The debt limit, should we should the markets worry about this?
Mr. I don't think the markets should worry
too much. We will pay our bonds, we will pay our
bills, but it's going to be a bumpy ride until that moment happens.
It's not inconceivable to me that we go a little bit past the X date because I
think Treasury can prioritize. But once you get it, prioritizing the
politics gets really ugly. But why go?
Why go past that date if there's notices in the market and you just don't
understand why the US is in the state? That is just how the politics of these
things typically work. I've been involved in a number of these
deals. It is not rare to have fiscal reforms
coupled with a debt limit increase. I don't think that's asking too much,
but frankly by House Republicans. Well, I was part of the BCA in 2011 and
I was part of an agreement in 2013 that that fix this.
So we have a debt problem. We have a debt crisis coming.
It's a good idea to get something to get under control.
And it's not going to be big entitlement reforms like Medicare and Social
Security. But maybe they can get some fiscal caps,
spending caps in place. But it's clear the Bush administration
doesn't do that. So I think you're going to have a little
bit of brinksmanship here. But at the end of the day, our bonds are
going to be paid. OK, but is it right to bring it until
the very Jihye Lee say, to get it done in two or three of these deals?
It was always like the day over the day before.
It would surprise me if they saw this much earlier than that.
But at the end of the day, we're going to make good on our bonds.
Our full faith and credit will be maintained and intact.
So the message to the markets is stay cool, stay cool if we're gonna pay our
bonds. It may be a little bumpy.
Maybe just don't watch TV for it too. Well, except for Bloomberg.
Definitely said yes. All right.
You don't have to watch anything else. McCarthy strategy on this.
How do you see that developing coming? Well, I mean, his members, of which I
used to manage the same conference, want to see a budget advance that actually
gets our fiscal house in order. So I'm happy that we have this revived
concern about our fiscal problems. But but you're not going to get a giant
package through something like this, a debt limit increase.
So the question is, can you get some pretty good incremental fiscal reforms
in place like, say, spending caps or some kind of financial mechanism to help
get our debt going in the right direction?
And we'll see what that looks like. I think it's possible.
And the reason I think it's possible is because that's what we've done before in
the past. So we'll see what happens then.
But at the end of the day, we're going to really have to get serious about our
debt crisis. It's every modern country has this
problem. And we can't keep piling on this kind of
a debt because we're the world's reserve currency.
We're not acting like a reserve currency, frankly.
Is it playing with fire, doing it at this time of market volatility?
Because inflation is has often actually that the Fed is raising rates.
It's some of the more, I would say, but it is what it is.
This always happens, especially when you have divided government.
So hopefully a cool heads can prevail. And hopefully the administration will
agree to some kind of fiscal reforms that will help us put our debt in the
right trajectory. Is monetary policy on the right
trajectory right now? I don't think they have a choice.
Yeah, I think I think January's numbers were pretty clear.
It's going to be a lot harder to get inflation from 5 to 2 than it was from 8
to 5. And the Fed doesn't have a choice.
What worries me is the fiscal policies that we could put in place supply side
fiscal policies, make tax cuts permanent, give you increased labor
market participation through immigration reforms, things like that.
Those aren't going to happen. So fiscal policy is not going to be
improved from a supply side standpoint. So it's really all on the Fed.
And my guess is you probably won't get out of this without a recession.
Get out of this being getting to 2 percent inflation.
It's going to take a long time, longer than people thought and hoped.
And it could be a lot harder for the Fed to get to 2 percent than it was from 8
to 5. So you think is there a possibility that
they have to crush the economy to get to 2 percent?
I mean, I'd like to use the word crush, but it would surprise me that we could
get out of this, get to 2 percent without a recession.
And the Fed cannot back off that 2 percent target.
If they do, they'll lose their credibility.
They know this. So that's why I think they're terminal
rates probably going to be a little higher today than what we thought it
was, say, a month or two ago. But recession with a lot of job losses
or what? Well, I mean, it's been it's been
amazing, resilient. The job of economy.
But if unemployment gets to something with a five handle, I think the Fed's
going to have a little harder time getting consensus.
So I think it's in J. Paul's interest to get as many rate
increases as he can right now. I frankly think they should have stayed
with 50 basis point raises and not gone to 25.
I think that had fixed the market sort of pump fix the market.
Hopefully they'll go back to 50 because get it now as fast as you can get the
rate increases another year. The consensus on the Fed, because if we
start seeing unemployment really starting to creep up past 4 percent,
that I think is going to be really dangerous and difficult.
I guess the danger is that there is a monetary policy lag.
There is. And then that means a mistake.
And then they have to and and they overshoot.
The Fed's been a lot of shooting. That's that's the story of the Fed.
But I don't think the Fed really had a good thesis on how inflation works.
They had the Great Moderation baked into their models.
So I think the Fed was a little too late.
They they they kept rates too low. They had too many asset purchases.
Now they're making up for that. But it's really clear it is stubborn.
And with the. Happening with deep linking our
economies with China to some degree, indeed, globalization happening to some
degree. That stuff's all inflationary.
So there's structural inflation baked into the cake, which means it's going to
be harder. Like I said, for the Fed to get
inflation closer to 2 percent than then getting it from 8 to 5 like they've
already done. How would you describe the mood in
Washington, D.C. right now from the outside?
It seems like I mean, we're not talking about not getting along.
This is, you know, even more than that. Is there anything that you can both both
parties can agree on to get done? I wish we had better, but our political
climate. Our politics are pretty unserious.
I just put out a book at the American Enterprise Institute showing how to get
the debt under control to preserve the dollar's reserve currency.
We're not doing those things because we have unserious politics.
The one thing I would say to that, though, is we are forging a bipartisan
consensus on how to deal with China. I have a lot of confidence in party
leaders in Congress right now in this new committee chaired by getting Mike
Gallagher, that there will be a bipartisan consensus on how to deal with
China. So that is something that I think you'll
see us working well together. There are going to be some bipartisan
things, but it's mostly going to be revolving around our foreign policy, our
China policy and our Ukraine policy. I think we'll still be bipartisan.
What will happen in Ukraine? More weapons, more money, more work,
more weapons, more money. There's still a lot of support for that.
But both sides. Both sides.
Is there a limit to that as we get into the presidential election?
There's a limit to how much our defense industrial base can produce.
And there's a limit to how much we can get to the field on time to the
Ukrainians. So, yes, there's a limit based on
capacity, but I don't think there's a limit to our support, broad Republican
support, broad Democrat support for supporting our friends in Ukraine to
standing up against Russia. And there's obviously a lot of consensus
on how to deal with China. What who do you think will be the
Republican candidates? I think it's got to be somebody not
named Donald Trump. We know that we lose with Trump.
We lost the house in 18. We lost the White House in the Senate in
20. We lost the Senate again in 2022.
We didn't win as nearly as many seats now as we should have in 2022, largely
because it trump our voters more or less know this.
So I think the fact we want to win. We know we need to nominate somebody not
named Trump. And if we do, I think we'll win.
I think we'll win the races. Who, if not Trump.
It's too early to say. I just don't know the answer.
That question does. There's this big investigation of, of
course, the reaction from News Corp. and Fox on how they dealt with
allegations of the election. What's your take on that?
Donald Trump lost the election. It's really clear.
But Fox here. Well, there's a lawsuit.
I want to get in that pending lawsuit issues.
But but there are some opinion hosts that made their opinions.
And there are people who, on behalf of the president, United States made
claims. Those are newsworthy claims.
They weren't. They were faulty claims.
But when the president, United States has his lawyers saying things, that is a
newsworthy, news worthy event. Those claims were false.
Donald Trump did not win the election and he spread conspiracy theories to the
contrary to that. And we all now know that.