tv Bloomberg Markets Balance of Power Bloomberg February 7, 2018 1:00pm-2:00pm EST
r. the senate has reached a bipartisan deal that will provide for defense and nondefense spending, but can it get support from members of the house? republican members of the senate on nafta, will find out white louisiana republican what's to hear from the president as he heads to a key meeting at the white house. and in germany, chancellor deal --inally signs a but can it get too much power to her rivals, including the critical finance repost? ♪ david: breaking news, a short time ago senate leaders
announced a bipartisan deal on the two-year budget provided more spending for military and domestic spending including disaster relief. kevin, give us what you know about this deal. kevin: a busy afternoon on capitol hill as mitch mcconnell senate majority leader chuck schumer that they have a two-year agreement to keep the government open. this comes as the house of representatives sending the measure to the senate, and we should know the details crossing the terminal as we speak. the deal will include disaster and o'connell is calling this a significant bipartisan step forward. it also notes the immigration debate is still coming and they have to get i march 5. it appears republicans got their
way and separating immigration from this deal. should also report that president trump did not play a significant role in the back channel negotiations. shery: given that he said immigration is decoupled from this budget deal, we have heard house minority leader nancy pelosi opposing it. what you know on that front? nancy pelosi saying she will not be able to get on board with this, really digging into dacaemocratic position on of the 800,000 people brought here illegally by their parents, the so-called dreamers. that said, it is a heated political product -- topic. note that with the two-year agreement, they now turned their attention to immigration and the debt limit,
something that has been brewing quietly behind the scenes now for a few weeks. david: i am reading it now, is this a deal or is this a deal to have a deal? it is an agreement to work out the details of the deal, and they suspend? kevin: it looks right now they have a temporary agreement dated and with regards to the depth limit, all sites have said they do not want to raise -- risk not raising the debt limit. we are going to have to wait and see with regards to that. david: even as the senate works through a new budget deal, they're also focused on nafta negotiations with senators headed to the white house to meet with the president an hour from now. kevin cirilli, who is a busy man today, caught up with the
senator to talk about what is going to be discussed at the white house. >> there are a lot of jobs in we louisiana leads to nafta. in my state, international trade accounts for almost 35% of my states gdp, their agricultural, refinery workers -- you name it. we need to reserve those louisiana jobs. indicating that america first does not mean america alone -- but on the issue of nafta, this is something that president has campaigned on as something he thinks is not a good deal for americans. what you say to president trump supporters who don't like nafta? update nafta and recognize that our problems are not canada or mexico, our problem is china. we haveico and canada,
adopted similar values because we have stronger trade relations, and with louisiana we have our industry helping develop mexico energy resources to the benefit of all. that is a good thing. there is jobs in my state and elsewhere. our problem with trade is china and that is what we should focus on. kevin: what part of nafta would you like to see particularly -- canada, concerns about what are specifics about nafta should be updated? met with lumbar fox and there are some concerned with lumber trade with canada, we get that. but there is an energy portfolio i want to see extended. mexico is one of the leading receiver's of gas, and we are building pipelines. as they built their economy, they buy more american goods, but they also buy more american manufacturing goods, so we need
to maintain that trading block to the benefit of our people. my state, for the benefit of people of oilfield service providers. kevin: do think president trump is going to save nafta? i tenduld hope so but not to predict what this president does. --id: the senator's hearing is there something bothering them and bring them about nafta and is the president going to listen to them? kevin: what you didn't hear in that infield is what i was told off camera that he is encouraged by the president's rhetoric with regards to nafta in the last couple of weeks. they view this as momentum being shifted in their direction on the issue of nafta. hewe heard from the center, doesn't like to predict what this president will do. and quickly with the question in
regards to debt limit, the debt limit will be increased as part of this two-year agreement between senator mcconnell and senator schumer. what is unclear now is whether this will have support when it goes to the house of representatives. that is where this is headed. we get higher spending not only on military funding but domestic funding, how much opposition can we get in the house especially from fiscally conservative republicans? kevin: that is the question and where all the attention will be focused on. nancy pelosi says they don't feel that the are not going to be able to get support from this unless speaker ryan guarantees the way senator mcauley -- mcconnell bit on the process of immigration. that gives clout the ultraconservative freedom caucus about their concerns about raising the debt limit. this a political tightrope that
the leadership will have to walk through, that said, a monumental development with a two-year deal without the assistance of president trump emerging here in the senate. kevin, thank you so much for that update from capitol hill. now a check of the markets as we are seeing that rally still in the green. julie has the latest. julie: we have the results in the past few moments, it was the highest tenure auction stock since january of 2014. it means there was less demand, and it covers 2.34 versus 2.69 previously. a weaker auction perhaps than expected. we see the yield picking up a basis point after the results of this action, leading up to the auction. elixir perhaps the drop in has something to do it
that. it looks perhaps the drop in stocks has something to do with that. in's lastest september, and then you have to indirect versus primary and direct -- it is a strong demand from direct bidders for this particular auction. let's see what the latest is as we see enormous swings in the stock market. dow and s&p still hanging on to gains and the nasdaq is down now by half of 1%. but if you look at the bloomberg here, we have the spread between the intraday low and high, and the dow would have the biggest point swings because it is the highest index a numeric terms, but it is also having the biggest percentage swings on a daily basis.
this link today is as much as 2% between the hype envelope of the session. continuinghave been with choppiness across the length of the trading day. in terms of movers, there is one that has seen a lot of choppiness is going straight up resorts.d that is wynn that is on the announcement that will be stepping down as chairman and ceo and to be replaced by the president at wynn. most analysts saying this is good news and could help the company avoid regulatory scrutiny in the wake of sexual harassment allegations against steve wynn. david: we just heard from the senate on what it wants to do on the budget, that it is the houses turn. will talk next with congressman scott perry, a member of the house freedom caucus.
shery: this is bloomberg markets. david: not for first world news -- now for first world news. mitch mcconnell announced a two-year budget agreement that would provide $300 billion more for defense and nondefense spending. past the housen last night and the run funding will last through march 23 while details on longer-term spending -- senator chuck schumer said the first spout of bipartisanship.
bloomberg will have more this afternoon. the senate homeland security committee is raising questions about fbi impartiality dating back to the obama administration. messages between former bureau officials in 2015 reference a directive from "knowent obama to everything we are doing with regards to the clinton email investigation." center clinton what avoid prosecution even being -- before being interviewed by the fbi. armsdmark cold war era accord -- with the insistence that moscow was on it of the 1987 nuclear forces treaty, rejecting u.s. kinds that russia has violated it. was said that they don't want an
escalation of confrontation. the way has been cleared for chancellor angela markers fourth term and has reached a deal with social democrats to form a coalition government. people familiar with the matter say social democrats will run the labor ministries, and merkel will get the fence and economy. the deal ends a four-month stalemate. global news, 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. congress continues to work against the deadline of midnight tomorrow to fund the government, and the house passed its bill last night and now the senate has announced its bipartisan deal. but some republicans say they have a problem with the senate approach. by scott joined now perry and as a member of the house freedom congress and joins us from capitol hill. welcome representative, it is good to have you here.
this news is new, have you had a chance to look at it and what is your reaction? got the briefing, and my initial reaction is that i don't think the american people elected the party of fiscal fiscal conservatism or responsibility to increase spending by 13% at the federal level. we just did tax cuts which is great, but it doesn't give us a license to spend like there's no tomorrow. i want to remind everybody we have a $20 trillion deficit and more. am concerned with what i am hearing right now. we also have eight or 10 democrats dictating what we do across the country, two weeks ago there were holding immigration hostage and now are saying we're going to back the country if were going to fund our country -- our military. we understand our military needs to be whole again but it doesn't mean we back up the country to
do it. david: let's parse this a little bit, you are fine with spending a little bit -- a lot of people agree we need that, but you are not ok spending it for domestic purposes. explain to american people why one is ok and one is not. >> we have a constitutional mandate and we would be standing in this country if it wasn't for our military -- yet rick gates ready to go to war, and when you have twice as many aviation accidents and readiness has been cut in the last decade. our military has been decimated by the last administration's policies, so we understand we need to make the military whole again and back to a point they can operate in a hostile world. people like me have been advocating that since last fall, but we have been held hostage month after month after month for one reason or another. a week and a half ago it was over deferred action of people who came here illegally, that is
why we held the military and government hostage and averted a shutdown, but 13% increase in domestic spending across the federal government -- 13% increase. people about the tax cut, and hopefully wages go up, but i doubt they are getting 13%. that is not draining the swamp. shery: where do negotiations go from here? the house passed its own bill yesterday, so do you pass another stopgap at work out the details on the budget and appropriations bill until march 23? we can do that, the house passed all 12 appropriations bills. is held up again by eight or 10 democrats who refuse to vote on appropriations bills. we have to prioritize just like everybody who has a house.
yet to make payments, you have to do those things, but the things you would like to have, sometimes you don't have enough money for. we have to defend our nation, that is paramount. but other things left to decide, which things are in the lower tier and we are not willing to make those decisions -- we are talking about over a trillion dollars of deficit spending this year. it is unacceptable. democrats are not happy with this deal with nancy pelosi coming out that they need a commitment on immigration. if you get another spending bill without immigration, can they get a decade deal afterwards -- daca deal. immigration is a whole reason -- holding the federal funding hostage for immigration -- we need to deal with that policy and we can, but let's get the funding off the table and fund the federal government so we don't do this month to month
thing every month where we are back here saying there is another government shutdown looming in a couple of hours and yet the clock running. that is craziness. -- that isle here what we're supposed to do, picked the priorities, how much spending, and for what? --t's not hold it hostage that's not hold it hostage. shery: thank you scott perry. deala merkel strikes a with rival social, but that she give up too much? this is bloomberg. ♪
reached an agreement of forming a coalition with rival democratic party. the members of the social how they finance post. now i will go to social democrats, how significant is this? >> it is quite significant. iny had a bad result september election and still managed to get three major ministries out of this deal. we are hearing that these are from unconfirmed media reports that the social democrats -- the mayor of hamburg will run the ministry for the party, and that is a significant step. this, as we come out of is angela merkel stronger or weaker, did she give up to much and does it undermine her strength going forward?
today's meeting was quite tough. the social democrats basically swept to walk out if they do not get the three major ministries -- which spent the most money in this government. short of talking about black male, the social democrats played their cards very well, and that seems she is weakened here. we have to see how a social democrats finance ministry will be different from the one that -- who was the finance minister for eight years. allow schulz that will be finance minister, his policies approach might not be different, but that remains to be seen. shery: how much of a boost will
it be for the campaign of a closer eu? >> martin schulz, the social democrats party chairman who will actually step down and make room for another party member -- stressed the importance of advancing the european union and deepening integration. with the stp controlling two ther ministries -- sdp, foreign and finance ministry, which is a lot of financial stuff with europe -- the sdp have a strong instrument and had to influence european policies according to its own party preferences. notd: for those of us steeped into german politics, how much of a difference does this make? >> it depends on the wiggle room.
the two sides have a coalition contract that spells out 170 pages, it is quite detailed. this contract spells out what they're planning to do over the next four years, but there is always wiggle room, and that may make a difference if the wiggle sdp runl be used by an ministry. david: up next, the olympics start in south korea and will speak with an investor about the current state of north and south korean relations. live from new york, this is bloomberg. ♪ we use our phones and computers the same way these days.
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the s&p 500 accelerating losses in the afternoon session. at 2690ly higher now seven, while the nasdaq is down half a percent. the s&p 500 also coming off the best day in 15 months. take a look at what treasuries are doing right now, because they have reversed course throughout the session, dropping had asion lows after we 10 year auction tailing by almost one basis point. the vix also beginning to decline for a second session, after falling 20% in the previous session. wti also lower today, around $62 a barrel. reportget the eia showing a jump in production. david: now for the first word over to mark crumpton. mark: senate majority leader mitch mcconnell today announced a two-year budget agreement that would provide 300 billion dollars more for defense and nondefense spending. a separate plan house by the
house last night, government funding would continue until march 23 while lawmakers fill in the details on longer-term spending. one complication as house pelosi, leader nancy who was part of the negotiations on the agreement. she said earlier that house democrats will not back them without a commitment from speaker paul ryan to allow open immigration legislation. egyptian officials say the country has opened its border with the gaza strip the first time this year. officials said the crossing point would operate for three days on a humanitarian basis. thousands of gaza residents are on travel lists, most of the medical patients, students, and holders of residency permits of other countries. the border has been mostly closed since hamas took over the territory in 2007. inrch and rescue teams taiwan are searching for people trapped in the rubble from tuesday's earthquake. six people are known dead, more
than 250 wounded, and 76 to 70 still unaccounted for. andliterary personnel volunteers are assisting the rescue teams with the search. a politician who took part in mockn opposition leader's presidential election last week has been deported to kenya. the government spokesperson says --s man, seem to the left seem to the left of a below, renounced his citizenship and never explained it. thelans to challenge the regime, calling o despotic. >> which ever way we look at it, elections are wrote her -- over. the people of kenya has chosen their leaders. we now accept you -- expect you to step aside from
distractions, gains, and slideshows. mark: tensions remain high as the kenyan government has ordered a crackdown on opposition leaders who took part in the swearing-in ceremony. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm mark crumpton, this is bloomberg. david? david: thank you, mark. we are going to the white house, where sarah sanders is giving the press briefing. >> we will take a few questions on the importance of funding our armed forces, and i will be up after him to answer questions on news today. thank you. >> good afternoon, ladies and gentlemen, and thank you for taking time out of your schedule to be here today. i spent the last day and a half on capitol hill, briefing the members of congress on our 2018 national defense strategy. i heartened that congress recognizes the sobering effect
of budgetary uncertainty on america's military and on the men and women who provide for our nation's defense. will visitom now, i our nation's first security forces systems brigade at fort benning as they prepare to deploy to afghanistan. of ournce the security nation, these troops are putting themselves in harms way, writing a blank check to the american people, payable with their lives. operatingry is under debilitating resolutions, for over 1000 days in the past decade. in the last state of the union address, president trump said weakness is the surest path to conflict. in a world that is awash with increasing threat, there is no room for complacency. theure to implement or fund 2018 national defense strategy will leave us with a force that could dominate the last war, but be relevant to tomorrow's
security. lift theongress to defense spending caps and support a two-year budget agreement for our military. america can afford survival. for too long, we have asked our military to carry on stoically with the success at any cost attitude. the fact that our volunteer military has performed so well is the credit to their dedication and professionalism. we expect the men and women in power military to be faithful in their service, even when going into harms way. we have a duty to remain faithful to them. this year,udget america's military will be able to pay for our troops by the end of the year or recruit 15,000 army soldiers and 4000 air force airman required to build critical manning shortfalls. we would not be able to maintain our ships at sea with the proper andnce between operations time for training and maintenance. we would have to ground aircraft
due to a lack of maintenance and spare parts, degrading our proficieny. delay contracts for vital acquisition programs necessary to modernize our force. i cannot overstate the negative impact toward the troops and family morale from all of this budget uncertainty. --ay's gradual action congressional action will make sure the military can defend our way of life, preserve the promise of prosperity, and pass on the freedoms you and i enjoyed to the next generation. thank you. i can take a couple of questions. ing withal, how damagein the government shutdown be, given that we have this decision . for example, the wall was funded in this deal. how bad would that be to the military? government down the
would be very damaging to the military for all the reasons i just cited about the continuing resolution, but then aggravated by the shutdown itself, where we actually send home all nonuniformed personnel, except for those in a few critical areas. it paralyzes everything that we do if we go into that, other than the ongoing active .perations at sea troops will continue to fight, the ships will stay at sea, but the bottom line is training is delayed, the impact just ripples through the force, and it does not just happened today, it ripples on as people who are not flying are no longer gaining the level of skill that you and i would associate with them, even a year from now when they are promoted. >> you mentioned you have been spending the last day and a half on capitol hill. this is a senator agent. do you know if the houses equally as receptive and is enthusiastic as you are?
and the secretary has said that the funding problems are not maybe a direct cause, but contributed to the theft of -- in theth of seamen south china sea. is this money in fact provided? all the problems associated with training, maintenance that have been plaguing the military, will be eliminated? optimistic that what the house did earlier this week and what the senate did today can come together this week, and give us the budget that then enables us to carry out our responsibilities. i means, i mean -- ours the leaders in the departments of the places you just brought up. can count on us. we will learn your trust on this. we will spend the money wisely. >> secretary, if i can ask you postedhe recently
review, the smaller nuclear weapons to be added to our arsenal? thing as aere is no tactical nuclear weapon. how does this add to global stability? many believe if you have a smaller yield nuclear weapon, it might be more --. we are talkingat about here is the nuclear deterrent. that nuclear deterrent, we believe, some nations could miscalculate, one in particular, and that nation could assume that if they used in a conventional fight a small yield with a would not respond very large yield bomb. our response to this is to make a small yield bomb and say do not miscalculate. it is a deterrent. remember, determines is dynamic. it changes from year to year, from decade to decade. we have to address deterrence in
its current construct. we do this, the idea is to raise the threshold. do not even think about lowering the threshold to a conventional fight and escalating it to one small yield nuclear weapon, strategically changing the game, and then think our choice is either surrender or suicide, as dr. kissinger put it. david: we have been listening to defense secretary general james mattis at the white house. among other things, he said they have been operating under "debilitating continuing resolutions" for the last decade. he says if there was a government shutdown, it would paralyze pretty much everything they do. at the remarks, general mattis that the president had already said the best way to avoid conflict was by having a strong military. let's talk about a place where there is conflict we are trying to avoid, and that is the korean peninsula. we welcome ambassador christopher hill. serving under george
w. bush, and is now the chief advisor to the chancellor for global engagement at the university of denver. for coming, ambassador. let's talk about career for a moment. we will see opening ceremonies were the olympic games coming up in less than two days. the vice president, vice president pence will be over there. we are told kim jong-un's sister will be there. what are the chances that, at these olympic games, there could be geopolitical events of some significance? christopher: first of all, from koreanth perspective, it was important to get the north koreans into a discussion, to invite them to the olympic. i think so far so good for the south koreans. but i think the north koreans wanted more than just getting some olympic tickets. i think the north koreans are looking to see if they can work on the south to decouple the
south little from the united states. that is the whole name of the game, especially with their nuclear program. i do not think the south koreans do not want to play along with and certainly having vice president pence there at the opening of the games, i think that is also very important to the south koreans. but the question is whether this very influential family, family il-chung, if she will play a messenger role. i do not think it will be likely that there is not at least an incidental meeting. we will stay tuned. david: you have spent time over there as a more junior person, and negotiated with north koreans. how material could that be? at the same time that we have vice president pence in tokyo, announcing that there will be further sanctions against the north? i think frankly
speaking, north korea has not indicated they are prepared to do away with their nuclear weapons. i think what they are trying to do, first with the south koreans, is say look, we can be a responsible neighbor, a good neighbor to you even if we have nuclear weapons. do not worry about the nuclear weapons. i think they are trying to say that to everybody, and i think the u.s. administration is quite rightly saying no, we will not accept business as usual with program. korean an opportunity for the vice president to get a message very clearly and very directly to the north koreans that look, we are prepared to do a lot with you. we are prepared to eventually normalize relationships, but we are not prepared to deal with you as a nuclear state. it is up to you. do you want a relationship with us and the rest of the world, or do you want nuclear weapons? you will not get both. shery: right now, secretary mattis was talking about nuclear deterrence and having to raise the threshold in the u.s. i.
-- he said some this miscalculate, and would not lead to anything larger. but if you are not dealing with a rational actor on the other side, how relative -- relevant is the strategy? christopher: first of all, i think the united states has sufficient conventional capabilities, both in south korea and the region. fly and forces very quickly, we practice that every year, which is why the exercises are important. but i think we could inflict a devastating blow on north korea through conventional means. i know that secretary mattis has been talking about this threshold of how you escalate and whether we have a gap in our escalate tory capacity -- icalatory capacity, but think we could hit north korea extremely hard with conventional
forces without having to go nuclear. i think the north koreans, whether they are rational or not rational, they can certainly figure that out. we have made it very clear over the years, and one of the problem with the donald trump regime -- or administration, is he said nobody did anything before him. that is not quite true. many, many u.s. presidents have made abundantly clear to the north koreans what is at stake here. i think those messages, plus whatever message the vice president wants to convey in the coming days, i think it has been very clear to the north koreans. shery: a similar point was made, and he was dropped as the future ambassador to south korea. how worrisome -- first of all, that dr. chow was dropped, because he was not hawkish enough for the administration? number two, we still do not have a new u.s. ambassador in south korea. christopher: yes. the last u.s. ambassador to south korea left on january 20,
2017. and it is quite extraordinary to have an absolutely key u.s. ally in a frankly, what looks like a crisis situation in the past year, which could go on. it is quite remarkable that we do not have a u.s. ambassador. victor chow, at lifelong republican who worked during the george w. bush administration, really takes a very firm view on north korea. the fact that he did not support this idea of a so-called bloody nose, the single strike against north korea to tell them gee, there is more of where that came from -- the fact that he did not support that to me, does not indicate some huge policy gap because frankly, i do not think secretary mattis or secretary tillerson have ever supported the idea of a so-called bloody nose. saidrofessor chow has look, we finally got going with
sanctions, we finally have some capacity to go after the north koreans, especially on refined oil. so let's give that a chance to work. best wayat is a forward on north korea? you would use to be our records -- you used to be our representative. russia, we are not sure what they have gone off. china is not only sure -- do we need to continue to proceed through those six party talks, or are we better off with bilateral discussions? first off, i do not think the problem is the format of the talks. we had six party talks, which was a good platform to have bilateral discussions, trilateral discussions, all kinds of different configurations. i do not think it is the format of the talks. what i think it is essential -- what i think is essential if we are going to achieve this is that the u.s. and china have clear expectations of the
expectations of each country, china, we will not take strategic advantage against china. you recall how upset they were at the deployment of the data missilesystem -- thaad system about a year ago. they sought not so much the connecticut abilities of it, they were upset because they do not like the fact that it has a radar system that could you are peer deepchina -- into china. we need to address those issues, intensively with china. i think it is a way forward. it is frustrating as anything to deal with china. they look at north korea and somewhat different terms than we do. it is a neighbor, it is right on their border, it is hard to see it in the same way that we do. so i think we need to have a comprehensive effort with the chinese, not just these episodic jetts by blurry eyed and
lag secretaries of state coming in for 18 hours. in respect to russia, they have biggesteen the disappointment in the six party talks. they should know better, but they have done very little. david: you mentioned there has been a lot of work done by various ministrations through the years. has it ever had any success? have we ever managed to change the behavior of the north korean regime? i am not aware of what we have done successfully their? christopher: fair enough, but what we did during the george w ocean ministrations much shut down the reactor, and we had international inspectors there. that also happens during the clinton administration. clearly, we were able to slow down the development of their plutonium-based program. but the reasons the talks did not succeed is that we needed much better access to what they were doing with so-called you radium in richmond which is the other way to a bomb.
to suggest that shutting down the reactor and blowing up the cooling tower, having international sectors on the ground, having continuous diplomatic talks, especially with the chinese but also with the south koreans, who at the time were committed to a diplomatic process. nothing is aat did misreading of the historical facts. it did not solve the problem, but we have to get some processes in play. i am of the view we cannot accept a north korean nuclear program. we cannot accept that. to be get there, we need much more engaged than we have been, and engaged across the andd not only on sanctions military contingencies, but in the negotiating process. shery: you might not recall this, but i was one of the reporters stocking you when we saw the nuclear reactors being blown apart. thank you for the interview today, former ambassador christopher hill from the university of denver.
david: i got to speak with white house chief economist kevin has .n earlier >> the president has been right about the market since he was elected. you might recall that someone said the market would never recover, and moving through the ups and downs, we are up about 35% right now since he was elected. just mumbo-jumbo or a mystery, the reason that the market is up in the president has pushed policies that are good for workers, good for the economy, good for business, and there has been a median term upward trend that is very significant. the day-to-day fluctuation is
something we will always see, and the president understands that. but what the president is pointing to is strong arm fundamentals. david: good for workers, and good for workers and wages. one of the things we saw were the wage numbers come out, with a 2.9% increase in wages. many observers think that was the first to refer the market selloff, because people were worried about inflation. what were people wrong to be concerned about inflation? guy,: i'm a chicago style so i never want to say the market is wrong or right. beene show, we have talking and going all the way back to the fall about the fact that wages are going to go up because we are cutting corporate taxes, and that is going to increase the margin of productivity of workers and dried about their wages, -- drive up their wages. came out on friday showed we had the biggest increase in wages in about 10 years. the market is worried that is an
inflationary sign, but as an economist, i do not see it as an inflationary sign. wages are going up with productivity, it makes complete ends. it is different from a normal celebs curve event. if you go back to your curve from your economy 101 class, if you shift the supply curve, quantity goes up, so a big tax cut should put downward pressure on inflation and be good news for those who want to see a sustained recovery. david: you had to reach back a long ways. explain to me the productivity growth? if you have more dollars chasing the same goods, that drives up inflation. you have to produce a lot more goods, but productivity has not been increasing at a faster pace. was 1.2% or something like that. kevin: do not forget the capital growthg contribution to went negative in the obama
administration. wages were declining because they had chased businesses offshore and all the capital formation was overseas. thatdent trump has brought stuff home, and that will lift productivity. the wage increases are coming faster than we expected, but there is a strong explanation for it, which is that firms are about what the tax cuts and deregulation will do for this year, and worried about retaining their workers once these new factories start relocating to the u.s.. they are preemptively increasing wages week they see the higher productivity around the corner. david: that was kevin hassett. shery: coming up tomorrow, exclusive interviews with two fed presidents. first, the dallas fed president, and then the new york fed president bill dudley. this is bloomberg.
♪ are live in bloomberg world headquarters in new york over the next hour. here are the top stories we are covering on the bloomberg and from around the world. the path to recovery. u.s. stocks continuing to fluctuate, currently a little higher in the dow and the s&p as the downplay worries about the turmoil. and the view from goldman sachs. the banks presidents harvey's givesrvey schwartz his view on the markets in a bloomberg exclusive. and senate leaders strike a bipartisan two-year budget agreement. how will it fair in the house? under twots close in hours, and as we have seen in the past couple of sessions, the past few hours can be very volatile. julie: that it has been volatile already. this is remarkable by usual standards, but not of the past several days. the dow fell as much