Latest / Trumponomics / Why This US Government Shutdown Is Different

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Why This US Government Shutdown Is Different · Trumponomics

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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
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Speaker 2: A lot of people are saying Trump wanted this, that
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Speaker 2: I wanted this closing, and I didn't want it, But
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Speaker 2: a lot of people are saying it because I'm allowed
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Speaker 2: to cut things that should have never been approved in
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Speaker 2: the first place.
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Speaker 3: I'm Steady Flanders, head of Government and Economics at Bloomberg
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Speaker 3: and this is Trumponomics, the podcast that looks at the
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Speaker 3: economic world of Donald Trump, how he's already shaped the
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Speaker 3: global economy and what on earth is going to happen next.
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Speaker 3: This week, we're asking why is this US government shut
0:46
Speaker 3: down so different from others we've seen, and what could
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Speaker 3: it mean for the US economy. Now, government shutdowns in
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Speaker 3: Washington aren't new, but they have become more common in
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Speaker 3: a politically polarized country in which the two main parties
1:01
Speaker 3: don't want to agree on anything. And his latest one
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Speaker 3: is the third shutdown under President Trump. He had two
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Speaker 3: in his first term, including one in twenty eighteen that
1:09
Speaker 3: lasted thirty five days, the longest on record. Now, as
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Speaker 3: we record this on Wednesday, the eighth of October, the
1:15
Speaker 3: shutdown is entering its second week, having started at midnight
1:20
Speaker 3: on October first, when Congress failed to pass a stopgap
1:23
Speaker 3: funding measure. But already it feels a bit different politically
1:27
Speaker 3: and economically different politically because this time around, both sides
1:31
Speaker 3: seemed to want to shut down, and the standoff between
1:34
Speaker 3: them feels less like a dispute about funding than a
1:37
Speaker 3: constitutional struggle over the relative strength of the executive in
1:41
Speaker 3: America's political system. And that's a feeling that's intensified by
1:45
Speaker 3: the body language of both sides and the Director of
1:48
Speaker 3: the Officer Management and Budget, Russell Voyd, seeming to relish
1:51
Speaker 3: the opportunity of talking about mass layoffs and holding up
1:55
Speaker 3: billions of investment funds earmarked for projects in democratic controlled state.
2:00
Speaker 3: There's one reason why the economic stakes also seem unusually
2:03
Speaker 3: high this time. I mean, typically any economic impact of
2:06
Speaker 3: the federal workers not getting paid during a shutdown gets
2:10
Speaker 3: completely offset when the government reopens and they get the
2:12
Speaker 3: money their own. If that doesn't happen, or if there's
2:16
Speaker 3: deeper cuts, it could have a more lasting impact, and
2:19
Speaker 3: at a particularly sensitive time for the economy, when the
2:22
Speaker 3: labor market's already weakening and many think we could be
2:25
Speaker 3: on the brink of a recession. Deepening government cuts and
2:29
Speaker 3: heightened uncertainty could just push the economy over the edge.
2:33
Speaker 3: But the longer the shutdown continues, the less likely we're
2:36
Speaker 3: going to know what's really happening, because those crucial economic
2:38
Speaker 3: statistics aren't being gathered by all those furloughed federal workers,
2:43
Speaker 3: and neither with the Federal Reserve know what's going on
2:46
Speaker 3: potentially as it goes into its next meeting at the
2:48
Speaker 3: end of the month. So there really is a lot
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Speaker 3: at stake here and more than enough to talk about
2:54
Speaker 3: with my guests. Matthew Glassman, a senior fellow at the
2:57
Speaker 3: Government Affairs Institute at Georgetown University and former appropriation staffer
3:01
Speaker 3: on Capitol Hill. Matt, thanks very much for joining us,
3:04
Speaker 3: Thanks for having me, and as ever from Washington, our
3:07
Speaker 3: own Anna Wong, chief US economist at Bloomberg Economics, and
3:10
Speaker 3: reminding you she was also an economist at the Federal
3:13
Speaker 3: Reserve before she joined us and on to comment to
3:16
Speaker 3: the White House Council of Economic Advisors during President Trump's
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Speaker 3: first term. Anna, welcome back.
3:22
Speaker 1: Happy to be here again.
3:28
Speaker 3: Matt. One of the reasons that we invited you on
3:31
Speaker 3: is you've written an excellent piece for Politico on this
3:34
Speaker 3: topic and we allow people who listen to Trump nomics
3:37
Speaker 3: to read non Bloomberg publications. Your big assertion there was
3:42
Speaker 3: that this was a different kind of shutdown and we
3:44
Speaker 3: should perhaps take it a bit more seriously than the
3:46
Speaker 3: shutdowns we've seen in the past. So broadly, why do
3:49
Speaker 3: you think there's so much at stake?
3:52
Speaker 4: I think in past shutdowns, we've typically had one party
3:55
Speaker 4: trying to leverage the shutdown to achieve a policy goal.
3:58
Speaker 4: So you can think about the Republicans in twenty three
4:00
Speaker 4: they want to repeal Obamacare, right, so they're going to
4:03
Speaker 4: proudly say we are not going to fund the government
4:05
Speaker 4: until you do this. It did work, of course, and
4:07
Speaker 4: in twenty eighteen, same thing with Trump and the Wall.
4:09
Speaker 4: I am not going to vote for spending buil or
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Speaker 4: sign a spending bill until you give them my wall.
4:13
Speaker 4: Or the Democrats with DACA, we are not going to
4:16
Speaker 4: go with the spending bills till you give us DACA.
4:17
Speaker 4: And those are all sort of like policy fights. Here
4:20
Speaker 4: we have something a little deeper, and that is democratic
4:23
Speaker 4: concern with Trump's unilateral spending moves. Right there are bargains
4:27
Speaker 4: for proporations bills because they can be filled us from
4:30
Speaker 4: the Senate, so the parties have to work together, and
4:32
Speaker 4: those have been sort of undone by the Trump administration
4:35
Speaker 4: this year through processes called recisions and also things called impoundments,
4:39
Speaker 4: where the president is unilaterally trying to cancel some of
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Speaker 4: that spending and that makes bargaining for the next bills impossible.
4:46
Speaker 4: How can you bargain if the president is just going
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Speaker 4: to pull the rug out from under you? And so
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Speaker 4: that's underlying what the Democrats are doing here, or real
4:52
Speaker 4: fight over the very appropriations process, and that's something different
4:56
Speaker 4: than sort of a policy hostage situation. It's a little
4:59
Speaker 4: weird of cour because they have translated that into a
5:02
Speaker 4: fight over healthcare where they're claiming they want to extend
5:05
Speaker 4: ACA subsidies, which is sort of like a classic policy
5:09
Speaker 4: hostage shutdown. But we do have this bigger issue in
5:12
Speaker 4: the background, which is how can they bargain with someone
5:14
Speaker 4: who is just going to turn around and cancel the bargain.
5:16
Speaker 3: I said at the beginning, both sides seem to want
5:18
Speaker 3: the government to shut down. Why is that not being
5:21
Speaker 3: the case in the past in pass shutdowns?
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Speaker 4: The side that wasn't trying to sort of leverage the
5:25
Speaker 4: shutdown to Win policies had had a clear message, reopened
5:29
Speaker 4: the government and then maybe we'll negotiate with you. We
5:31
Speaker 4: don't want a government shutdown. Here, it's more complicated because
5:35
Speaker 4: the Trump administration sees this democratic and do shutdown as
5:39
Speaker 4: a way for them to further their ideological project of
5:42
Speaker 4: shrinking the federal workforce and increasing sort of presential control
5:45
Speaker 4: over the agencies. So the administration, and this is President
5:48
Speaker 4: Trump and omb Director of Vote Have you know, said
5:52
Speaker 4: if you shut down the government, we are going to
5:54
Speaker 4: do things like start cutting federal workers or potentially even
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Speaker 4: closing whole agencies or defunding things completely permanent. And so
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Speaker 4: there's a sense that this shutdown is not simply open
6:04
Speaker 4: or closed, but can the Trump administration leverage this to
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Speaker 4: sort of further their own separate ideological ends, and that
6:10
Speaker 4: gives both sides incentives. There is this big group of
6:13
Speaker 4: Republicans caught the middle who really just want the government open,
6:15
Speaker 4: like sort of a traditional anti shutdown view, but the
6:18
Speaker 4: administration certainly sees this as an opportunity to take advantage of.
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Speaker 3: We'll come back to you on the sort of constitutional
6:24
Speaker 3: aspects of this. But Anna simply why the economic state's
6:29
Speaker 3: particularly high.
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Speaker 1: As you mentioned, the economy is in a particularly fragile
6:35
Speaker 1: state right now, and it's even perhaps at a turning
6:39
Speaker 1: point stage. Is it turning toward a deeper recession into
6:42
Speaker 1: a new recession or is it actually in the phase
6:46
Speaker 1: of recovery. And even before the shutdown, the economic picture
6:50
Speaker 1: was particularly blurry. Economic data was sending various message and
6:56
Speaker 1: now we are at a very sensitive point of the
6:59
Speaker 1: mind Tarry policy cycle where the FED is on the
7:03
Speaker 1: cusp of cutting again. But it's unclear whether this cutting
7:08
Speaker 1: cycle would continue or would it be cut short because
7:13
Speaker 1: of concerns of rising inflation or actual actually rising inflation.
7:18
Speaker 1: So without the data, it's just very difficult.
7:22
Speaker 3: Just remind us how would you normally think about the
7:25
Speaker 3: economic impact of all these furloughed workers.
7:29
Speaker 1: So for each week of shutdown, there's a rule thumb
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Speaker 1: that says it will knock off about zero point two
7:35
Speaker 1: percentage point off the annualized quarterly GDP growth. However, once
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Speaker 1: the shutdown is over, then you'll see a commensurate rebound
7:44
Speaker 1: in GDP. So as long as this shutdown is over
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Speaker 1: by mid November, the fourth quarter GDP should be relatively unaffected. However,
7:53
Speaker 1: in terms of labor as statistics, furloughed workers would be
7:57
Speaker 1: counted as temporarily unemployed if they're recorded correctly, And so
8:02
Speaker 1: that means that seven hundred and fifty thousand furlold workers
8:06
Speaker 1: will roughly translate it to an increase of the unemployment
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Speaker 1: rate from currently four point three percent to four point
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Speaker 1: six to four point seven percent in a non farm
8:16
Speaker 1: payrolls for LOLd workers would still be counted as employed,
8:19
Speaker 1: as they will be continued to be paid.
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Speaker 3: And Matt, how do you view the sort of aggressive
8:25
Speaker 3: posture of certainly Russell Voyd from the Office for Management Budget,
8:30
Speaker 3: who's had this very kind of matcho stance writing memos
8:34
Speaker 3: about accelerating the shrinking of the federal workforce. But it's
8:38
Speaker 3: not supposed to be even possible to not pay furloughed workers,
8:43
Speaker 3: and it's not even clear that he can fire workers
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Speaker 3: in response to a shutdown. So how do you think
8:47
Speaker 3: that's going to play out? I mean, are we going
8:49
Speaker 3: to see more cases going to the court.
8:52
Speaker 4: Perhaps, But the thing pushing back on this is sort
8:54
Speaker 4: of the political position of the Republicans. The way to
8:58
Speaker 4: sort of win a shutdown if someone else is trying
9:00
Speaker 4: to use it against you is to just say, Nope,
9:02
Speaker 4: we are not giving into your demands. We don't know.
9:05
Speaker 4: We don't give into demands of hostage takers. Reopen the government.
9:08
Speaker 4: We're negotiate votes. Actions are sort of undermining that by
9:12
Speaker 4: doing things to leverage the shutdown from their own side.
9:14
Speaker 4: And you saw the reaction of Republican senators when he
9:16
Speaker 4: said they might not pay furloughed workers. That's totally off
9:19
Speaker 4: message politically, and all of a sudden, it looks like
9:21
Speaker 4: both sides are trying to leverage the shutdown. So I
9:23
Speaker 4: think there was a pretty strong reaction on Capitol Hill
9:26
Speaker 4: towards O and B director and the President just being like, stop,
9:29
Speaker 4: stop trying to leverage this, and just let us tell
9:32
Speaker 4: them to reopen the government. And you can see reflected
9:34
Speaker 4: in public opinion. In past shutdowns, the side that just
9:37
Speaker 4: wanted to reopen the government and then continue to negotiate
9:40
Speaker 4: has always politically had the upper hand, and we're not
9:42
Speaker 4: seeing that this time. The Democrats currently are doing better
9:45
Speaker 4: in the polling than the Republicans, and I think that's
9:47
Speaker 4: in part because the administration is muddy in the waters
9:50
Speaker 4: by themselves trying to leverage the shutdown.
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Speaker 3: To their own ends, and you've had this kind of
9:54
Speaker 3: funny thing on social media. Well, on the one hand,
9:56
Speaker 3: you've got Karlyn Levitt in the White House briefing room
9:59
Speaker 3: saying no, no one is enjoying the shutdown, and at
10:02
Speaker 3: the same time, the President tweeting out memes that suggest
10:05
Speaker 3: that maybe he is having a bit of fun. But
10:07
Speaker 3: you mentioned the public. You could say that the Democrats
10:10
Speaker 3: are also not negotiating. There's been no negotiations happening on
10:14
Speaker 3: the Hill. So is it What are the risks here
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Speaker 3: for the Democrats in terms of public opinion?
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Speaker 4: The risks are that they will be perceived as the
10:22
Speaker 4: party not wanting to just cleanly reopen the government. That's
10:25
Speaker 4: always been the risk in pass shutdowns, and we've seen
10:27
Speaker 4: this with the Republicans in thirteen and Trump in eighteen,
10:30
Speaker 4: that you just lose the public if you try to
10:32
Speaker 4: demand policy concessions in order to reopen the government. That said,
10:36
Speaker 4: the Democrats have done an excellent job so far of
10:39
Speaker 4: turning this into a fight over healthcare subsidies rather than
10:41
Speaker 4: a fight over whether the government should be open or closed.
10:44
Speaker 4: In pass shutdowns, it's been almost impossible for the party
10:47
Speaker 4: shutting the government down to get their message through, and
10:49
Speaker 4: the issue has always come down to should the government
10:51
Speaker 4: be open or closed because of sort of the mixed
10:55
Speaker 4: messages from the Republican side. I think the healthcare message
10:57
Speaker 4: and the unity of the Democrats have brought that through
11:00
Speaker 4: in a way that has really turned this into sort
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Speaker 4: of a healthcare subsidy debate rather than should the government
11:04
Speaker 4: be open or close debate, And so for now I
11:06
Speaker 4: think that's the Democrat's best issue. It's not a secret
11:09
Speaker 4: why they're turning this into healthcare. It's by far their
11:11
Speaker 4: best issue with voters. And to the degree that this
11:13
Speaker 4: becomes a healthcare debate, they will benefit from it politically.
11:16
Speaker 4: The degree it becomes a debate whether the government should
11:18
Speaker 4: be open or closed, they will be hurt. But for
11:20
Speaker 4: now they're doing fine. That's said. Shutdowns aren't static, like
11:24
Speaker 4: they get worse and worse and worse in terms of
11:26
Speaker 4: their impact on actual citizens, on agencies and federal workers.
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Speaker 4: Military paychecks are going to get missed next Wednesday, civilian
11:33
Speaker 4: paychecks this Friday, and those sorts of things. Programs start
11:37
Speaker 4: to run out of money, airport lines get longer, and
11:39
Speaker 4: those sort of things build up the pressure and so
11:41
Speaker 4: you could very easily see public opinion reverse in the
11:43
Speaker 4: Democrats here and really start to hurt them.
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Speaker 3: Yeah, we've been monitoring that on just on the airlines,
11:50
Speaker 3: for example, because there's a core staff who are still working,
11:53
Speaker 3: but then they're calling in sick, and we've seen some
11:55
Speaker 3: delays at airports yesterday. It looks like the fear is
11:58
Speaker 3: that could intensify. Matt you're describing something where for the
12:13
Speaker 3: first time in a while, the Democrats are potentially losing
12:17
Speaker 3: at least one small part of a political battle. It's
12:20
Speaker 3: not been a good year for them. And I just
12:22
Speaker 3: wondered the President's quite good at noticing those things and
12:25
Speaker 3: you know, turning things around. I wonder how you read
12:28
Speaker 3: what the comments he had at the beginning of the
12:30
Speaker 3: week where he seemed to also recognize that it just
12:32
Speaker 3: being about healthcare was not going to be good for him,
12:35
Speaker 3: and that maybe if there was a deal to be done,
12:36
Speaker 3: he could be the one to get the credit for it.
12:39
Speaker 4: Yeah, for sure. And I think this is one spot
12:42
Speaker 4: where you see differences between Trump and the congressional Republicans
12:45
Speaker 4: quite starkly. They each have sort of their own ideological projects,
12:49
Speaker 4: and Trump's has been going after his enemies, which he
12:52
Speaker 4: I think largely perceives as this professional liberal class of
12:55
Speaker 4: government workers are very often in his target zone. Whereas
12:57
Speaker 4: Republicans on the hill, their ideological project has for a
13:00
Speaker 4: long time been sort of cribbing or reducing or eliminating Obamacare.
13:04
Speaker 4: The President is perfectly happy to compromise on healthcare, just
13:06
Speaker 4: as he seemed perfectly happy to compmise on things like abortion.
13:09
Speaker 4: He doesn't have sort of that traditional Republicans streak about
13:12
Speaker 4: those things that throws them off message because they are
13:15
Speaker 4: caught between sort of their ideological view of health care
13:17
Speaker 4: and then their desire to be in line with Trump,
13:20
Speaker 4: particularly in the House. I do think a healthcare compromise
13:22
Speaker 4: is coming. One of the weirdest things about this shutdown is,
13:25
Speaker 4: in the past shutdowns, the policy demand of the people
13:28
Speaker 4: shutting the government down has been a non starter. Like
13:31
Speaker 4: President Obama was never going to sign a law repealing Obamacare, right,
13:34
Speaker 4: and the Democrats were never going to go for a
13:36
Speaker 4: border wall. But a healthcare compmise to extend these subsidies
13:39
Speaker 4: is something a lot of the moderate Republicans want and
13:41
Speaker 4: I think is going to happen, whether there's a shutdown
13:43
Speaker 4: or not. So this shutdown is about, like now turned
13:46
Speaker 4: into an issue that is actually solvable through compromise, and
13:49
Speaker 4: that makes it a little bit different than pass shutdowns too.
13:53
Speaker 3: I mean, just sort of switching back to the economy.
13:55
Speaker 3: I mean, it obviously is going to make a difference
13:57
Speaker 3: in people's cost of living if some of these big
13:59
Speaker 3: increases in health insurance come through, but we won't know
14:01
Speaker 3: what's going to happen with that for a few months.
14:03
Speaker 3: If you're the Federal Reserve, and we've talked about the
14:05
Speaker 3: FED a lot in different contexts than the threats to
14:07
Speaker 3: its independence and other things over the last few months,
14:09
Speaker 3: but even if they weren't facing a quite aggressive White
14:13
Speaker 3: House in the last few months, they'd be facing a
14:15
Speaker 3: tough choice when it comes to the economy. So talk
14:18
Speaker 3: us through how problematic it is for them if some
14:22
Speaker 3: of these sort of core economic data are not available
14:24
Speaker 3: when they go into that next meeting at the end
14:26
Speaker 3: of the month.
14:27
Speaker 1: So the next meeting is October twenty eighth to twenty ninth,
14:31
Speaker 1: and before that, we were supposed to have received the
14:35
Speaker 1: September CPI report on October fifteenth, and also weekly jobless
14:41
Speaker 1: Claims OUR reports and also of course the non farm
14:44
Speaker 1: payroll for September. And if the shutdown last beyond October eighteenth,
14:50
Speaker 1: for example, then the collection of the unemployment rate for
14:54
Speaker 1: October would be disrupted and price quotes for CPI for
14:59
Speaker 1: October would also be disrupted. So basically the FED would
15:04
Speaker 1: be going into not just the October meeting, but also
15:07
Speaker 1: going into the December meeting sort of flying blind on
15:11
Speaker 1: both inflation and jobs. And this is quite different than
15:15
Speaker 1: the twenty eighteen shutdown, for example, because back in twenty eighteen,
15:19
Speaker 1: the BLS was actually funded, so CPI and non farm
15:23
Speaker 1: pay was not actually disrupted. And so to see how
15:27
Speaker 1: shutdown affected collection of economic statistics, you have to go
15:31
Speaker 1: back to twenty thirteen. But even then the shutdown lasted
15:35
Speaker 1: only two weeks, and that already reduced the CPI price
15:39
Speaker 1: quotes by twenty five percent for collection in October, and
15:43
Speaker 1: also disrupted or reduced the number of responses in the
15:47
Speaker 1: unemployment survey, causing more error in the unemployment survey.
15:52
Speaker 3: And just to be clear, what happens if you've just
15:55
Speaker 3: not collected the data the labor for survey, for example,
16:00
Speaker 3: that goes uncollected for that month, right, I mean, what
16:03
Speaker 3: would they normally do.
16:04
Speaker 1: Yeah, So for the Unemployment rate survey in twenty thirteen,
16:08
Speaker 1: a BLS resumed collection a week after they normally do it,
16:12
Speaker 1: and they have to kind of ask the responders what
16:16
Speaker 1: was your status two weeks ago? So they're basically asking
16:20
Speaker 1: people to recollect something that happened in the past, as
16:23
Speaker 1: opposed to asking them what happened just you know, just now, right,
16:28
Speaker 1: So this is a sampling error.
16:30
Speaker 3: And again in practice, how could that affect what the
16:34
Speaker 3: Federal Reserve does at the end of October or do
16:37
Speaker 3: you think that their decision is kind of baked in
16:39
Speaker 3: at this point.
16:39
Speaker 1: So in the last FMC meeting, they flagged in the
16:42
Speaker 1: dot plot the median wanted to cut fifty basis points more.
16:48
Speaker 1: It was a very close call, and without a shutdown,
16:51
Speaker 1: I would have thought that given indications of many inflation
16:54
Speaker 1: measures edging up again, they would not be cutting in October.
16:59
Speaker 1: But because of the shutdown and the uncertainty to economic
17:03
Speaker 1: activity and also increased upside risk to employment, I think
17:07
Speaker 1: they will follow through with a twenty five paces point
17:10
Speaker 1: cut this October.
17:12
Speaker 3: Interesting, well, Matt, I mean that would be an upside
17:14
Speaker 3: for the president from all this. The tradition of the
17:17
Speaker 3: podcast these days, At the moment you decide to talk
17:19
Speaker 3: about the shutdown, the government's going to reopen again. So
17:22
Speaker 3: even even as people are listening, something miraculous might have
17:25
Speaker 3: happened on late Wednesday night or something. But given your
17:29
Speaker 3: experience and given the analysis of what's going on and
17:33
Speaker 3: how much each side has at stake, but also, as
17:36
Speaker 3: you said yourself, the fact that it's actually over something
17:38
Speaker 3: quite doable on both sides, the sticking point, even though
17:41
Speaker 3: there's these very high stakes, Actually the single thing that
17:44
Speaker 3: the Democrats are focused on is something that could be fixed.
17:47
Speaker 3: How do you think this is going to end?
17:49
Speaker 4: I mean, I think how it ends is relatively clear.
17:54
Speaker 4: You will get a Democrats voting to reopen the government
17:58
Speaker 4: unconditionally and Republican promising a good faith negotiation over the
18:04
Speaker 4: healthcare subsidies which will be extended. And so that sort
18:07
Speaker 4: of allows everybody to win in some sense politically. Leader
18:10
Speaker 4: Schumer of the Democrats will get sort of the credit
18:14
Speaker 4: for having fought that his liberals want, and the Republican
18:18
Speaker 4: moderates will get their healthcare subsidies. The Republican leaders will
18:21
Speaker 4: have not just given away the healthcare subsidies angering their base,
18:25
Speaker 4: and Trump will end up with no further restrictions on
18:28
Speaker 4: sort of executive spending encroachments that have gone on. That's
18:31
Speaker 4: sort of the terms that I think are mostly imaginable
18:33
Speaker 4: as to how long it goes. I think there's a
18:36
Speaker 4: bunch of pressure points, and the first one is really
18:38
Speaker 4: next Wednesday with the military pay and the eighteen shutdown.
18:41
Speaker 4: In the long shutdown, DoD was funded so we didn't
18:44
Speaker 4: have this issue of soldiers missing checks. But that pressure point,
18:48
Speaker 4: to me is sort of the front end window of
18:50
Speaker 4: when this would end sometime middle of next week. If
18:53
Speaker 4: they go through that and they're still on a stalemate,
18:56
Speaker 4: then you start to talk about longer term. But I
18:59
Speaker 4: do think there's a good pressure point to end this
19:02
Speaker 4: sometime next week.
19:03
Speaker 3: But what you've described is something that they could do tomorrow.
19:06
Speaker 3: If you think the Democrats are actually willing to give
19:09
Speaker 3: in without having a solid assurance on the health insurance subsidies,
19:15
Speaker 3: then it just seems odd that they would hold out
19:17
Speaker 3: this far and make that their point and then only
19:20
Speaker 3: accept a sort of good faith promise from an administration
19:23
Speaker 3: and from a Republican leadership that is not they would
19:25
Speaker 3: say not shown them a lot of good faith, you know,
19:27
Speaker 3: with the rescinding of past funding and other things.
19:30
Speaker 4: Yeah, I mean, And that sort of highlights how sort
19:32
Speaker 4: of this shutdown is both very high stakes over these
19:35
Speaker 4: constitutional issues of executive power and also very low stakes.
19:39
Speaker 4: It's over a healthcare policy that was probably going to
19:41
Speaker 4: be compromised anyway in the next couple of months, whether
19:44
Speaker 4: there was a shutdown or not. And so part of
19:46
Speaker 4: what you're seeing here is that the sort of going
19:49
Speaker 4: through the motions of the shutdown is a exercise in
19:53
Speaker 4: coalition management. Remember, Schumor did not go to shut down
19:57
Speaker 4: the government last March, and that really had much of
20:00
Speaker 4: the liver wing of his party sort of nipping at
20:02
Speaker 4: him pretty bad over the last six months, and for
20:04
Speaker 4: him to not engage in a shutdown now probably would
20:07
Speaker 4: have lost them forever and maybe cost him his job,
20:09
Speaker 4: if not his seat in the Senate going forward. And
20:12
Speaker 4: so part of what both sets of leaders are doing
20:15
Speaker 4: right now is fighting for their basis admiration. And yes,
20:19
Speaker 4: you could end the shutdown today, but is the left
20:22
Speaker 4: flank of your party for Schumer or the right flank
20:24
Speaker 4: of your party for Johnson and Thune. And in some
20:26
Speaker 4: ways Trump going to accept that as a worthy effort
20:29
Speaker 4: and a worthy fight. And I think the answer today
20:31
Speaker 4: is no, And I think the answer next week might
20:33
Speaker 4: be maybe, And I think in a month the answer
20:35
Speaker 4: would definitely be yes.
20:37
Speaker 3: And what will the public think about it? Who will
20:39
Speaker 3: benefit in the end? Do you think?
20:41
Speaker 4: Unknown? I mean, the one thing we do know about
20:43
Speaker 4: shutdowns is traditionally the party trying to leverage it has
20:46
Speaker 4: lost politically. But in every case, both parties have seen
20:50
Speaker 4: blame taken upon them. It's kind of like you know, war, right,
20:55
Speaker 4: you can't increase, sort of like the overall happiness with
20:58
Speaker 4: both parties. Both parties are going to see a negative.
21:00
Speaker 4: It just who sees a more negative. And I think
21:02
Speaker 4: we're seeing that in the polling right now, like the
21:04
Speaker 4: typical citizen is not thrilled with either party in these situations.
21:07
Speaker 4: I suspect, you know, the longer it's dragged on, the
21:10
Speaker 4: more it would tend to shift to hurt the Democrats.
21:12
Speaker 4: But so far they've defied that, and they've done an
21:14
Speaker 4: excellent messaging job. And I think the President has made
21:16
Speaker 4: some sort of errors in judgment about how to approach this,
21:19
Speaker 4: such that right now, if it ended, it would probably
21:22
Speaker 4: call it a draw, but no harm to the Democrats,
21:24
Speaker 4: which would be exceeding expectations in these things where going
21:26
Speaker 4: into this, I don't think anyone thought sort of the
21:28
Speaker 4: Democrats were going to come out better on the other
21:30
Speaker 4: side of this.
21:32
Speaker 3: Interesting. I remember when I was in the US treasurer
21:36
Speaker 3: in the late nineties, and there was one time when
21:38
Speaker 3: we thought we were heading into a shutdown, and of
21:40
Speaker 3: course the big debate internally was about everybody wanted to
21:43
Speaker 3: be considered an essential worker, and it was kind of
21:45
Speaker 3: insulting not to be an essential worker. But it does
21:48
Speaker 3: seem like the definition of an essential worker has been
21:52
Speaker 3: much tighter this time around. Even in this conversation, we've said,
21:55
Speaker 3: you know, previously the Pentagon was funded, this time it isn't.
21:58
Speaker 3: Previously the BLS was that, this time it isn't. I mean, Matt,
22:01
Speaker 3: is there a sense of which the administration has heightened
22:04
Speaker 3: the cost of this?
22:05
Speaker 4: Yeah, I mean, and I think that's that's something all
22:08
Speaker 4: administrations do on the margins. If you think about the
22:10
Speaker 4: twenty thirteen shutdown. Obama was against the shutdown, of course,
22:14
Speaker 4: and so what did he do. He immediately made sure
22:16
Speaker 4: the national parks were closed, the Washington Monument was closed
22:19
Speaker 4: so that would inconvenience tourist who would publicly see it.
22:21
Speaker 4: And then in the twenty eighteen shutdown, when Trump was
22:23
Speaker 4: in favor of the shutdown, he left those things open,
22:26
Speaker 4: left the parks open, and left the monuments open and
22:28
Speaker 4: things like that. So the president has some wiggle room.
22:30
Speaker 4: The key question, and the key discretion is about what
22:33
Speaker 4: is an accepted or sometimes people say essential worker. And
22:37
Speaker 4: in the laws Congress have written about this essentially comes
22:40
Speaker 4: down to people doing sort of life safety things, so
22:42
Speaker 4: that's soldiers, law enforcement, people feeding the animals at the zoo.
22:45
Speaker 4: But there's also an exception for people essential to the
22:48
Speaker 4: constitutional process, so aiding the present or aiding Congress in
22:52
Speaker 4: sort of ending the shutdown, right, and so that definition
22:56
Speaker 4: can be stretched so widely. Is some person at Treasury
22:58
Speaker 4: important to that that's really in the eye of the beholder.
23:01
Speaker 4: And so presidents absolutely do use this discretion to help
23:04
Speaker 4: them politically and substantially in these shutdowns. And the Toy
23:07
Speaker 4: administration certainly is, like with many things, using that latitude
23:11
Speaker 4: to stretch it beyond perhaps what sort of a neutral
23:14
Speaker 4: reserver would say is reasonable.
23:16
Speaker 3: Although these days it seems like soldiers are much more
23:19
Speaker 3: essential to curb crime and disarray in our cities settle
23:23
Speaker 3: on anything else. But that's a whole other issue. Anna,
23:25
Speaker 3: I guess the last word for you. I mean, if
23:28
Speaker 3: just listening to Matt, it does sound like there will
23:30
Speaker 3: be a sort of decision point coming in the middle
23:32
Speaker 3: of next week around the military pay. Do you think
23:35
Speaker 3: that could also be significant in terms of the economic
23:38
Speaker 3: impact and the lack of economic data. You know you're
23:41
Speaker 3: going to get bigger aera statistics all of those things.
23:43
Speaker 1: Yes, absolutely, If the shutdown does end next week, sometime
23:47
Speaker 1: next week, then we'll basically get barely a blip in
23:50
Speaker 1: terms of the sampling error that I mentioned just now,
23:54
Speaker 1: and also the jobless claims. If so far from the
23:57
Speaker 1: state level jobless claims, the shutdown has not led to
24:00
Speaker 1: a spike, but with next week's jobless claims, we were
24:04
Speaker 1: expecting that we would start seeing a drift shop. So
24:08
Speaker 1: if the shutdown resolved by then, I think things will
24:11
Speaker 1: go on as usual.
24:13
Speaker 3: And not get the extra cut or the cut that
24:15
Speaker 3: you might you wouldn't have expected to have otherwise.
24:17
Speaker 1: Well, I still think that there will be a cut,
24:19
Speaker 1: because it's already mid October, and I think the job
24:23
Speaker 1: report is still going to be pretty modest enough to
24:26
Speaker 1: warrant some concerns to buy insurance for the labor market.
24:30
Speaker 3: Anna Wong, Matthew Glassman, thank you so much. Thanks for
24:40
Speaker 3: listening to Trumponomics from Bloomberg. It was hosted by me
24:42
Speaker 3: Stephanie Flanders. I was joined by Anna Wong, chief US
24:45
Speaker 3: economists for Bloomberg Economics, and Matthew Glassman, a Senior Fellow
24:49
Speaker 3: at the Government Affairs Institute at Georgetown University. Trumponomics was
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