHTFORWARD WAY TO DEAL WITH THIS WOULD BE TO SAY IF CONGRESS THINKS THE R & D CREDIT IS TOO GENEROUS, THEY COULD TAKE IT HEAD-ON. A MORE RATIONAL APPROACH WOULD BE TO GO WITH THE VARIOUS INCENTIVES THAT CONGRESS HAS VOTED FOR, LARGELY ON A BIPARTISAN BASIS, AND TO WITH THEM INDIVIDUALLY. THAT IS HARD, IT IS POLITICALLY DICEY. TAKING A BLUNT INSTRUMENT AND HAIRCUTTING EVERYTHING IN AN IRREGULAR WAY IS TYPICALLY THE WAY CONGRESS DEALS WITH THESE THINGS. IT DOES SCRATCH THE POLITICAL EDGE OF THE COMPANY THAT HAS LIVE HEADLINE IN, WITH NO FEDERAL TAX LIABILITY. IF YOU LOOK UNDER THE HOOD YOU'LL FIND THE COMPANIES ARE ENGAGING IN BEHAVIORS CONGRESS WANTS THEM TO ENGAGE IN AND IS REWARDING THEM WITH TAX INCENTIVES. DAVID: WHAT ABOUT THE INTERNATIONAL COMPETITIVENESS. ONE OF THE THINGS WE HEAR FROM REPUBLICANS. WHAT YOU'RE DOING WITH THE TAX CODE WILL PUT US AT A DISADVANTAGE. ROHIT: THIS IS QUITE TROUBLING. IF YOU LOOK AT THE PROPOSAL, IT WOULD BE A SUBSTANTIAL INCREASE ON THE OVERSEAS INCOME OF U.S. HEADQUARTER MULTINATIONAL COMPANIES OPERATING WHERE THEY COMPETE WITH FOREIGN HEADQUARTERED MULTINATIONALS. IT IS ABOUT $160 BILLION OF ADDITIONAL REVENUE. I HEAR A LOT FROM CEOS AND CFOS WHO WORRY ABOUT THE ABILITY OF U.S. HEADQUARTER MULTINATIONAL TO COMPETE IN THOSE FOREIGN MARKETS THE U.S. COMPANIES ARE CARRYING AROUND A MUCH LARGER TAX BURDEN THAN THEIR FOREIGN COMPETITORS. THAT SHOWS UP IN COMPETITION TO MARKET SHARE, COMPETITION FOR ACQUISITIONS, EVEN ORGANIC GROWTH. THE ARGUMENT THE TREASURY IS MAKING IS IS THE REST OF THE WORLD GOING TO DO THE SAME THING? WE HAVE TO SHOW LEADERSHIP AND STRIKE OUT AHEAD. A LOT OF LAWMAKERS, EVEN DEMOCRATIC LAWMAKERS, YOU HAVE HAD DEMOCRATIC LAWMAKERS WRITE LETTERS EXPRESSING SKEPTICISM OVER WHETHER THE REST OF THE WORLD WILL FOLLOW US AND WHETHER IT IS RIGHT FOR THE U.S. TO LEAP OUT AHEAD OF THE REST OF THE WORLD, POTENTIALLY PUTTING COMPANIES ANY DISADVANTAGES, AND THAT IS IF EVERYTHING GOES SWIMMINGLY. EVERYTHING GOING SWIMMINGLY AND THE REST OF THE WORLD IS NOT A GREAT STRATEGY. PEOPLE ARE TICKING THE ARGUMENT LET'S WAIT AND SEE IF THE REST OF THE WORLD DOES THIS THAT WE CAN JOIN THEM. WE CAN MAKE COMMITMENTS TO JOIN THEM. THERE'S A LOT OF SKEPTICISM ABOUT WHETHER THE REST OF THE WORLD WILL DO THIS. THAT IS EUROPE OR CHINA IN PARTICULAR. DAVID: THANK YOU SO MUCH TO ROHIT KUMAR. COMING UP, THE INFRASTRUCTURE TRADE IS ON. CATERPILLAR IS OUR STOCK OF THE HOUR. GUY: THIS --THIS IS "BALANCE OF POWER" ON BLOOMBERG TELEVION AND RADIO. I AM DAVID WESTIN. STOPS EDITOR DAVE WILSON IS HERE WITH THE STORY. DAVE: THIS INFRASTRUCTURE PACKAGE COVERS SO MANY AREAS. CATERPILLAR STANDS TO BENEFIT IN MULTIPLE WAYS. EASY ROADS AND BRIDGES, YOU SEE RAIL, YOU SEE THE POWER GRID. THE ISSUE OF CLIMATE CHANGE. CATERPILLAR HAS A ROLE TO PLAY IN ALL OF THOSE AREAS IN TERMS OF WHAT THEY PROVIDE. THAT SAID, YOU'RE TALKING ABOUT A COMPANY THAT IS INCREASINGLY DEPENDENT ON ITS CONSTRUCTION BUSINESS. ABOUT 44% OF THEIR REVENUE THIS YEAR. YOU LOOK AT IT HISTORICALLY, THAT IS THE HIGHEST PERCENTAGE YOU SEE IN THE HISTORY OF OUR DATA. YOU PUT THAT TOGETHER AND IT IS CLEAR THIS COMPANY IS IN A POSITION TO BENEFIT, AND THAT IS HOW IT IS PLAYING OUT. BAIRD RAISED ITS RATING. THEY ARE LOOKING FOR THE SHARES TO MOVE UP MORE THAN ALMOST ALL OF THE FIRMS PEERS IN RESPONSE. YOU LOOK AT INFRASTRUCTURE MORE GENERALLY, GOING BACK TO THE 2020 ELECTION, NUC -- AND YOU SEE A BUNCH OF INFRASTRUCTURE COMPANIES HAVE DONE BETTER THAN THE S & P 500. CLEARLY PEOPLE LOOKING AHEAD ENDED TO SUBMITTING SOMETHING WILL HAPPEN. DAVID: IT WILL HAPPEN AND IT LOOKS LIKE IT MAY HAPPEN. THAT IS STOPS EDITOR DAVE WILSON WITH REPORT ON CATERPILLAR. COMING UP WE TALKED A FORMER SECRETARY OF TRANSPORTATION AND OF LABOR, ELAINE CHAO, ABOUT FRIDAY'S NEWS ON JOBS AND INFRASTRUCTURE. THIS IS "BALANCE OF POWER" ON BLOOMBERG TELEVION AND RADIO. DAVID: THIS IS "BALANCE OF POWER" ON BLOOMBERG TELEVISION AND RADIO. I'M DAVID WESTIN. FOR BLOOMBERG FIRST WORD NEWS, WE GO TO MARK CRUMPTON. MARK: PRESIDENT BIDEN IS FACING PRESSURE TO DECIDE HOW TO ADDRESS A SURGE IN GASOLINE PRICES. OFFICIALS WILL BE LOOKING AT NEW PRICE DATA TOMORROW AS A GUIDEPOST WHILE WEIGHING A RELEASE FROM THE STRATEGIC PETROLEUM RESERVE. OPEC-PLUS HAS IGNORED REQUESTS FROM SOME OF THE WORLD'S BIGGEST OIL CONSUMERS, INCLUDING THE UNITED STATES, JAPAN, AND INDIA, TO INCREASE SUPPLY TO MEET ELEVATED DEMANDS. THE U.S. POWER GRID IS BECOMING LESS RESILIENT AND RELIABLE WITH EXTREME WEATHER LEADING MORE AMERICANS WITHOUT ELECTRICITY MORE OFTEN OVER THE PAST SEVERAL YEARS. THAT IS ACCORDING TO ANALYSTS FROM FITCH RATINGS. THEY SAY THE WEATHER ACCOUNTED FOR 20% OF UTILITY COMPANY DOWNGRADES FROM 2017 TO 2021, AND THEY SAY POWER NETWORKS ARE LESS RELIABLE THAN OTHER INDUSTRIALIZED COUNTRIES. NEW YORK CITY IS TAKING STEPS TO MAKE IT EASIER FOR PARENTS TO GET THEIR KIDS VACCINATED. MAYOR BILL DE BLASIO TODAY SAID THE CITY IS EXTENDING ADDITIONAL PAID SICK LEAVE TO CITY WORKERS AND CONTRACTORS SO THEY CAN TAKE THEIR CHILDREN FOR SHOTS. THE MAYOR SAID PEOPLE SHOULDN'T HAVE TO CHOOSE BETWEEN A PAYCHECK AND THE HEALTH OF THEIR FAMILY. BRITISH PRIME MINISTER BORIS JOHNSON IS REFUSING TO APOLOGIZE FOR HIS ATTEMPTS TO PROTECT A RULING YOU CONSERVATIVE PARTY LAWMAKER WHO BROKE LOBBYING RULES. HIS GOVERNMENT IS STILL DEALING WITH THE FALLOUT FROM THE DECISION LAST WEEK TO TEAR UP PARLIAMENT RULES RATHER THAN ACCEPT A SUSPENSION WHEN PETERSON WHO LATER RESIGNED. GLOBAL NEWS 24 HOURS A DAY, ON-AIR, AND ON BLOOMBERG QUICKTAKE, POWERED BY MORE THAN 2700 JOURNALISTS AND ANALYSTS IN OVER 120 COUNTRIES. I'M MARK CRUMPTON. THIS IS BLOOMBERG. DAVID: THANK YOU, MARK. FRIDAY WAS A BUSY DAY IN WASHINGTON WITH STRONG JOBS NUMBERS IN THE MORNING FOLLOWED BY THE PASSAGE OF THE INFRASTRUCTURE BILL LATE THAT NIGHT. WE WELCOME SOMEONE WHO HAS BEEN RESPONSIBLE IN BOTH AREAS. ELAINE CHAO SERVED AS SECRETARY OF LABOR UNDER PRESIDENT BUSH, SECRETARY UNDER PRESIDENT TRUMP. GOOD TO HAVE YOU HERE. JOBS NUMBERS, FRIDAY MORNING, 531,000 REVISED UP. WHAT DO YOU MAKE OF THE NUMBERS? ELAINE: IT IS WELCOME NEWS AFTER A PRETTY DISMAL AUGUST AND SEPTEMBER. IT JUST SHOWS THAT THE ECONOMY IS COMING BACK, EVEN WITH COVID-19, PEOPLE SEEM TO HAVE GREATER CONFIDENCE IN COMING BACK TO WORK. WE ARE SEEING THAT IN THE RESURGENCE OF THE NUMBERS. CLEARLY WHAT HAPPENED WITH THE DISCONTINUATION OF THE FEDERAL BENEFITS ON TOP OF THE SUPPLEMENTAL UNEMPLOYMENT INSURANCE BENEFITS, MUST HAVE HAD AN IMPACT AS WELL. WE ARE SEEING MORE WORKERS COME BACK INTO THE WORKFORCE BECAUSE THEY NO LONGER HAVE THE CUSHION THEY USED TO HAVE WITH THE SUPPLEMENTAL BENEFIT. DAVID: YOU HAVE THE HOLIDAYS COMING UP. THERE ARE VARIOUS REPORTS OF PEOPLE LIKE UPS AND OTHERS HAVING TO HIRE A LOT OF PEOPLE. AT THE SAME TIME, WE HAVE A WORKER SHORTAGE IN A LOT OF PLACES. ELAINE: IF YOU LOOK AT THE LABOR PARTICIPATION RATE, IT IS STILL VERY LOW, ABOUT 61.6%. WE, AS A COUNTRY, HAVE TO ENCOURAGE PEOPLE TO COME BACK TO WORK. WHEN WE ARE SEEING IN THE SUPPLY CHAIN CRISIS IS BASICALLY THE LACK OF WORKERS. THERE ARE NOT ENOUGH PEOPLE TO PRODUCE GOODS AND SERVICES. THAT IS PUTTING INFLATIONARY PRESSURES ON OUR ECONOMY, ADDING TO THE WOES OF THE SUPPLY CHAIN. WE NEED THESE WORKERS TO COME BACK. WHEN IRA SECRETARY OF LABOR, THE LABOR PARTICIPATION RATE WAS ABOUT 66.4% OVER A WORKFORCE OF 157 MILLION PEOPLE. WE BASICALLY HAVE 5 MILLION PEOPLE NOW WHO HAVE LEFT THE WORKFORCE, AND BECAUSE OF COVID, SOME HAVE RETIRED EARLY, SOME HAVE DECIDED NOT TO COME BACK. WE ARE GOING TO NEED THESE WORKERS TO DO THEIR PATRIOTIC DUTY TO COME BACK AND HELP THE ECONOMY. DAVID: DO YOU THINK WE WILL SEE MORE LABOR ORGANIZING? WE HAVE SEEN VARIOUS STRIKES, UAW AND JOHN DEERE, NOW A CAMPAIGN FOR STARBUCKS. ELAINE: CAN YOU IMAGINE STARBUCKS? HOWARD SCHULTZ USED TO BE ONE OF THE MOST BENEVOLENT AND ENLIGHTENED EMPLOYERS, SO IT IS REALLY AMAZING. DAVID: DO YOU THINK WE HAVE MORE UNION ORGANIZATION? ELAINE: I THINK WE DO. THIS ADMINISTRATION IS SUPPORTIVE OF ORGANIZED LABOR, AND WE HAVE A PRESIDENT WHO HAS SAID ON MANY OCCASIONS THAT HE WILL BE THE STRONGEST ORGANIZED LABOR PRESIDENT IN HISTORY. I THINK THAT HAS A PSYCHOLOGICAL IMPACT ON THE LEADERSHIP OF THESE INTERNATIONAL UNIONS, AND THE MARGINS THEY WOULD HAVE IN EXERCISING SOME ACTION. DAVID: LET'S TURN TO YOUR OTHER CABINET POSITION IN YOUR CAREER, TRANSPORTATION SECRETARY. WHAT DO YOU THINK OF THE INFRASTRUCTURE? ELAINE: YOU CANNOT NOT EXPECT ME TO SUPPORT SOMETHING LIKE THIS. OUR COUNTRY NEEDS INFRASTRUCTURE INVESTMENT, ESPECIALLY TO BE COMPETITIVE OVERSEAS. THIS INFRASTRUCTURE BILL IS VERY INTERESTING. IT HAS SOME PERMITTING PROCESSES,. WHICH DAVID: PERMITTING FORMS. ELAINE: I AM SO GLAD TO SEE THE FEDERAL DECISION, ONE OF THE PREMIER PERMITTING REFORM PROCESSES IN THE LAST ADMINISTRATION HAD BEEN INCORPORATED INTO THIS BILL. THIS BILL IS ALSO UNIQUE IN THAT IT HAS A LARGE COMPONENT THAT IS DISCRETIONARY. DAVID: THIS IS SOMETHING YOU POINTED OUT, I HAD NOT FOCUSED ON, BUT THIS IS STRUCTURED FROM OTHER SIMILAR BILLS. ELAINE: A LARGER AMOUNT IS DISCRETIONARY POTENTIALLY, SO WE HAVE ABOUT 20%. THAT MEANS THIS ADMINISTRATION HAS A REAL OPPORTUNITY TO IMPRINT THEIR VISION ON AMERICA INTO HOW THEY DESCRIBE THE CRITERIA FOR THESE GRANTS, HOW THEY WOULD WRITE THEM UP. EVEN THOUGH IT IS LEGISLATIVELY GUIDED, HOW YOU WRITE THE RULES AND REGULATIONS, CRITERIA FOR APPLICATIONS WILL BE VERY IMPORTANT. DAVID: HISTORICALLY, WHAT IS THE ALTERNATIVE? ELAINE: FORMULA. THE FORMULA IS AN EASY WAY NOT TO HAVE THE MEMBERS ARGUE WITH ONE ANOTHER. IT IS A FORMULA BASIS, FUNDS ARE DISTRIBUTED TO THE STATES BASED ON A FORMULA, BASED ON THE SIZE OF THE POPULATION, THE MILES OF ROAD IN THE STATE, AND ALSO THE GASOLINE REVENUES THAT ARE GENERATED EVERY YEAR. THERE IS ALWAYS DISCRETIONARY BUT THERE IS A BIG COMPONENT PART OF THIS. $550 BILLION, OVER $120 BILLION WILL BE DISCRETIONARY. THIS ADMINISTRATION BELIEVES IN SOCIAL EQUITY AND ALSO CLIMATE CHANGE, SO THEY WILL PROBABLY SKEW -- I DON'T WANT TO USE THAT AS A PREJUDICIAL WORD -- BUT THEY WILL SKEW MORE TOUR THOSE CRITERIA THAT THEY FEEL IS IMPORTANT. DAVID: SOMETHING THEY HAVE TALKED ABOUT REPEATEDLY IS THAT THEY FEEL SOME HIGHWAYS WERE PUT THROUGH LOWER INCOME DISTRICTS AND URBAN CENTERS, BUT THAT SHOULD BE FIXED, BECAUSE IT DIVIDED UP COMMUNITIES. ELAINE: THEY WILL HAVE A CHANCE TO DO THAT. EVERY STATE WILL VYE FOR THESE DOLLARS BECAUSE THIS IS MANNA FROM HEAVEN, AND EVERY STATE SHOULD, BUT THEY SHOULD ALSO TAKE INTO ACCOUNT WHEN THIS ADMINISTRATION HAS FOR THEIR PRIORITIES. AMTRAK WILL BE GETTING $66 BILLION, $10 BILLION GOING TO HIGH-SPEED RAIL. THERE IS A PRETTY IMPRESSIVE PROJECT BETWEEN DALLAS AND HOUSTON AND HIGH-SPEED RAIL. I HOPE THAT WOULD BE COMPETITIVE. IT DEPENDS ON HOW THIS ADMINISTRATION USES THESE DOLLARS. THE OBAMA ADMINISTRATION HAD $10 BILLION. THEY GAVE IT TO EVERYBODY. THE IMPACT WAS DISSIPATED. DAVID: PERHAPS A POLICY SHIFT HERE, BETWEEN PERSONAL TRANSPORTATION AS OPPOSED TO MASS TRANSPORTATION. PEOPLE CONCERNED ABOUT THE CLIMATE WANT US TO HAVE MORE MASS TRANSIT. DOES THIS BILL SHIPPED MORE MONEY TOWARD MASS TRANSIT? ELAINE: IT DOES. THIS IS ALWAYS A DEBATE, HOW MUCH TO RESOURCE URBAN VERSUS RURAL AMERICA, HOW MUCH TO RESOURCE THE TRANSIT VERSUS HIGHWAYS. PEOPLE TO THE LEFT ARE PRIMARILY VERY MUCH ENAMORED BY TRANSIT BECAUSE OF ALL THE REASONS WE KNOW ABOUT. I WOULD ALSO REMIND THEM THAT RULE AMERICA NEEDS TO BE RESOURCED AS WELL. RULE AMERICA IS TRADITIONALLY OVERLOOKED, UNDERINVESTED. 44% OF RURAL ROADS ARE TRAVERSED BY URBAN DWELLERS. RURAL AMERICA HAS A DISPROPORTIONATELY HIGH RATE OF FATALITIES AND INJURIES ON THE ROADS. FOR THE BENEFIT OF ALL OF US, WE NEED TO MAKE SURE THESE RURAL ROADS ARE ADEQUATELY FUNDED AND IN GOOD CONDITION. DAVID: THAT IS A FASCINATING FACT. THERE WAS A LOT OF DISPUTE EARLY ON ABOUT WHETHER THIS WAS REALLY INFRASTRUCTURE OR NOT. SOME REPUBLICANS SAID THE DEMOCRATS ARE TRYING TO PUT THINGS IN THAT ARE NOT. NO BILL IS PERFECT, NOT EVERYONE CAN AGREE, BUT DID WE GET TO WHAT NEEDED TO BE DONE IN THIS BILL? ELAINE: WHAT WAS NEEDED TO GET IT PASSED. IT WAS NECESSARY TO GET PASSAGE. DAVID: GREAT TO HAVE YOU HERE, ELAINE CHAO, FORMER TRANSPORTATION AND LABOR SECRETARY. GETTING A GRIP ON THE SUPPLY CHAIN ISSUES. WE WILL TALK TO BILL OF SURGE AIR. THIS IS "BALANCE OF POWER" ON BLOOMBERG TELEVISION AND RADIO. DAVID: THIS IS "BALANCE OF POWER" ON BLOOMBERG TELEVISION AND RADIO. I'M DAVID WESTIN. SUPPLY CHAIN ISSUES ARE NOT GETTING ANY BETTER, AND THEY LOOK LIKE THEY ARE LIKELY TO EXTEND INTO NEXT YEAR. WE WELCOME SOMEONE WITH HIS FINGER ON THE PULSE OF THE PROBLEM, BILL WAPPLER, CEO OF SURGERE, A COMPANY THAT TRACKS SHIPMENTS FROM INDUSTRIES FROM AUTOMOTIVE TO AEROSPACE TO RETAIL. I TRY TO DESCRIBE YOUR COMPANY, DIDN'T DO A GOOD JOB. WHAT DO YOU DO THAT GIVES YOURSELF SUCH A UNIQUE VANTAGE POINT ON THE SUPPLY CHAIN? BILL: IS GREAT TO JOIN YOU, THANK YOU. WE ARE A SOFTWARE COMPANY, BUT WE GENERALLY USE A NUMBER OF ADVANCED TECHNOLOGIES, WHETHER IT IS SATELLITE POSITIONING, RFID, BLUETOOTH, A LOT OF DIFFERENT TECHNOLOGIES THAT SUPPORT OUR ABILITY TO TELL OUR CLIENTS WHAT THEY HAVE AND WHERE IT IS. THAT CAN BE ON A GLOBAL BASIS, SUPPLY CHAIN BASIS, OR WITHIN FOUR WALLS. DAVID: USING THAT SPECIAL WAY OF GETTING A SENSE OF WHAT IS IN THE SUPPLY CHAIN, WHAT IS IT TELLING YOU ABOUT WHERE THE PROBLEMS ARE RIGHT NOW? BILL: IT IS TELLING US THE PROBLEM IS PRETTY BIG. WE DO QUITE A BIT OF BUSINESS ACROSS MANY OF THE AUTOMOTIVE MANUFACTURERS, A GREAT DEAL OF THEIR SUPPLIERS. WE ARE ALSO INVOLVED WITH HEAVY EQUIPMENT, WE ARE INVOLVED WITH FOOD, PHARMACEUTICAL AND A LOT OF OTHER INDUSTRIES. BASICALLY, WHAT WE ARE FINDING IS THAT EVERYONE IS WORKING DESPERATELY TO SOLVE THE PROBLEM . THE PROBLEM IS A FUNCTION OF A LOT OF FACTORS COMING TOGETHER AT A SINGLE TIME. I OFTEN ASKED THE QUESTION, IS THIS A COVID PROBLEM? THE ANSWER IS IT CERTAINLY STARTED WITH COVID BUT IT IS NO LONGER A COVID PROBLEM. I AM ALSO ASKED WHETHER IT IS A TRANSPORTATION PROBLEM. WE SEEM TO BE TALKING A LOT ABOUT PORTS, TRUCKS, TRAINS, AND HOW THOSE ARE FUNCTIONING NOW, BUT FRANKLY, IT IS MUCH MORE COMPLEX THAN THAT. DAVID: ARE THERE PARTICULAR BOTTLENECKS THAT SCREAM OUT AT YOU AS YOU LOOK AT YOUR DASHBOARD? BILL: THERE ARE. CERTAINLY, WE ARE LOOKING AT THE PORTS FIRST. WE SEE THAT THE ABILITY TO OFFLOAD IS PROBLEMATIC IN SEVERAL WAYS. FIRST OF ALL, THEY HAVE OFFLOADED A NUMBER OF CONTAINERS THAT NOW ARE BEING STACKED, IN SOME CASES, FIVE HIGH. IN THE PAST, IT WAS ONLY THREE HIGH. WE ARE SEEING FEWER AND FEWER CHASSIS ON THE ROAD THAT ARE SPECIALIZED TRUCK TRAILERS THAT ALLOW FOR THE CARTAGE OF SEA CONTAINERS. RAIL, AS YOU MIGHT IMAGINE, IS FIGHTING THE SAME PROBLEM. REALLY WHAT WE ARE SEEING IS THAT THE SUPPLY CHAIN, WHICH IS A LOT MORE THAN TRANSPORTATION, CHANGED DRAMATICALLY DURING COVID, WHERE PEOPLE STARTED TO WORK FROM HOME. OUR LIFESTYLES CHANGED DRAMATICALLY. AS A RESULT, SO DID OUR PURCHASING HABITS. ALONG WITH THAT, WE ARE AT HOME, AND WE SAY, WE HAVE A COUCH THAT WE THINK SHOULD BE REPLACED. LET'S DO THAT NOW. THEN AS POLICY, WE BROUGHT A LOT OF THEM INTO INVESTMENT, INTO OUR COUNTRY, SOCIETY. THAT FREED UP A LOT OF AVAILABLE CASH, AND NOW THE PROBLEM STARTS. THE FOLKS AT HOME HAVE NOW INCREASED THE AMOUNT OF VOLUME FROM ASIA INTO THE UNITED STATES AND HAVE COMPLETELY CHANGED AND CONVERTED WHAT IS TRAVELING ACROSS THE OCEAN AND INTO THE PORTS. DAVID: FROM YOUR PERSPECTIVE, DOES THIS ALL MAKE THIS A ONE-OFF? ONCE WE GET THIS FIXED, WILL IT STAY FIXED? BILL: THAT IS THE THIRD QUESTION I AM OFTEN ASKED. I SEE THAT WE SHOULD BE VERY PATIENT COMING INTO THE HOLIDAYS. I DON'T BELIEVE THAT EVERYTHING WE WOULD LIKE TO HAVE ON THE SHELVES WILL BE THERE IN TIME. I SEE MIDYEAR THAT WE WILL START RUNNING BACK TO NORMAL. THERE ARE SOME CONSIDERATIONS THAT COULD CHANGE EVERYTHING. ONE OF THEM AS AN EXAMPLE IS, AS EVERYONE KNOWS, WE HAVE A LONGSHOREMAN AGREEMENT THAT WILL BE REEVALUATED AND NEGOTIATED SOON. IF THAT GOES WELL, THAT WILL HELP. IF IT GOES POORLY, WE WILL ALL BE DISADVANTAGED, SIMPLY BECAUSE OF THE DELAY. WE HAVE, THOUGH, A LOT OF PARTS FOR AUTOMOTIVE, AEROSPACE, SOME OF THOSE PRIMARY INDUSTRIES, THAT ARE STILL WAITING. MANY OF THOSE INDUSTRIES FUNCTION ON A JUST-IN-TIME BASIS. SO FOR THEM TO RAMP UP, AND ALL OF US TO GET PAST SOME OF THOSE PRODUCTS THAT ARE PAST THEIR USEFUL TIME AND HAVE TO BE REORDERED, REPLENISHED, IT COULD TAKE A WHILE. SOME OF THE FOLKS I TALKED TO ARE EXPECTING REALLY THIRD QUARTER OF NEXT YEAR BEFORE WE START NORMALIZING AGAIN. DAVID: WOW. LONGSHOREMAN. DO THEY HAVE A CATBIRD'S SEAT RIGHT NOW? BILL: THEY REALLY DO, DON'T THEY? WE KNOW THAT LONGSHOREMAN ARE GOOD FOLKS, THEY WORK HARD. THEY HAVE BEEN DOING A GREAT SERVICE TO OUR COUNTRY. WE ALL HAVE TO APPRECIATE THAT WE RECEIVED OUR GOODS BASICALLY BECAUSE THERE ARE FOLKS HELPING US THROUGH THAT EXCHANGE FROM THE SHIP TO THE PORT TO THE TRUCK. IT IS A WONDERFUL THING. HOWEVER, WE CANNOT CLEARLY ALLOW THIS TO SUSTAIN FOR TOO LONG DURING THESE NEGOTIATIONS. I HOPE THEY GO WELL. BUT IT COULD DELAY US ANOTHER QUARTER, IF NOT EVEN MORE. DAVID: THAT IS SOBERING. THANK YOU, BILL. HELPFUL TO HAVE YOU WITH US, WHETHER GOOD NEWS OR BAD NEWS. HE IS THE SURGERE CEO. THE PENTAGON HAS THE SOLUTION TO ONE CHIP PROBLEM, BUY $2 BILLION WORTH IN ONE FELL SWOOP. THIS IS "BALANCE OF POWER" ON BLOOMBERG TELEVISION AND RADIO. DAVID: THIS IS "BALANCE OF POWER" ON BLOOMBERG TELEVISION AND RADIO. I'M DAVID WESTIN. THE PENTAGON NEEDS A SPECIAL SEMICONDUCTOR FOR ITS B-2 BOMBER, AND IT SUPPLIER IS ABOUT TO GO OFF-LINE. TO TELL US WHAT THEY WILL DO ABOUT THAT, WE WELCOME TONY, WHO COVERS NATIONAL DEFENSE ISSUES FOR BLOOMBERG. EXPLAIN TO US WHAT IS GOING ON. > > THE DOD IS TRYING TO GET AHEAD OF PARTS OBSOLESCENCE. GLOBAL FOUNDRIES, ITS PROVIDER FOR A SPECIALIZED APPLICATION SPECIFIC INTEGRATED CIRCUIT, GPS ENABLED SYSTEMS FOR THE B-2 BOMBER, OTHER DESTROYERS, GLOBAL FOUNDRIES IS SELLING ONE OF ITS FACILITIES THAT MAKES THESE CIRCUITS TO ON SEMICONDUCTORS. THEY WILL NO LONGER MAKE THESE AFTER THEY TAKE OVER THE PLAN IN DECEMBER 2022. DOD IS USING INCREMENTAL ORDERS TO GET THE LINE GOING, TO BASICALLY STOCKPILE THESE CHIPS, BEFORE THE PLANTS TRANSFER. DAVID: ONCE THEY GET THIS $2 BILLION WORTH OF CHIPS STOCKPILED, HOW LONG WILL THAT LAST THE DEFENSE DEPARTMENT? > > A NUMBER OF YEARS. THEY WOULDN'T TELL ME. IT IS CLASSIFIED, BUT I AM THINKING YEARS. THEY DO FORECASTS OF PARTS OBSOLESCENCE IN THEIR PROGRAMS, AND THEY CAN GO ON 8, 9 YEARS. THEY ARE SMARTLY STOCKPILING. TO BE CLEAR, GLOBAL FOUNDRIES IS NOT GETTING THE ORDERS DIRECTLY. THE PENTAGON IS CEDING THE MONEY WITH ITS DEFENSE INDUSTRIAL BASE, WHO WILL ORDER FROM GLOBAL FOUNDRIES AND OTHER COMPANIES, BUT THEY WILL GET A LARGE PART OF THE DOLLARS. DAVID: AFTER THEY USE UP THESE CHIPS, WILL THEY HAVE REDESIGNED THE STEALTH BOMBER OR PLACED IT WAS SOMETHING ELSE SO THEY WILL NOT NEEDED ANYMORE? > > CHIPS OF MORE ADVANCED CIRCUITRY. THEY ARE BUILDING IN SOME LEAD TIME. THE PENTAGON IS NORMALLY NOT A JUST-IN-TIME ORGANIZATION ON THINGS LIKE THIS. SECOND ITERATION CHIPS OVER THE YEARS, BUT THEY NEED THESE TO BRIDGE THE GAP BASICALLY. THEY GET OVER THIS END-OF-LIFE PARTS OBSOLESCENCE CHALLENGE. DAVID: WHAT DOES THIS TELL US ABOUT OUR ABILITY TO SUPPLY OURSELVES DOMESTICALLY WITH THE SOFTWARE THAT WE NEED FOR MILITARY EQUIPMENT? > > THE DOD DEPENDS ON REALLY GOOD FORECASTING AND COOPERATION BETWEEN THE MILITARY SERVICES AND PENTAGON ACQUISITION AND SUSTAINMENT OFFICE IN TERMS OF THE VARIOUS NEEDS OF THE SERVICES AND PROJECTED LIFETIMES OF CHIPS. IT SHOWS INTRA-AGENCY AND INTERDEPARTMENT COOPERATION IS KEY IN SOMETHING LIKE THIS. DAVID: THANK YOU SO MUCH FOR SHARING. THAT IS TONY COPART YOU DAVID CHECK OUT THE BLOOMBERG TERMINAL ONLINE. TODAY IS ABOUT THE COMMONEST PARTY PLENARY BEGINNING IN CHINA. IN OUR SECOND HOUR OF BLOOMBERG

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Balance of Power (11/08/2021)

"Bloomberg: Balance of Power" focuses on the intersection of politics and global business. Former U.S. Transportation Secretary Elaine Chao says the new infrastructure bill is like "manna from heaven" for states seeking transportation funds. Also joining is Surgere CEO Bill Wappler on how tech is helping supply-chain challenges and PWC tax principal Rohit Kumar.