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00:00From the world of politics. January 6 was the culmination of an attempted coup a brazen attempt to overthrow the government. To the world of business one of the benefits of this period of of above higher inflation is going to be the weak and start to closed some of the wage gap and help the people at the bottom catch up. This is balance of power with David Westin. From Bloomberg World Headquarters in New York to our television and radio audiences worldwide welcome now to Balance of Power. Consumer numbers out this morning have the markets reeling as the inflation story continues. Here to take us through those numbers is Bloomberg International economics and policy correspondent Michael McKee. So I'm not sure if we looking for relief from inflation. We got much today Mike. We didn't get much today. And speaking of really they've got to be doing that down at the White House because these are particularly bad numbers for Joe Biden. Energy up by four point one percent. That's the gasoline price increase in almost forty nine percent over the course of a year. And the problem is there isn't a whole lot they can do about it. Food prices are up. And while we see demand destruction when the Fed raises interest rates for other categories people don't stop eating. So food prices are going to play a big role going forward. Some of the other categories that were up big owners equivalent rent that's the way they measure home prices. And those just continue to rise because we've seen a lot of strength in the real estate industry. Now the question is as sales fall off as mortgage rates rise do we see that start to lighten up a bit. There hasn't been any indication so far yet. And then used cars airfares. Those are things that have been a problem all along. So for the president and his campaign campaign buddies on the Democratic side in this midterm election they have to be worried. You saw after the CPI come out the University of Michigan numbers set a record low. That's kind of hard for me to believe given that we've had a whole lot of problems in the economy in the past. But I think the overall speed of the increase in inflation has really shocked people and they are not happy about it right now. Question then becomes what does the Fed do about it at their meeting next Wednesday. All of a sudden we're hearing a lot of talk from Wall Street about a 75 basis point move. They don't usually like to surprise the markets but the markets seem to be giving them their permission to do it because they've priced in least a 50 percent chance of going 75. You know we talked to Larry Summers of Harvard a little earlier today. And what he was saying is don't forget about 25 versus 50. We've got to go to 75. That's what he agreed with. Thank you so much to Bloomberg's Michael McKee for their reporting on CPI numbers. And now for a view from an economist we turn to Alison Boxer. She's an economist with PIMCO. Alison thanks very much. Is there any good news in these numbers if we're looking for inflation to slow down or even diminish. Thanks for having me. Yeah I think that I think the news from the inflation report this morning was not just about the magnitude of the surprise that we saw but also but also the details. I think that the real challenge and the real story that we saw in terms of core inflation was the fact that we saw rental measures of inflation really accelerate relative to last month. I don't think this is this is really challenging not just for the Fed for politicians but also for the U.S. economy more broadly. I mean that these measures tend to be really sticky. We tend to see that that changes in housing markets or the economy more broadly really only impact rents with a lag. So I think this raises significant questions as we think about the outlook. You know if this type of inflation you know sticks around you know what does that mean for the Fed and for the economy more broadly. Alison how broad is the inflation. Because we go back a year or so as I recall we're hearing from people from the Fed as well as administration was this is fairly narrow. Its specific areas are affected by 10 pandemic. How broad is this inflation at this point. Yeah I think that what we've seen year to date is is certainly the drivers of inflation have have brought in doubt rents in particular being being sort of a key source. But I think it is important to take a step back and note and note that you know we are still seeing some pandemic effects. You know as we look across inflation we're certainly seeing effects on commodity prices from from sort of the broader global geopolitical situation war in Europe and things like that. So certainly I would say that that that inflation has has brought in. But I do think you know you also have to take a step back and keep in mind that you know we are seeing disruptions pandemic effects. I'm still today. Well what about the war. Because that's something President Biden has referred to several times. That affects as you just suggested some commodities. Does it have broader effects on inflation or are there other factors at play. Yeah absolutely. I mean I think we saw that very clearly this morning and we've seen it really in the past several months not just inflationary pressures coming from from higher commodity prices but I also think a lot of uncertainty and a lot of volatility in the inflation coming from from these issues in terms of whether that sort of spreads more broadly. You know I think that I think the important thing to keep in mind is really where we're seeing inflation today is in these sort of essential categories. Rents as we've discussed energy prices food prices and that starts to eat into into consumers real incomes into their disposable income to spend on other categories. So certainly I think we can see some of those sort of commodity specific issues that we're seeing today. Some of this volatility start to be a broader problem for the U.S. economy in the coming quarters. We are told some by kind of such as you that inflation expectations are critical here that if they become as they say unanchored we have a problem. Do we have any indication yet that that might be happening. You know I think I certainly would agree I think inflation expectations are really key and we've heard Fed officials really consistently over the past year sort of guide to the fact that that this is really key and they're in there watching of inflation. I think we got sort of mixed messages today. So if you look at you know sort of longer run measures of inflation expectations we did see this take a little bit higher in the University of Michigan data that we saw this morning. But if you look at sort of a broader sort of consumer surveys plus market based measures and professional forecasters measures you know it doesn't look like we've seen significant UN anchoring. But certainly I think this is this is a risk given how high food and energy prices are. I mean something that's really critical as we think about the Fed outlook as well. If we go back again a year or more ago we were told by the Fed chair Jay Powell that if inflation does kick in we that is the Fed has the tools to do that. Do we have the indication those tools are working yet. And what does that tell us about what the Fed might have to do next. Yeah absolutely. I mean I think the Fed has sort of a broad menu of hawkish tools that they can use you know not not just next week but also going forward to sort of address inflation. You know I think certainly this inflation expectations issue does suggest that you know that at least the good news is this hasn't become you know super on anchored on on the upside. But but certainly I think the Fed has has more to do in the coming in the coming weeks and in the coming months to it to address this problem just given how high and how far from target we are on inflation at this point. Alison do economists have a sense of whether the important thing is the rate of increase or the ultimate terminal rate. Did you get two for the rates. Because it's one thing to say we've got to hike faster. Does this affect potentially where they end up as well. Yeah I think this is a really sort of a really key debate. You know the question being you know the financial conditions tightening that we've seen year to date is it's sort of about the level or the amount of tightening that we've seen. I think that I think the ultimate answer is it's probably a little bit of a mix of both. But I think it is important to keep in mind as we think about how much financial conditions have tightened this year how sort of quickly the Fed has has shifted towards a much faster rate hiking cycle. You know this is not something that we've seen in the past several cycles. This is sort of much much more rapid financial conditions tightening than than we're all used to. And then the economy's used too. So I think over time you know we are going to see this slow growth and not something that the Fed's going to have to take into consideration as we get towards the later part of this year. So Alison wrap this up. That seems to be a key question. Should we be more patient because what's working will work. It shouldn't take longer. Or should we begin to get concerned that in fact the tools aren't working at all. Yeah so I mean I think we sort of think about it as a little bit of a tug of war between you know higher inflation versus lower growth. I mean I think the period we're in right now in terms of in terms of the Fed outlook is really just sort of solely focused on inflation. Inflation is just uncomfortably hot. There's there's risk to inflation expectations. So they're really going to lean on that for now. But I think you know over time as the economy slows. If we were to see inflation come down I think that's when the Fed can start to think about you know the unemployment part of their mandate. Think about growth as well. But again I think for right now very much in this in this inflation vs. growth tradeoff the Fed has to focus on inflation. Okay. Alice this has been very helpful. Thanks for your time today as pinkos. Alison Boxer. Coming up we're going to welcome Congressman French Hill of Arkansas to our New York studios right here for his views on the economy and the January 6 committee hearings. This is balance of power on Bloomberg television and on radio. This is balance of power on Bloomberg television and radio. David Westin want to keep you up to date with this from all around the world. For that we turn to Riddick Gupta here with the first word. Thanks David. Baltic leaders lashed out at Russian President Vladimir Putin for comments suggesting that his war aims compared with his nation's 18th century imperial expansionism underscore. He said the great Russian troops are fighting to tighten control over Ukraine's eastern Donbass region where Kremlin led forces have made steady progress in recent weeks. Meanwhile Ukraine's finance minister tells Bloomberg Radio the country urgently needs a new International Monetary Fund loan. This comes as efforts to fight off invading Russian forces stretched its budget to the limit. Data shows its economy shrank by almost a fifth in the first quarter the most since 2015 after Russia annexed Crimea. The Biden administration is lifting its requirement that international travelers test negative coronavirus before flying to the US. The change comes amid pressure from airlines that need the measure excessive and blamed it for depressing ticket purchases. A senior administration official says the change will take effect just after midnight on June the 12th. And Colombia's presidential race is too close to call according to a new poll nine days ahead of a runoff between construction magnate and a leftist Senator Rodolfo. And I'm just surprised many by making it to this month's second round with 48 percent of voter intention. That is compared to four seven Gustavo Petro. The gap between the two candidates is less than the margin of error meaning they are technically tied. The nation will be holding that second presidential vote on June 19th. In Brazil President Jacob Ball scenario says he will leave the government in a democratic way adding he expects the October presidential elections to be clean transparent and auditable. Paul Allen frequently raised questions about Brazil's electronic voting system. He made the comments after a bilateral meeting with President Biden over in Los Angeles. Global news 24 hours a day on air and on Bloomberg Quicktake powered by more than 20 700 journalists and analysts and a hundred and twenty countries. I can get to these things. I thank you. Saturating. So last night 8:00 p.m. Eastern Time we had the first installment of that select committee from the House of Representatives investigating what happened on January 6th of last year. That invasion of the capital. And I will say just as a former TV producer or person that it was well produced. And the question is what we learned from it all for his sense of what we learned. We turn now to represent a French Hill Republican of Arkansas who serves on the House Financial Services Committee. So first of all welcome to New York. Great to have you. Thank you. So what did you take away and what do you think the American people took away. What we saw on this is the first of six. But what did you take away from last night. Well I wish Speaker Pelosi had agreed to truly a bipartisan equal commission to look at the reasons why the security of the capital was breached and not well handled. And I thought that came out last night. You know President Trump had authorized the National Guard to protect D.C. but that request had been turned down by the sergeant at arms at the Capitol. And that's a key question I thought was raised last night. But it would really be good in my view if we were having hearings on inflation and things that Americans in my district are really talking about. So that was my initial reaction to what I saw. Well last night I absolutely want to get to inflation with you here. But just before we do that you as I recall did back a bipartisan commission to look into this because you thought we needed to know what really happened. Given what we're seeing so far do you think we still need that commission. Is it too late. Well look I think the Senate report that I read just around the time of voting for the bipartisan commission indicated to me that we had a real security management problem at the Capitol and that's the responsibility of the speaker. And so that's why I did support the bipartisan commission. But that's not what was happened. It was rejected by the Senate. And we got this partisan committee that's been set up by Speaker Pelosi and very importantly the speaker's office. Her e-mails her direction on that day of January 6 are not permitted for discovery by the committee that she set up. So we do need to see what the result of it are. But from talking to people in my district they're more concerned about some of these other pressing issues in the country. It's a watching that last night I must say I was struck it different from all the other hearings I remember. I mean I'm old enough to remember Watergate right. I was in college at the time but certainly Clarence Hill Clarence Thomas and Robert Hill things like that because there wasn't much back and forth. Let's figure out what's happening was more a presentation of a point of view. Is there some benefit to having that presentation. What do you think people are taking away. Well a lot of this has been covered by all the major networks HBO and others that have carried on long discussions about what happened on January 6. The tragedy that vent the horror of that event. And it was so appalling what happened on January 6. So it was hype highly produced people reading teleprompters and really kind of giving you a book report of what they've heard over the last few months. So I don't know so far of it's adding any news or adding any important material to something that we've already. Read or seen previously. Any chance we could put to stop the steel behind us and just get on with business and go to the next election. I do think that would be important. Look I was disappointed President Trump didn't win the election but he didn't. And so we need to move forward and think about what we should be doing as Republicans if we are put in charge and have the blessing of leading the House next year and focus on how we will lead the House and what the policies and priorities of Republicans will be to help fight inflation secure the border and get our economy moving again. So let's start with that economy and some of that inflation. We had those CPI numbers out today which some people are finding alarming. The markets certainly are reacting to that. I mean one of the great advantages of having you here is you're not only a congressman but you were a senior executive in the senior official in the Treasury Department under George Herbert Walker Bush also built your own bank back in Arkansas. What do you make of the economy right now the inflation situation. Well it's a great time to be looking for a job because there are 12 many job openings but our families are hurting. And that's what I hear about when I'm home in my district in Arkansas. You know a family right now due to this inflation spike over 8 percent consistently the highest in 40 years. The last time it was this high working 9 to 5 was on the top of the charts. So it's been a long time ago. It's costing an average family you know 450 dollars more per month for gas and food and groceries for their family. So this is having a big impact on our families on fixed income and our hardworking people. And so it's a challenge. And I think that's where we're in sort of that very strange economy where we have high inflation. People haven't seen it in 40 years and it's causing their rent their mortgage their groceries their gas. And that goes into everything because produce supplies prices recently were as high as 11 percent. And so high oil and gas prices produce higher products across the board. And so our families are hurting out there. And I think it shows in the statistics and I think it shows in President Biden's approval rating. So the question is what do we do about it. And maybe as important who should do something about it. Is it up to the administration. Is up to the Fed or by the way what could the Republicans do and the Republicans what what would you do if you could do anything like right now to address inflation. What would you do. I think there are three things that we should be doing. One the Fed should begin to shrink its balance sheet and raise interest rates which has been doing but it's over a year late and that contributed to this inflation. And I think Jay Powers acknowledged that. Secondly we should not be spending money like drunken sailors in Washington. And that's been the proposal of the Biden administration to get out of inflation by spending more money. And even though Joe Biden's last week suggested in the Oval Office that he wanted the Fed to have the authority to do his job next week on the House floor we're going to add a new mandate to the Fed. House Democrats led by MAXINE Waters are proposing to have racial equity as a new mandate for the Fed. That takes their eye off the ball of curtailing inflation. And finally what we need to do David is open up the supply side. After all this demand stimulus and that means we get people back to work truck drivers back to work. Unleash American energy so that energy prices fall and that we can get more things to the store shelves and a more cheap and effective way. So there are a lot of things that we could do on the supply side. But the cause of this inflation in my view principally is demand side stimulus too much loose policy from the Fed and too much fiscal stimulus from the central government. You say we're spending money like a drunken sailor in Washington these days. Republicans have spent a fair amount of money as well. They tend to do it a different way. They may not have big programs and they do tend to cut taxes. Is what is good for the goose good for the gander. Yeah. Women report to you that the Trump Tax Cuts and Jobs Act produced over a trillion dollars of money coming to the United States and corporate tax revenues are up. They're at record highs right now. We have more money coming in from corporate taxes than in American history. So we don't have a revenue problem in this country. We have a spending problem. And yes we spent money during the pandemic six trillion dollars. And since that time Republicans have been trying to press Democrats to get back to pre pandemic spending priorities. Just one point on that. OK fine. Revenues are up. But at same time the deficit went up under. President Trump did not go down. Right. That's true. It went up because he was spending a lot of time rebuilding our American defense after the bad cuts of eight years of the Obama administration. And when you rebuild American defense that's a priority of Republicans. The domestic spending goes up as well because Democrats want that in the compromise. Final comment. Our mandatory spending programs like Social Security Medicaid are growing at 6 percent per year. That's unsustainable. Yeah. Good luck to you in addressing those entitlements. Everybody talks about that but nobody gets it done. In my experience. You bet. It's hard work. But we've got to do that. And that's something that takes bipartisan consensus. That sounds right to me. Thank you so much. My pleasure to have you. Great to be with. That is represented French Hill Republican of Arkansas. Still to come chair of the Council of Economic Advisers Cecilia Rouse. For the White House. Views on. CPI numbers released earlier today. This is Balance Power a Bloomberg television and on radio this June in honor of Pride Month in June Team Bloomberg brings you a special a quality series every Thursday in June at 1 p.m. Eastern Bloomberg Quality. Celebrating inclusion this Pride month and all year long. This is ballot power on Bloomberg Television Radio. I'm David West. When we started this program by saying that the markets were reeling from those CPI numbers and now we get to find out just how much they are reeling. Abigail Doolittle is here with that story. Well I don't know where to start. It's hard to know. It's unbelievable the reaction that we're seeing to that hot print. The S & P 500 right now down two point seven percent. The Nasdaq 100 down three point five percent. But the bigger story yields absolutely surging higher. The two year yield right now at 3 0 3 essentially its highest level I believe since 2008 June of 2008. And if you can imagine the 30 year yield is at 323. So this curve is so flat at this point. Of course the to 10 the way that you would look at it more traditionally it flattened. It has flattened. It inverted as you know in early April. Who knows. Maybe we're going to see it invert again. And that's not great because it tells you have a super hot economy in some ways and the slowing ahead. And of course that potential recession and tech is getting hit here in the NASDAQ about three and a half percent down but still three point three and a half compared to 2.8. Isn't that big a difference. Yeah I mean it is down 2.8. Yeah. Either way stocks are tumbling. And something interesting on it all week because this is of course the worst week since January. This is the third down day in a row. Today it's on volume. Before it had been on 25 percent below volume. Today it's on 6 percent above value. But yeah to your point it's just a very bearish reaction. It's so bearish in fact David that you have oil which is a risk asset and also a tell on inflation. So here we have this huge reading on inflation. Oil's down more than 1 percent. That could have something to do with the dollar being up for a third day its best three days in more than a year. And of course the Fed can't do much about energy. And as you say you always say it's all about the Fed. So balls ordered the Fed. What do they do with it. Well you know it's interesting because a couple of months ago I said that you know I'm. I'm just getting a lot of things wrong here. A couple of months ago I said that the Fed doesn't make mistakes right now. It's hard to believe that they're not really behind the curve. I mean that's at least what yields are telling you backing up in this way. And on top of the year they of course again don't have control over energy. Can't get that much wrong. Used to say we'd get to two on the tenure we got we got there best. Thank you so much to Bloomberg. Abigail Doolittle. Coming up we're gonna ask President ISE lead economic advisor Cecilia Russ about the CPI numbers. That's next on Bloomberg. This balance of power on Bloomberg television and radio. I'm David Westin want to keep you up to date with news from all around the world. For that we turn to Riddick Gupta here with the first word. Thanks David. Lawyers for members of the right wing proud boys accusing us of bringing new charges against their clients to coincide with televised congressional hearings on the Capitol riot Monday. Federal prosecutors added seditious conspiracy against five members of the group. The charges amongst the most serious bought in the government's massive case over the effort to thwart Joe Biden's election as president and keep Donald Trump in power. But Francis has canceled a planned trip to Africa in July. The Vatican says doctors requested he remain in Rome June 2. Ongoing knee problems. The move has raised by the questions about the health and ability of the 85 year old pontiff. He has used a wheelchair for about a month due to strained ligaments in his right knee. California fire officials say PG & E should have removed a visibly damaged tree that fell into one of the utility power lines. And spot the second largest wildfire in state history. An investigative report on the Dixie fire found it would not have started if the decaying Douglas fir tree that toppled into the electric wire had been identified by the utility inspectors. Maybe one million acres would put chalk and record heat will sell down across California and the Southwest through the weekend before pushing east into Texas and the southern Great Plains. So far this month the Permian Basin in Texas topped 100 degrees three times. Houston has opened cooling centers as temperatures are expected to hit 99 degrees today and 100 tomorrow. The National Weather Service also warning dust from Africa's Sahara Desert will drape itself across Houston and east Texas telling skies a milky gray. Keeping temperatures high and making allergies was open 24 hours a day on air and on Bloomberg Quicktake filed by more than twenty seven hundred journalists and analysts similar over 120 countries. I'm here to get to. This has been bad. David thank you so much. Rebecca. Well we had the CPI numbers this morning and certainly the markets were surprised by how hot they were. And so now we turn to someone who really is responsible for explaining them to the president states she's doctors here rather. She's chair of the president's Council of Economic Advisers. Dr. Rice thank you so much for being with us. Let me start with the most basic question here. The markets certainly were surprised. Were you surprised by how hot these numbers were. Well look we understand that inflation is a global challenge right now as we knit our economies back together after this pandemic and given the war Russia's war against Ukraine. So we expected them to be elevated. You know forecasting is really difficult at this time. And what we could see is in the month on month increase in headline which was about 1 percent about 50 percent about 50 percent of that was due to food and energy. And my understanding is really difficult to forecast price increases you know changes in prices. And that's really what was challenging for forecasters. But look the president understands that prices are a challenge which is why he's focused on it every day. So Dr. ISE as you say it's really hard to forecast. I certainly wouldn't want to try to do that. I would be no good at it whatsoever. But as you look forward as you advise the president. Do you see any prospect of a significant cooling of inflation before November. And I picked that date perhaps at random perhaps because they're midterms. So what we understand is that again as we just pointed out especially month on month that the headline inflation which includes food fuel and food is our biggest challenge. We understand that even core inflation was broad based and some of that is actually due to energy costs which bleed into many other factors. And the fact that we are coming out of a global pandemic. I do see I do I am optimistic that we will see some quilt of inflation. I am not going to forecast exactly what the numbers will be and how fast. But we we see supply chains getting better. We see you know the throughput getting better. We see consumption patterns re normalizing which will put some pressure on services. But nonetheless we see a rebalancing which I think will be healthy for price stability as well. Importantly the Fed is also focused on inflation. That's part of their dual mandate price stability full employment. The president is giving them the space to do what they need to do. And we can you know part of the market's reaction is they're expecting the Fed to actually take that charge seriously which will also generate some cooling. We all have to have faith in the Fed after all because as you suggest the president has said it's really their responsibility. The same time the Fed has been off and some feather fairly substantial ways. I talked earlier today with somebody you know well a former colleague Larry Summers of Harvard. And he had some harsh words for the Fed's projections so far. This is part of what he had to say. I think the Fed's forecast for March saying that inflation would be coming down to the twos by the end of the year was frankly delusional when issued and looks even more ridiculous today. So Dr. ISE is that a fair characterization and perhaps beyond what happened in the past. Does it raise questions about how confident we can be going forward that the Fed has their arms around this problem. Look I am not going to. I'm going to respect the independence of the Fed and not comment on their policy making but I will say that they are focused on it and I do have confidence in the team. It's great that they're the nominees have been confirmed. We need Michael Barr to get through as well. But we know that they focused on it. Importantly the president is doing what he can to complement those efforts. So for example he really encourages Congress to pass the bill that would address shipping costs because we know against shipping costs raise the price of bringing goods in particular overseas or across the country. And it's important that we reduce those costs of shipping. He encourages Congress to work with him to reduce the costs for families for prescription drugs for a child care effort for energy costs. And importantly deficit reduction is also deflationary and helps with inflation. And the president urges Congress to work with him to raise taxes for the various wealthiest Americans for our biggest corporations because again that will help to ease pressures on prices as well. Dr. ISE we've heard some talk about corporate profit making driving the inflation problem. And yesterday we heard that Treasury Secretary Janet Yellen at a New York Times event actually address this question although she allowed as how there might be increased profits. That was not fundamentally what was driving. It was supply and demand. Do you agree with that. I do agree that what is what is generating the inflationary pressure right now is a mismatch between demand and supply. Again this goes back to the pandemic when we had to power down the world economy. But our government supported people so they could buy food pay rent consent continue supporting their lifestyles. But our supply could not match that. You know we sit so we say that's why we see inflation around the world and even in the U. They're seeing inflation at historic levels. The the what the war in Ukraine is has only exacerbated those efforts. So as supply and demand start to to normalize I am optimistic we will get back to price stability and get back to an economy that is building in a more sustainable steady way. I'm curious about what target the White House has for inflation. We know the Fed's target is 2 percent. Some people think that might be a little unrealistic at the moment at least. Do you have a target for inflation. So having an inflation for target is really in the domain of monetary policy and that is squarely in the domain of the Federal Reserve which is why it's so important that they be given the independence and the latitude to do what they need to do to address inflation which has not been the case with every administration. There've been presidents that have wanted to get in the way of the Fed for it for political reasons. But this president understands that that is what the Fed needs to do. And he wants to be pursuing fiscal policies that are complementary to that. Everyone is very concerned with inflation. The president's been very explicit. I think he called the bane of our existence earlier this week. No question. But are there some benefits actually from some inflation. We talked with Dr. Paul Romer. You know him. He's the Nobel laureate in economics yesterday. And he suggested that actually there may be some benefits. This is part of what he had to say. Yeah. This is the the hidden and unnoticed true success of Biden's policy because we've got wages growing faster in dollar terms for the people at the bottom end of the skill distribution. One of the benefits of this period of of love. Higher inflation is going to be the we can start to closed some of the wage gap and help the people at the bottom catch up. And Dr. Laura came complete with a chart as you expect him to the broke out and the wage increases by quartile showing that the lowest quartile is going by far the fastest of the four different quartile ISE. Is this part of White House policy. So the president has always been very clear that his economic policymaking is geared towards building this economy from the bottom up and middle out. And so the fact that wages are growing for those who have not seen significant wage increases for the past several decades is part of his economic plan. What's important is it going forward that those wage increases are built on a growing a growing economy that they be sustainable and that they be steady. And so he the president understands that that involves bringing down the cost for households but it also means getting inflation under control. But absolutely the president's whole economic policymaking is designed to generate greater sustainable economic growth that is more widely shared. So I wonder we've heard from you and from others at the White House. We want sustainable stable growth. What does that look like. Do you have a definition for that. You have a target there for what that would look later a weight of GDP growth or job growth whatever. What does it look like. So what that looks like is an economy that's growing because we have productivity increases because we have a growing labor supply because we've been making the kinds of investments that we're making through that bipartisan infrastructure law that the kinds of investments in our physical infrastructure so that we're making goods in the United States that those goods are productive and that it's efficient that we are doing so so that that workers who are working are making goods that people want to buy that they're able to support their families in a sustainable way don't feel they have to cobble together two three jobs in order to get food on the table and pay their rent. And that we're seeing the kinds of advances that we know we need to be making to address the kinds of challenges we know we have such as climate change and addressing and being prepared for the next pandemic. So that president's economic policymaking is built on generating and increasing economic capacity so that all workers can benefit. And we have a higher level of what we economists would call well-being. People are well off as they go about and leave that and lead their lives. Dr. ISE one more if I could. You mentioned productivity increases. I've learned from economists like you that there are two ways you really get growth. It's a combination of productivity increases but also an increased number of workers. Should immigration legal immigration I'm talking about now should that be part of our economic policy. Because that actually could lead to sustainable growth could it not. Absolutely. And the president has been very forthright in welcoming having more robust legal immigration. He's been he and in his business station have been working hard to reduce backlogs in visa processing finding other ways to increase the number of legal immigrants because we know just how important they are for innovation for productivity increases and for the health of our economy and our society. OK. Dr. ISE thank you very much for your time. I really appreciate that. Cecilia Rouse. She's chair of the president's Council of Economic Advisers. Coming up we go to the Port of Los Angeles for an update on labor negotiations out there. This is balance of power on Bloomberg television and on radio. This is balance of power on Bloomberg television and radio. I'm David Westin President Biden is on his way to the Port of Los Angeles. So we sent our own Ed Ludlow to be there with him to keep him company. And part of the reason is because there is a big labor negotiation pending out there. So Ed we're gonna go to you now. The Port of Los Angeles. Why is the president going there. Yeah I mean he zeroed in on inflation and the backlog. The breakdown in global supply chains the port of Los Angeles here was really case in point that at points during the pandemic we ground to a standstill in America's busiest terminal. In the background as you say you have this impact between the longshoreman and warehouse workers union and the port operators which is not unique to the port of L.A. something happening all along the West Coast. But the concern is that if they cannot reach an agreement over pay and benefits that we will see further breakdowns in how this port is operating. Things have improved. But if there is a breakdown in operations it means that there's a scarcity of containers because those containers are not moving efficiently through the port and that it has been a directory through to the inflation that we're seeing now. And we know it's top of mind for the president. A White House official briefed us that that is what his speech on the USS Iowa had. Just over my right shoulder will be a little later today. It is dangerous as we all know and I know because I have negotiators and labor deal deals with unions. It's dangerous to anticipate where they're going how long they'll take. There's ups and downs and backs and forth. But to reduce it to one basic issue how much of this is employment versus automation. Yes it is both to be a longshoreman in Los Angeles has been difficult over the last 18 months. There was a surge in demand a surge in volumes. The way that officials and executives describe it here is that there are five lanes of available traffic for container ships to pass through where I am. But there were 10 lanes of volume trying to fit in because the world suddenly became so focused on ordering things. So for a longshoreman you know it was not good working environments. We also bathe themselves feel the pain of inflation at these levels. They want higher wages. It's interesting some reporting that a longshoreman important in the port of Los Angeles could earn as much as one hundred thousand dollars a year with benefits. And so that is why we're focused because historically strike bona fide strikes have not happened. But we have had standoffs between the unions and the operators that have caused disruption. As I said that disruption gives real rest to inflationary pressure. Okay. Thank you so very much. It's great to have you with us. Ed from the Port of Los Angeles I suspect it was not a longshoreman. It was a motorcycle that we heard there. Thanks a lot for joining us. Coming up we're going to go from the Port of Los Angeles to the broader issues about supply chains and turned the body of a kill of resolute. That's coming up next. The balance of power on Bloomberg television and on radio. This is balance of power on Bloomberg television or radio. I'm David Westin. We've just been talking about the port of L.A. which is one part of a much larger issue involving the supply chain that we would contending with at least since the pandemic hit us. We turn to now Ben of a kill wrestling chairman and co-founder and CEO. We talk to her periodically but worry on the supply chain. Yeah. Great to have you back with us. First of all start with the Port of Los Angeles. How integral is that to the supply chain issues. Extremely 40 percent of everything we buy and across the U.S. makes its way into the country through the Port of Los Angeles. So this is a very critical time. Last year we saw massive disruptions due to the ships that were backlogged there. And now we are seeing those ships that are leaving Port of Shanghai and making their way across the ocean. They should be hitting our ports within the coming weeks. And it's a very critical time for these negotiations to be going on. So let's assume for the moment that they get a deal done. They come to a contract so it doesn't get near up to the Port Los Angeles. Overall how are we doing the supply chain right now. Are we getting better. We are definitely continuing to see massive disruptions especially if you just look at the wrestling data set. We went from 200 destructions a week in Q1 to about 300 last month. Eighty seven factory fires alone which has five to six acts the number of factory fires we were seeing prior to the pandemic. So just Shanghai alone seven thousand sites in our database making 14000 products that make their way in to just about every product that we buy across our our daily lives. And so this is a disruption that is still not over by any means. We're going to continue to see pain ahead in the next 12 to 18 months. The deal what kind of adaptation are we seeing at various chunks of the supply chain to try to deal with this issue for example automation. You know automation is just a manufacturing thing. There's labor trapped labor shortages that we just heard. There are so many different choke points across the supply chain. Many companies unfortunately took a wait and see approach to this. Questioning the are alive resiliency or greater mapping or transparency or really hesitated to change their overall CAC chairman strategies throughout the pandemic. Apart from panic buying being the default and we're now seeing that they're paying for that wait and see approach in terms of raw material premiums expedited freight. But remember not everyone has been equally burned by this. There are companies who took a proactive approach throughout the pandemic. They had mapped their supply chains multiple tiers deep continuous monitoring of disruptions. They were giving their supply chain an information advantage. And now what we're seeing does a recent study from Gartner that showed that 73 percent of companies are now looking to invest in greater transparency supply chain mapping in the next two years. We're certainly seeing this demand hit wrestling where we tripled our team in the U.S. and are raising our growth round. So we're definitely seeing companies are realizing that I.T. ditching J or on shoring or second sourcing everything are very expensive strategies. And we need the information advantage to manage the supply chain across so many different ranges of disruptions coming at us. You said companies are investing. Investing is one word for it is spending more money is another in order to fix the supply chain over the longer term. Is it necessarily going to increase the costs temporarily. We will see some companies invest in strategies like on shoring our I.T. just in case inventory levels. But those have a massive price tag you know on during a factory can add billions hundreds of millions of dollars and cost an investment. Adding a warehouse and stuffing it for less inventory is one hundreds of millions of dollars. But mapping our supply chains working with suppliers collaboratively with greater transparency and trust and coming together to solve pro-growth problems in real time. The price tag of that is hundreds of thousands of dollars. It's attainable. It's definitely affordable and scalable across 40 50 different types of disruption. So I don't think that cost is as much of a problem as on shoring or inventory. Changing your inventory strategy is in between on shoring and what we've been doing the past is something called near shoring. I've learned are you seeing shifts toward things like Mexico as a place to supply out of. Absolutely in fact south of the border just about everything that you can think of their capacities are already gone. In September of last year I co-authored an article with some of my colleagues on the Pan American supply chain looking at countries like Honduras El Salvador and others where there's cost parity on labor markets. China. There's also. We are connected by road. So we could avoid the port completely. We could create greater partnerships and trade agreements. And we're definitely seeing companies look at this region piggybacking on the experience of their apparel and food industries to create their land based supply chain. Closer to closer to home. Okay buddy it's always great to check in with you on the supply chain you're so in for. That's been the kill of Reza Link. Check out the Balance Power newsletter on the terminal and also online. Coming up Balance of Power continues on Bloomberg Radio. In our second hour we're going to talk with former Democratic congressman of New York. He's Joe Crowley about the first hearings the House Select Committee on the January 6th riot at the Capitol. What did we learn. What will we learn. This is balance of power on Bloomberg television and on radio.

Balance of Power Full Show (06/10/2022)

On Bloomberg’s ‘Balance of Power’ with David Westin, Allison Boxer, PIMCO Economist, on CPI numbers; Rep. French Hill, (R) Arkansas, on day one of the Jan. 6 committee hearings; Cecilia Rouse, Council of Economic Advisers Chair, on inflation and CPI numbers; Bindiya Vakil, Resilinc Chairman & CEO, on supply chain issues. (Source: Bloomberg)

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