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00:00From the world of politics to the world of business. This is balance of power with David Westin. From Bloomberg World Headquarters in New York to our television and radio audiences worldwide. Welcome to Balance of Power. It's another noon in Washington, and that means, at least for this year, it's another day of trying to get a speaker of the House. And if they have a vote at this hour, as they're scheduled to, it will be the 12 vote to try to elect a speaker of the House to bring us up to speed on what where we are, what we expect. We welcome now Laura Davison, who covers Congress for Bloomberg. So, Laura. Thank you so much for all your coverage throughout this week. What to expect today that's any different from yesterday? Well, so far. Not much. They met late into the night trying to hash out this deal. You know, McCarthy and his allies in this group of hardliners that have so far continued to vote no against McCarthy. There was a Republican wide call this morning where some of the details of this, you know, potential emerging deal have been discussed so far. No one has agreed to this and said they're willing to switch their votes. And even still, there's some discussion that that the things that have been discussed so far, you know, committee seats changing some numbers regarding the budget and defense spending, as well as looking at different levers to make it easier for a single Republican to oust the speaker. No one signed up for that. And even if if all those things combined get some people to move, it may not be enough to get all 20 or enough of those 20 to make Kevin McCarthy speaker. So a lot of confusion. The reporting I've seen from Bloomberg and others so far is the possibility, just the possibility of a deal with Chip Roy, the Republican congressman who seems to be a linchpin. But how critical is he to McCarthy's ambitions here? So Chip Hoyt leads a faction of these 20 that's really concerned about process and rules and procedure and some of the really arcane stuff. You know, there's others other factions. You know, they're more it's more personal. So Matt Gates, Lauren Ober, there's almost probably nothing that McCarthy can offer in terms of some sort of concession with how the House works that will swing them over. So there's you know, he's kind of working different groups, different factions, one by one to see who he can peel off. But even still, McCarthy's allies are calling this emerging deal potential deal, just phase one. And it's going to be you need to be further phases beyond this. Laura. From your reporting of their capital, is there anything to. So what we're hearing that there may be some moderate Republicans who are beginning to get me, I put it cold feet about how many concessions are being made to the more extreme wing. That is a real and emerging concern today of as these concessions have gotten bigger and broader. You have a lot of moderates who are very concerned, very worried that McCarthy may be giving away too much or, you know, potentially if he if he goes far enough, could potentially lose their vote. So this is something that all sides are are keeping close tabs on, and that could be the next problem in this story. OK. Laura, thank you so much for your reporting today. And throughout this week on this really important story, that's Bloomberg's Laura Davison up on Capitol Hill. Well, when Washington is not paying attention to the election, the speaker Washington, by the way, the markets are paying attention as jobs numbers out from Washington just today. Tune in. Twenty three thousand jobs were added last month. A really robust number at the same time, some indication that some of the wage inflation may be ameliorating a bit. Take us through these numbers. We welcome now. Betsey Stevenson. She's professor of public policy and economics at the University of Michigan Ford School. Dr. Stevenson earlier served as chief economist at the Department of Labor. So welcome back, Professor. Great to see you. We have heard some fairly encouraging news. The markets seem to like what they're seeing. What did you see in these numbers? You know, two very strong jobs report. What we saw was ongoing job growth. And, you know, 20, 21 was the strongest year of job growth we've ever had. And 2022 came in there in the second. And we did see some slowdown as the year continued. But even if you're just looking at those last three months where we average 247 thousand jobs a month for three months, that's a pretty high job growth compared to the whole 21st century, so that the job market is strong. And where that strength is coming from right now are the sectors that were the slowest to recover from the pandemic. Leisure and hospitality was called out in this jobs report. It's still not all the way back, but it is chugging along. And we're also seeing recovery in caregiving jobs, which is really a welcome change because, you know, child care, nursing care. Those have been the markets that have been slowest to recover. So those are some sectors. Do we have a sense if you really take a look at the level of income where the jobs are being added? Is it the higher end of income, the lower or across the board? Well, it's kind of difficult to take a look at on a month to month numbers and you know, what we've seen is really strong growth and recovery of for highly educated workers, which shows that there was a lot of growth and recovery at the top end. But we've also seen, you know, a lot of recovery and low falling unemployment rates at the bottom end of the labor market for workers with less education. So I think what you see is that this has been a job growth that has really been across the board benefiting a wide range of workers. I think, you know, it's been inclusive growth. So to slice and dice, it's like a different way. What about the demographics? What about women versus men? What about people of color? Well, you know, we're all we have gaps. We know the unemployment rate of people among African-Americans, among Hispanic Americans is always higher than that among whites. And we see that again in this report. But what we've seen is across the board, everybody's rates are coming down. And we're seeing participation rates recovering across the board, particularly among a minority and underrepresented groups. One big highlight in today's report was the employment of people with disabilities. So this really this tight labor market is benefiting a large part of the population. So one of the concerns over is happy people are getting jobs and good jobs. That's the better. But people are concerned about possible inflation. Talk to us about the wage increases, which were a little bit less rapid than had been anticipated. You know, the wage data has been really quite noisy in these reports. Right. We saw, you know, sort of concerning increases that then have been corrected back down. But, you know, if you you look you know, again, over the last few months, it looks like the wage increases have started to slow. And they're in that sort of Goldilocks space where there are enough for workers to be able to get some wage increases, which they desperately need, but not enough to set off any kind of wage price spiral that will fuel ongoing inflation. When the Fed looks at these numbers, you know, look, there's some indication in today's report that the that these wage increases are consistent with the inflation they're trying to target, bringing inflation down towards 3 percent. You know, it's also possible that these wage increases are consistent with sort of ongoing inflation around 4 percent. And the Fed is going to want to bring that down. So we're going to keep an eye on wage data. But what I've been seeing for the last year continues to be true in this report, which is that it is not wages that are is driving inflation and inflation is not being further sparked by any kind of inflationary wage pressure. Professor, I don't know how precise we can be, but just to go back to the numbers you just mentioned, you said towards 3 percent, the Fed has been talking about 2 percent. Right now you're Europe here is four point six percent. Where do we need to get in terms of wage increases to get down to 2 percent, which I think is still the Fed's goal? Is it that way the Fed wants to get to 2 percent inflation. But, you know, we have productivity gains typically that allow us to have wage growth that exceeds inflation on average. Now, I think I am being a little fuzzy here because I think we don't really know. You know, it's productivity actually growing right now. How much wage growth can we sustain above? How much nominal wage growth can be sustained above inflation? And also, we're not going to jump back down to 2 percent inflation next month. Nobody expects that. What we're going to see is inflation hopefully slow and get us back to 2 percent over the next couple of years. But, you know, if we're seeing inflation right now, given all the actions the Fed has taken, like coming down towards 3 4 percent and staying, you know, getting down there that quickly, then that tells us that the Fed's done a lot of its work and it's going to have to just let that work play out. So, Professor, that's a really important distinction. I'm glad you made it about the productivity as opposed to the wage increases. If you take the historical trend to productivity the last 10, 15 years. How much does that give you some leeway on the wage growth versus the inflation? Yes. Typically, you can have something around three and a half percent, 4 percent wage growth that is consistent with a 2 percent inflation target. So it's falling on that. Historically, have we really got a substantial increase in productivity without layoffs? Because often I think historically where the productivity gains come from is actually having fewer workers. Oh, you know, economic growth is all fundamentally about us being able to do more with less. And so I don't think that's about laying people off. That's about people getting better at their jobs. You know, productivity is difficult to measure. But you know, what we we've seen over the pandemic was pretty big productivity increases and people who were able to work from home. It turns out working from home, at least in the short run, was very good for productivity. Where we've seen productivity declines are the in-person service industries where all of a sudden you had to take a lot more precautions to not accidentally give people Covid in the process of your service and not reduce productivity. I think those are the big drivers. I don't think we should be thinking about productivity as being a function of whether we've laid workers off or not laid workers off. There is some mechanical movement that happens as you lay workers off, particularly because you tend to lay off the least productive workers first. And because of the fact that you're asking your existing workers to do more, we can see some productivity gains. But I don't think of those as real productivity gains. Look, if you fire my colleague and you asked me to teach their class, you didn't get a productivity gain. He just shifted their work over to me. Well, I wasn't suggesting that. I think that. Professor, one last one. Take us through the JOLTS numbers we got actually this week. They would indicate, as I understand it, that we still have a pretty tight labor market. Look around the corner. What's coming up next? Well, the labor market is really tight, so you know that the warning I will give is we're going to have to see further increases in labor force participation or we could see inflationary pressure coming out of the labor market because I don't see how employers can continue to hire at this rate. This unprecedented high rate when we also, over the course of the years saw labor force participation barely budge. So where workers going to come from, they've got to come back. You know, we've got to see higher participation rates in order to for people to be able to continue to hire. Otherwise, we're going to start to see, you know, employers of fighting with each other for workers. Now, all that said, I just think it's really important to realize we've got a lot of, you know, sort of sectoral reallocation going on right now. I know the information services, that's the tech sector. It shrunk this month. We all knew that was coming. Lots of CEOs have told us they got ahead of their skis and over hired. We saw the same thing in business and professional services. That's a sector that has expanded by 5 6 percent from over where it was in February, 20 20. So didn't just recover, but it's grown a lot. I think we're going to see some stalling out in the sectors that sort of over grew or grew very quickly relative to their pre pandemic rates and where we're going to continue to see growth in education and health services, caregiving and leisure and hospitality. I think a big surprise in this report is that we're also continuing to see growth in construction. But I'm going to guess we see that slow with the housing market cooling. Professor, thank you so much. Really helpful to take us into the numbers in depth. That's Betsey Stevenson. She's professor of economics and public policy at the University of Michigan. Coming up on the anniversary of the January 6th Blake invasion of the capital, we're going to talk with one of the members of the committee to investigate it. Former Congresswoman Stephanie Murphy. This is balance of power. I'm Bloomberg Television and Radio. This is balance of power on Bloomberg television or radio. I'm David Westin today is January 6th. It's the second anniversary of that invasion of the capital that we all watched on live television. Most of us, I think, said please let that not happen again. Since then, there's been a major investigation by us, a House select committee. Welcome. Now, one of the members, that committee, Stephanie Murphy. She served as Democratic congressman from Florida. And as I say, served in the House Select Committee to investigate the January 6 invasion, the capital. So thank you so much, Congresswoman, for being with us. Take us back two years. What have we done since then that might avoid it ever happening again? It's great to be with you, David, and I think a lot of what we did over the last two years was to actually lay out for the American people the facts of how. January 6 came to be. And it turns out that it wasn't a protest that got out of hand, but rather it was a very deliberate effort by an individual and his allies to overturn a free and fair election in the United States. And I think in a democracy, information is power. Were there specific things coming out of your committee's investigation and recommendations that might actually have the force of law that might discourage future people who might like to take over the Capitol again? Well, I think the electoral count act, which we were able to pass in the waning days of the last Congress, is a really great step in trying to button up some of the seams and the gaps that existed that were exploited by the former president in his efforts to pressure federal, state and local officials to change the outcome of the election and then the will of the people. We also need some recommendations and around things that the law enforcement could do to better coordinate. We provided additional information in the annexes about the coordination on the day of and in response to the intelligence before January 6. I'm hopeful that the committees that have jurisdiction over these agencies will use to move forward to provide more concrete recommendations and make changes so that we can better secure our capital. So I'm very curious about that specifically because in the end, the aftermath of that, there is a lot of talk about the security around the capital and what they had, what they didn't have. Also, as you suggest, coordination among various law enforcement authorities was more money appropriated for for security up there. Are there more officers on guard? We have provided more resources. And I know that the U.S. Capitol Police is working to hire additional folks. I think, though, that beyond the issue of resources and money, there needs to be better coordination as well as identification of who's in charge on events like the certification. They should be treated as the inauguration is treated as a special event and preparations need to be put in place for those types of events. So I'm struck with the fact that you decided to step away from Congress. You know, part of what we're seeing right now on Capitol Hill, but you were there just a week ago. You were still a congresswoman. So give us a sense as you watch what's happening there in the back and forth about selecting a speaker. What do you make of it? Is there any good that could come of this? You know, I I'm a little heartbroken for the institution, but mostly for the American people. I think that they don't care upon whose head the Republican crown rests. As far as it relates to being speaker of the House. But what they really care about is what is being foreshadowed by the extremist wing of the Republican Party. They are demonstrating that they are willing to shoot the hostage, so to speak. And that means that when it comes to really important issues like the debt ceiling or border security funding or funding the government that you're going to see much of this last week play out again as this small group of extremists take the Republican Party hostage. So it's really up to the Republican Party to cure their own ills here. I wonder if specifically on the debt ceiling, which that's something that's very important to the American economy and certainly to financial markets here in the United States, do not play around with that debt ceiling. I wonder if it's possible that having gone through this experience that people in Congress and I mean, some Democrats as well as Republicans would say, we don't want to do that again. And so we may avoid that that that sort of back and forth and the crisis mentality. My hope is that certainly that they do try to avoid that, because, as you know, when we have had debt ceiling conversations that have reached gridlock, it has moved markets. And that's really serious, not just for the American economy, but also for the global economy. We cannot risk the full faith of the U.S. government. And so my hope is that it's going to be that way. But what you're dealing with is extremists who there. There's not a lot of leverage that the current Republican leadership has over them. And you're watching it play out now as they try to pick a leader. But I'm my my hope is that they're not willing to play chicken with the credit of the U.S. government. We're actually watching other corner of our eye. And Mr McCarthy has been renominated. And now I think it's a nomination speech going on for Hakeem Jeffries says they're going to look. It looks like have a 12th vote now that we're about to see there. So as you as you think about the Congress going forward, is there a possibility people will move more toward the center from both sides? That's the only way that the U.S. Congress is going to be able to deliver for the American people in this upcoming Congress, where the far right, though they are in the majority. The far right is in control of the Republican Party. And so I think you're going to have to move to the center and find ways in which you can build common ground through the middle. I always have believed that the path forward for America is through the center, and that's where most Americans are. Despite the way that the Congress is constructed because of gerrymandering and other things. OK, Stephanie, thank you so much for being this. Really appreciate it. This former Democratic congressman from Florida, Stephanie Murphy. Still to come, we're gonna get the White House reaction to the jobs numbers today from Jared Bernstein. He is a member of the president's Council of Economic Advisors. That's coming up on balance of power. I'm Bloomberg Television and on radio. This is balance of power on Bloomberg Television Radio. I'm David Westin we can talk about those jobs numbers. The United States and boy, the markets did react today. Take us through some of the market reaction. Welcome now. Critic Gupta, so critical for the markets reacted. The markets are reacting is a little bit of a double whammy here. Now, it's almost some counterintuitive logic when you're talking about green on the screen in the equity market to the tune of one point seven percent on the S & P 500, the NASDAQ outperforming one point seven percent for our radio audience. But the bond market also catching a bit and a really big bid. I might add the 10 year yield at 357, that is a 14 basis point move lower. Something that is really moving the dollar as well. Weakness on the Bloomberg dollar index down about nine tenths of one percent. And it comes from two datasets. We're gonna start off with the 830 a.m. payrolls report we got this morning. The headline number, David. Much, much higher, much stronger, similar to what we saw yesterday as well. But is that average hourly earnings number that you're starting to see come in a little bit weaker? And it's kind of sounds the signal that even though we have all these other elements of inflation coming down quite a bit. The labor market was kind of the one piece of it that wasn't. So this was perhaps some indication that you can't actually have for the first time ever. I might add, the idea that unemployment can come down and wages can come down at the same time is something that Randy Kroszner on surveillance this morning, a former Fed official said we've never actually seen that before. But that's only one part of the equation, because at 10 a.m., just an hour and a half later, the U.S. services gauge a PMI numbers shrank by the worst slide since 2020. So the idea that the economy is also turning is part of that. Basically takeaway here is that does the Federal Reserve have to go as hard in February? These next few months as maybe they did yesterday? As you say, once again, it's all up to the Fed to study what some individual companies here, Tesla. Tesla is not having such a good day. Tesla is not having a good day. And it's actually had nothing to do with the Federal Reserve at all. You'll you'll say this access do with price cuts that are happening across the Pacific, over in China. They're model 3. And Model Y models for lack of a better term are actually coming down. They're seeing price cuts. And this is the second price cut they've seen in 10 weeks. Now, we know remember, Tesla has been deal. Tesla shares have been dealing with a lot of pain broadly. They've been dealing with supply chain issues, less demand, of course. But specifically, a lot of those Covid lockdowns you were seeing in China really impact their Shanghai factory. And remember, China is the leader in electrification around the world. So to see Tesla have to compete domestically quite a bit. Well, now we can see why we have those price cuts. Absolutely. And just to show we're right up to the moment, Tesla just turned positive, actually. So it just turned around. We'll be pursuing that as well. Thank you so much for Kristie Gupta. You can catch her again when she's anchoring at 1:00 p.m. Eastern Time on Bloomberg Markets. Coming up, we'll go through those jobs numbers with Jared Bernstein of the president's Council of Economic Advisers. Good to see why he is happy. Those numbers, which I suspect he is. This is balance of power on Bloomberg television and on radio. This is balance power on Bloomberg television and radio. I'm David Westin to keep you up to date with news from all around the world. For that, we turn to Lisa Mateo here with the first word. Thank you, David. The clock has started on Vladimir Putin's 36 hour cease fire in Ukraine for the Russian Orthodox Christian holiday. Ukraine has dismissed the truce as a ploy. Ukraine said air raid sirens sounded across the country shortly after the deadline. Russia claims it stopped firing across the entire front line and accused Ukraine of continuing to fight. Labor Secretary Marty Walsh says he hopes the U.S. can keep unemployment levels down. Speaking to Bloomberg today after the December jobs report, Walsh said he believes the tech industry will start to rehire. The tech companies are actually looking the way their business models are. They're looking at how inflate the inflation rate impacts their business. And a lot of these folks that are being laid off in the tech industry are finding jobs in areas that, quite honestly, people are looking for tech experts all across the country. But these tech companies have had gobbled up so much talent. Walsh added We have room to grow in communities of color. The U.S. labor market stayed strong last month and wage gains cooled. Reducing risk of a near-term recession and giving the Federal Reserve ROOM to slow interest rate hikes. The unemployment rate decreased by point one percentage point to three point five percent. And good news to report on Buffalo Bills safety, DeMarre Hamlin. His agent tells the Associated Press the 24 year old is breathing on his own, is able to talk and write and can grip people's hands. It's been four days since Hamlin went into cardiac arrest and was recessing today on the field during the game against the Cincinnati Bengals. The bill said on Twitter that Hamlin even enjoyed the team this morning via face time global news 24 hours a day on air and on Bloomberg Quicktake, powered by more than twenty seven hundred journalists and analysts and more than 120 countries. I'm Lisa Matteo. This is Bloomberg. David, thank you so much, Lisa. Well, earlier today, we talked to former Treasury Secretary Larry Summers. We asked him what he thought about those jobs numbers that came out this morning. This is part of what he had to say. These were good numbers. They showed in a strong economy with slowing inflationary pressure in far as there's a strong signal in them. It's gonna be encouraging for the reaction of the White House. We turn now to Dr. Jared Bernstein. He is a member of the president's Council of Economic Advisors. So, Dr. Bernanke, thank you for being here. You heard there a reasonably happy Sunny, I must say, Larry Tribe, Larry Summers. Sorry, he hasn't always said that about the White House. What do you make of these numbers? Yeah, it's great to hear Larry's assessment, of course, Larry has been very precious. Going back a ways here. This is another in a series of very strong jobs reports. And I think it just once again underscores that the president's economic plan continues to work well on behalf of American working families and households. Ten point seven million jobs since this president got here December over December. Now we have 20, 22 in the books, 4.5 million jobs. That's the second largest year of job gains. Second only to the year before 2021. So unemployment at a 50 year low and so on. So just. I think that those are great, somewhat backward looking numbers. I think if you look forward, the president said that this morning in his statement, you're talking about a year, 2023, where the bipartisan infrastructure law, the Inflation Reduction Act, the CHIPS Act, are all entering the economy, both putting further downward pressure on prices, particularly in health care and clean energy, creating more investment opportunities for the American workforce. So a good report, good momentum, and nice to hear Larry's comments as well. No question. And you've created a lot of jobs, no question. But that is a good thing for all those people, those jobs. There has been concern about wage inflation. We see in these numbers a little bit of amelioration in that we're down to like something like four point six percent year over year, I think, in the wages. What's the cause of that? Is that because what the Fed has done is that anything the White House does isn't what's causing that from your analysis? Well, anytime you're talking about any outcome in the macro economy, when you when you're in the midst of an aggressive Fed rate hiking cycle, a cycle the president has a door endorsed and endorsed from afar due to his respect for the independent Fed. Of course, the that campaign is going to show up in all aspects of the macro economy, including the labor market. But I think the important point there from our perspective is that, yes, while you're seeing some of the deceleration, both in job gains and wage growth that you heard Larry mention, and that is quite clear in the report today, these are still very robust job numbers. Two hundred and twenty three thousand. That's a great number for December. But if you if you go back and look at last December, it was five hundred eighty eight thousand. So that is an unsustainably a large number. That is December 21. What we see now is a downshifting to a steady, stable and I'd argue sustainable growth path. So all good news there. Now, when it comes to two wages, one very important thing, maybe it hasn't come up enough in some of the discussion because we tend to look year over year or maybe quarter over quarter is that if you look over the past three, four or five months on a monthly basis, wages have actually been beating inflation and there's been real wage gains. That has a lot to do with energy price declines. We don't have the December deflator yet. We know that wages went up three tests, four cents in December. But we also know that the gas price was down almost 9 percent in December. So we'll see how that plays out later when we get the CPI. And again, no question. Net more money into consumers pockets is a good thing, without a doubt. At the same time, we have even with the ameliorated my term, not yours. Wage increases were four point six percent year over year. That's a lot. Over 2 percent. We talked earlier today with Betsey Stevenson. You know, her former chief economist says if our labor. And she said you have to have to take into account productivity. We're not sure of the productivity gains. What's your analysis of the extent to which productivity gains may actually make that four point six? No, not so disturbing from an inflation point of view. Yeah, that's an important and a very difficult question to answer because near-term productivity statistics are really noisy. Let me offer a wage number, though, that I think is perhaps a little bit more salient than the four point six percent. That's the year over year number. If you look at the quarterly number and I think maybe it was Larry said somebody said this recently, I am not sure where. Four point one percent. That's the quarterly growth rate. Now, the Fed has talked about given productivity growth in their 2 percent target. The Fed has talked about a wage target of the three point five, maybe to 4 percent range. So that annualized quarterly growth rate of four point one percent is another move in the right direction. As far as productivity growth is is concerned, I just don't I don't think any of us have a great beat on that. What we do know is that under this president's guidance, we're making really important and really important investments in productive sectors of the economy, clean energy, batteries, reversing decades of disinvestment in public goods. I believe that over the longer term, maybe even over the medium term, that's going to show up as pro productivity growth. Jared, I'm always the first to say you're not the political guy. You're the economics guy, the White House. So this is not a political question, but it may have Family First to say that you're the second to say. But but at the same time, we're watching this standoff. If I can put it that way about electing the new speaker of the House, I'm not gonna ask you about that. What I want to know is, does it matter to you in terms of economic policy? Are the things you need out of Congress that you can't get as long as they aren't functional? Oh, that's a slam dunk. I mean, we need a functional Congress. We need a Congress that's willing to do what we've actually seen very recent Congresses do. Yes, we live in a part of the state to state the obvious. We live in a very partisan environment. But you saw President Biden pulling legislative rabbits out of hats over the past two years with great alacrity. And he continues to stress that if you're willing to meet him with an open hand versus a fist hill, shake that hand and he'll work with you on delivering for the American people. So, of course, we need a functional Congress that's essential to continue to build on the progress we've made. We'd love to do more. Getting back to the labor market, we'd love to do more on child and elder care to help boost a labor supply, particularly for women. So make that more accessible and affordable. But we also want to avoid any own goals. And of course, they're the debt ceiling looms large and we need a very much. We really need a Congress that's willing to get to work on that as soon as possible. Take that risk off the table. And trust me, the Bloomberg Markets is very concerned that debt ceiling, that would be a true own goal for an awful lot of us. The financial markets would get hurt. But let me go back to the open hand point a little bit on the child and elderly care. Do you think that that's something you might get an open hand from the Republicans once they've got their act together up there? Do you think that's something that you could have bipartisan support on? I think the conventional wisdom is that you hear like almost every day in this pretty cynical town is nothing's going to happen. And I think that that conventional wisdom has time and again been proved wrong. And I want one of the one of the reasons for that is the guy who occupies the White House, President Biden. He just doesn't take no for an answer when it comes to his priorities. He has shown that this investment in affordable, accessible care, child and elder care, is is it continues to be a top priority. I think that it's probably the case that there are a lot of members on Capitol Hill who feel the same way. So I wouldn't I definitely wouldn't count anything out. OK. Gerri, thank you so much. Always great to talk to you as Jared Bernstein, a member of the White House Council of Economic Advisers. Coming up, what the political struggles in the United States could mean for U.S. foreign policy. We're talk with Ian Bremmer of the Eurasia Society and Jane Harman, president emeritus of the Wilson Center. This is balance of power. Bloomberg Television. Radio. This is balance of power on Bloomberg Television Radio. I'm David Westin every year you citing issues, a report on possible risks we face in foreign policy in the coming year and this year. That report includes the fractious political situation in the United States. Among the potential risks to take us through it. Now we welcome Ian Bremmer, who is founder and president of the Great Society NGO Zero Media. He's also the author of most recently of The Power of Crisis How Three Threats and Our Response Will Change the World. And also, we are joined by Jane Harman, former Democratic congresswoman from California, chair of the Freedom House Board of Trustees and author of Insanity Defense Why Our Failure to Confront Hard National Security Problems Makes US Less Safe. So welcome, Ian and Jane. If you hadn't written so much, you would be faster into the discussion here. But you're so prolific. So, Ian, first of all, you set it up because you set it up through your report. What are the risks for our foreign policy? Because what we're doing domestically? Well, they're lower than they were a year ago, and that's meaningful. The fact that we got through the midterms and those people that we're running to oversee elections as governors, as secretaries of state that were prepared to to undermine a peaceful transition of power in 2024. All lost. So, frankly, that's much more important than the Democrats holding on to the Senate or the Republicans taking the House. The fact that we no longer have a tail risk of a constitutional crisis in front of us. That was something that was increasingly concerning allies around the world, panicking that American democracy might not actually be with us for very much longer. So we can take that off the table. But well, of course, what we continue to see this week is the level of dysfunction and polarization in U.S. politics continues to be very great and continues to undermine the ability of Americans to promote democracy around the world. I mean, if we can't walk the talk at home, it's very hard for us to be credible internationally. So, Jane, you spent a career really on foreign policy in large part as a congresswoman from California and then has had a Wilson Center and your writings. How do you see it? How is it progressed over time? It's gone downhill. Ian and I are good buddies and I'm an avid consumer of his material. And this report is superb. However, I think it's important not to understate what we're watching right now in the House. If the Congress can't function, the Senate is functioning. But if the House can't function, we cannot do anything in terms of projecting a common voice in foreign and security policy, which are crucial to U.S. credibility. There are a couple of adults in the room who are Republicans in the House, and I just want to give them shout outs. One is Mike Turner, who will chair the House Intelligence Committee and try to restore bipartisanship there. It's very important to do that. And the other is Mike McCaul, who will chair the House Foreign Affairs Committee. I've worked with both of them closely and they're adults in the room and they can't do anything until the dust the house organizes. Good news. There is good news. And just one other comment. Is the Senate does function. It was wonderful to see Mitch McConnell and Joe Biden do a common event in Kentucky. Imagine that. And just maybe this circus will end in the house and and we'll have our government back. But until then, I think we have a constitutional crisis. Again, what we're just doing to pick up on because you've been in the room, so to speak, what are the risks right now given even as we speak, not having a speaker, the Congress can't function in particular with intelligence briefings. Well, there there the old Congress is over. So nothing is happening. There can't be intelligence briefings right now. And if there are serious threats that require approving, which is something we ought to do. New appropriations of funds promptly or in the case of defense, authorizing the use of military force somewhere. We can't do it. And Congress, at least in my time, functioned to to carefully come through this stuff. We made mistakes. The Iraq war was one. I was a co-author with some Republicans of the law that set up the director of national intelligence and reorganized our intelligence community after that. And our intelligence reports are very good. And let's just underscore, David, one last thing. It's a good thing that it's a Republican offer. The Russian Orthodox Christmas in the CIA, there's a temporary cease fire in Ukraine. But what's going on is brutal and it was good. It is a good thing that we just closed intelligence reports to Ukraine, which we're going to be unable to do if we can't get Congress back in the game. Of course. Yeah, go ahead. Of course. I I would be hard pressed when when Jane has has been a seated member of Congress for a long time and knows the way this place works for me to say the fact that the house is dysfunctional is irrelevant. It is not nice. Right. And it's that that's not the message I wanted. Of course, it matters that the house is dysfunctional and I'm sad to see it. But but I also recognize that the big allocations that need to be made by the United States government for Ukraine to have military support through 2023 have been made. We're not going to have a debt limit crisis until the second half of the year. There's a long time before there's anything imminent or urgent that's really going to make the wheels sort of fall off in terms of what a dysfunctional house means for U.S. projecting foreign policy leadership around the world. Now, I am very sad that the obvious thing that should be done here, because it's not like the Republicans, not like McCarthy needs so many more votes. Why couldn't you know that a large majority Republicans reach across the aisle with a couple of centrist Democrats and figure out, you know, break through this dysfunction that we haven't seen in over 100 years and just, you know, vote in a new speaker so we could start working? Getting the answers is that's completely impossible because they both see each other as the enemy. And so they'll do anything possible to make the other side look bad. And and that's that's truly unfortunate. It's it's problematic for the Americans that air our dirty laundry that way to the rest of the world. So I think it's a Russian province as you shouldn't let the best be the enemy of the good. It doesn't look, you get back to the days when politics stops at the United States border. That's gone. What's the second best alternative to actually have a commanding presence in international relations, given the fact there will be these disputes, Jane? Well, Ian is right. And Ian, if I was not nice, I apologize profusely because I really want a nice seat because I really expect you. The second best alternative is to front load as well, get expenditures Shery Ahn grain and just point that out. And what's needed to keep the government open until next September? But what's scary about this is that we will we may not have anything going on after that. And if we have a few of the far, far right people in control of the House in so far as I know, most of the speaker's power has been given away already in order to try to win this election. If they have a veto power, then this stuff may stop and they may find a way to stop it sooner. And that would be catastrophic for U.S. leadership. We are leading in a fine way. Ian is right. And we NATO is is restored. The G7 seems to be working. Remember, Russia used to be the G8, Russia. There are risks with Russia and China, as you point out. The one thing I wanted to say, that it's not in his report or not focused on. I would say is India. India is a rising power and it has a different view now of multi alignment. Different from the post-Cold War order. And I think it's very interesting. You need to pay attention to that point. Very well taken. Thank you so much, both of you. Ian Bremmer of the Eurasia Society and former congresswoman from California, Jane Harman. Coming up, we're going to hear from former Treasury Secretary Larry Summers about what he expects to be the biggest story of 2023. That's coming up next. On balance of power on Bloomberg Television and on Bloomberg Radio. This is balance of power on Bloomberg Television Radio. I'm David Westin. Earlier today, I spoke with former Treasury Secretary Larry Summers and I asked him whether 2023 would likely see somewhat quieter markets for the year or whether, in fact, we'd see yet more tumult. I suspect tonal, David, look, the 30 year story, it has been declining interest rates, the idea that we're moving into an era of low interest rates. That was certainly the thesis that I was pushing with the secular stagnation idea prior to Covid. That's been the basis for a large amount of economic thinking. The idea that we're going to return to that is a kind of orthodoxy baked into markets. You see it when the Fed predicts a half a percent neutral real rate. You see it in break evens on inflation in the low twos. You see it in a 10 year rate in the 3 7 range. And that might be how things play out. The forces of secular stagnation, demography, inequality, lower priced capital goods, all of that are strong. But my guess is that just as those who during the Second World War predicted that when the war ended we would return to secular stagnation and a sluggish low interest rate economy turned out to be wrong. That that's going to be true this time round. That was former Treasury Secretary Larry Summers. You can watch the full interview tonight at 6:00 p.m. Eastern Time on Wall Street, right? Right here on Bloomberg. Check out the BOVESPA newsletter on the terminal and online before we leave you. There is the headline Crossing the rumor right now that Mr. McCarthy, Kevin McCarthy is on track to lose the vote. The 12 vote now for speaker once again in the House represents. We'll keep you posted on that as it develops. And this is ballot power on Bloomberg television and on radio.

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Balance of Power Full Show (01/06/2023)

Bloomberg: Balance of Power" focuses on the intersection of politics and global business. On today's show: Betsey Stevenson, former chief economist, US Department of Labor. Former Rep. Stephanie Murphy, (D) Florida. Jared Bernstein, White House Council of Economic Advisers. Ian Bremmer, Eurasia Group president & founder. Jane Harman, Chair of the Freedom House Board of Trustees. (Source: Bloomberg)

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