tv Bloomberg Markets The Trump Economy Bloomberg October 27, 2017 1:00pm-2:00pm EDT
lawmakers are bracing for a week of lobbying on a proposed tax bill expected to be unveiled on november 1. the white house council of economic advisers joins us on bloomberg. the waiting game for the next fed could and next week. president donald trump is expected to make an announcement for he just before he leaves for asian and friday. on friday. strong tech stocks today. julie: before we get to the politics, i want to pick up on the last theme that they would was mentioning in this the rally we are seeing in tech stocks. there is an unusual divergence
today between the dow which is of 1% and the nasdaq which is up 2%. that's the best since the election. the s&p 500 has a considerable weighting of tech stocks. it has to do with the earnings that came out after the close yesterday and many individual companies are trading at records. intel is at a 17 year high. is up 13%articular after the company be earnings estimates by a wide margin. it just acquired its whole foods business as well as his webs services business. microsoft is doing well in the cloud and alphabet is doing well in its core google business and intel performing better than expected. back to politics, a lobbying frenzy is set to begin next week in washington as the house ways and means committee chairman kevin brady unveils a tax bill the u.s.d affect
economy. it has largely remained a secret. here to talk more about what special interest groups are after and what tax details will emerge is our national political reporter. details, get to those why the secrecy? what is the strategy here? is to keep the lobbyist at bay and keep them guessing and not give them time to try to beat down provisions in the bill which frankly they are good at doing. it's a reason we haven't had a major rewrite of the tax code in 31 years. is that theyect don't want a free-for-all among their members which he -- with each one of them trying to negotiate their specific provisions. these pieces are interconnected and we so what happened when they put out the state and local taxes -- deductions. up giving those numbers what they want, it could be open season.
these are some of the challenges they face. julie: not only do they have to keep it secret but they have to have a vote relatively quickly after the bill comes out? is that what is due to happen? >> yes and they don't have to keep it secret, they just decided to go this route because they think it's the best shot they have a passing it and preventing the provisions they want them being taken out. so plan is within a week of of releasing the bill, the ways and means committee wants to approve this bill and send it to the full house for passage before thanksgiving. this would be a massive reshaping of the u.s. economy in just a matter of weeks. julie: thank you so much. we've got more on tax reform. president trump's council of economic advisers is out with
another report today. the change in corporate taxes could lead to gdp growth up to 5%. individuals would benefit from changes to the tax code. to the tune of at least $4000. you have the author of that report? withs, kevin hassett is us, great to speak with you. let's start with the data. 3% growth is the date that number today. that's together with the unemployment level of 4.4%. the president has talked about the need for corporate tax reform. in light of the date i mention, does making the case for tax reform become harder? >> not at all, if you look at the data going back the last two years, one thing that is most striking is that capital stock growth has been so low. capital deepening went negative in the obama administration for the second time.
if we want to keep the recovery going, we need to get capital companies to increase wages and give us the numbers we need. 2% growth has been driven by business optimism because the president has deregulated the economy and they expect a tax cut this year. be worried about the economy overheating. the cycle,point and one should worry about that. if we were provoked -- proposing a big demand stimulus, it could lead to inflation and an overheating economy but this is .he supply-side stimulus stop- = beenontribution has negative or zero the less four years of getting that back to normal something that will be a supply-side shot which will increase productivity and wages without creating inflationary fears. david: i have the report here.
could be increased 3%-5%. how long are we talking? reportention and the there are four different ways you can estimate the growth of the corporate tax. the optimistic model says we can get 3%-5% in 3-5 years in the pessimistic -- and the pessimistic model say it will be twice that long. david: you said you would respond to economic arguments. .et me ask you harvard is saying we don't have a tax plan. what we have is not clear enough to permit the quantitative thatsis of the budget cost proceed such legislation in a serious country. do you agree with that? >> it depends on which side of the tax code we talking. on the corporate side, we know the rate that has been agreed
to, we know the private side. at the council of economic advisers, we have modeled the corporate side of the reform but not the individual side. we are awaiting the complete plan on the personal side. on corporate taxation come you drew comparisons to how this plays out in other countries and you have looked at smaller companies -- smaller countries. why not look more at u.s. history? >> we are looking at u.s. history. in the paper that came out today, the vast user cost looks at what happens to u.s. investment when you change corporate tax policy. if you consider the user cost to capital is dropping about 50% because of the proposal, that gives you about 15% higher capital stock in the economic growth we are talking about. it's simple arithmetic. adamm struck by a piece by
looney. is there a misrepresentation about repatriation? >> is a smart guy honeys onto a subtle point. if you are a u.s. multinational come you can move your income to ireland by locating a plant there. that increases the demand for workers in ireland, reduces the demand for workers here, lowers wages here and lift wages there. once you have done that in got the money in ireland, the question of what you do with it. what many companies do is they
put it in the bank account of their irish subsidiary and the irish subsidiary often has a bank account in new york and that might be what adam is talking about. some people are wondering about the role you play in this administration, the role of the council of economic advisers. how do you see your role within the trump administration? a good job of going after substantial things. ofall bemoan the coarsening america and when you give attention to guys launching ad hominem attacks, you just encourage more. i won't respond to larry summers. you say there's considerable academic consensus. , havehe last few weeks you learned anything about how we regard academic consensus in the world of economics?
you looks at the facts and the evidence and look at the report today and count how many are peer-reviewed and there is a massive amount of evidence supporting what we are saying. we are not just making it up. david: thank you so much. let's check in on the bloomberg first word news with mark crumpton. the un's top human rights official is calling the syrian government siege of the capital suburbs and outrage and says food and medical supplies must be allowed to reach civilians inside. he says that residents are facing the humanitarian emergency despite a truce negotiated in april to facilitate relief. ofcalled images circulating severely malnourished children shocking. british foreign secretary boris johnson says it's on clickable that european union citizens living in the u.k. might be sent away or lose their rights after
brexit. he was asked by reporters and portugal after eu citizen rights. he said he cannot imagine circumstances in which citizens would be asked to leave our have their rights violated after the u.k. leaves the block. president trump is responding to a california billionaire who has promised to spend at least $10 million in advertising calling for the president's impeachment. on twitter, the president called tom steyer, wacky and totally unhinged. finding mehas been and my make america great again that from the beginning. he recently launched advertising arguing that the president should be removed from office. immigration officials say applications for u.s. citizenship are up. naturalization applications generally spiked during presidential cycles and fall after an election. this year, the volume of applications is on track to beat 2016 figures. the national partnership for new
american says it's the first time in 20 years that applications have not slipped after a presidential election. news, 24 hours a day, powered by more than 2700 journalists and analysts in over 120 countries. i'm mark crumpton. this is bloomberg. julie: coming up, the fed chair there are two gentlemen in it. we will discuss that next. we want to check the rally we are seeing in u.s. equities today especially in the nasdaq. in tech a big strength today. the nasdaq is up 2%, hitting a record high at its biggest percentage increase since the election in november. we will dig into that next. from new york, this is bloomberg. ♪
julie: with this big tech rally today, let's check on the markets. taylor riggs is here with the latest. like we areel speaking about record highs. that continues today. the doubt nearing record the s&p 500 inte record territory. and the nasdaq, like you said, it's all about tech today. it's up more than 2%. it's driven by a slew of tech earnings that we got yesterday including amazon and microsoft. 100 andsee the nasdaq you can see how the momentum is continuing as we get through the rest of the day. we are also looking at companies like apple, google, and facebook which are the major gainers in
this index. looking into apple, we are awaiting the earnings next week in the release of the iphone friday, apple said don't worry, the demand for the iphone 10 is off the charts. there were concerns of the production of the phone and that has been squashed for now. let's put this into perspective. you can see the nasdaq 100 index and its outperformance relative to the s&p 500. the spread really rising up. the relative outperformance is at its highest since 2009. it shows you the momentum we are experiencing today in the nasdaq. julie: thank you so much. we will follow that all day. president trump said this week he is very close to announcing his pick for fed chair. yesterday, there were reports
out of washington that janet yellen is out of the running. that would leave jerome powell and john taylor in the race. former federal reserve bank of philadelphia president offered his take for the next fed chair. john. supportive of is 's not to say the other candidates cannot do a good job but given my criteria about what i think is needed, it can of leads julie: to picking john. joining us now to discuss this is michael mckee and peter coy. -- guessing boast of them both of them have fed chair race fatigue. if trump is indeed going to choose powell to be the next fed chair, would taylor be a shoo-in for the vice chair? are both of them going to end up at the fed anyway? michael: we have no idea.
this week earlier that yes, he has talked about a package of the two of them but he did not say in what order. it could be taylor is chair and powell is vice chair. these are things that trump is considering but we don't know if either one would take those positions. >> one thing is a precedent. stanley fischer came on as vice chair to janet yellen and some people thought at the time, why would he do that. he gladly took the position maybe because he had already been head of the bank of israel will. he was fine without it may be taylor will think the same way. michael: jay powell is not an economist and will not lead by his great economic knowledge. john taylor is a very well-respected economist whose views on what should be done on regulatory of monetary policy are different than powell's.
john is a very strong personality. does he adopt the stanley fischer model of advising janet yellen quietly and not making waves or does he go out and start talking in opposition to the chairman? that's one of the things you would have to consider. that would be in a normal situation. nobody knows what trump wants. >> it's good to see a little fireworks inside the central bank. julie: there is also the shadow of janet yellen that looms over all of this. whoever gets in there is probably not going to be able to change policy quickly because of the gradual nature of what she has already implemented and this tone she has set. tohael: they may also have deal with janet yellen. she could stay on until 2024. she has that option. it would be a great story.
if we get the tax cuts that we were just talking about, the economy could heat up faster maybe the fed has to react more quickly. with the calm you have now and the process, that will not change very much. the fed bank presidents believe in the process. we know what they think will happen with monetary policy next year. it's unlikely they will change that. and of john taylor came in said i want to do my role now, he will not have support from the rest of the open market committee. julie: we have to leave it there, thank you so much. still ahead, barcelona and madrid have crossed the rubicon declaringatalogs
david: the parliament of catalonia has declared the area as an independent government. what will happen next? our spanish reporter is in barcelona today. what happens next? we saw the vote on the protests that followed so what happens next question mark what's likely to happen? we know the senate has given the spanish central government the power to essentially do a takeover. the regional government and catalonia, it was a dramatic day in barcelona. there was a declaration of independence that was made.
we expect the foreign minister to address the nation at 8:00 p.m. with this article being greenlighted, we are looking for what the central government will do. our impression is that the foreign minister say the regional president has no authority no matter what he says. president anymore. he has to leave. we are also hearing from the first legal repercussions. the state prosecutor has said anyone who participated in this faces charges every billion and sedition. carries a term in prison of -- who participate in this faces charges of red billion and sedition. it carries a term in prison of up to 30 years. the u.s. government is also saying catalonia's part of spain
and it's a key ally. the united nations said it is a domestic affair in spain. julie: we saw spanish stocks fall again today. the ibex is down about 1.5%. has business ground to a halt there? are we seeing corporations holding off on making decisions as this goes on? >> that's right. the ibex reverted all the gains it made yesterday. to stocks in particular are coming under pressure. catalonia assed in well as a catalonian bank. .hey are heavily exposed it's no secret they have links with the regional government. they are stuck in a difficult place. economy,of the overall the spanish government is saying we have to acknowledge that this is a big regional economy and we need to keep that in mind that the catalonian economy is
sizable. the growth forecast is for next year and the business community saying this was a bad decision and it's going to affect investor confidence and decisions made here. today, we have protesters and supporters of independence calling for a strike. there are a lot of moving pieces. julie: thank you so much. next, the tech giants are heading to capitol hill next week amid mounting pressure from lawmakers. we will have that story. from new york, this is bloomberg. ♪
first word news with mark crumpton. mark: the state department is warning countries and companies they risk u.s. sanctions if they do business with more than three russian entities. the list oflished businesses and individuals linked to russia's defense and intelligence agency nearly a month after it was due. the penalties were required by sanctions bill congress passed in july and president trump recently signed into law. that was in response to kremlin interference in the u.s. presidential election. president -- the cap the --catalon - catalon president says independence was a long time coming. this is a first stop and the great majority of politicians fulfilled a mandate which was validated by elections. the parliament voted today
to establish its own country with a secret ballot boycotted by opposition parties. the senate voted in favor of granting the prime minister the authority to remove catalan leaders. his spokesperson for the u.s. led coalition says he incorrectly announced a cease-fire between the iraqi central government and the country's kurdish minority. while talks are ongoing and clashes have stalled, an official cease-fire had not been declared. betweenmering tensions the capital of the kurdistan region and baghdad escalated after the kurds held a referendum on independence last month. president trump has ordered the release of thousands of secret files on president john f. kennedy's assassination. the cia and the fbi insisted the president block the release of hundreds of others. they cited potentially irreversible harm to national
security. president trump said he had no choice but to heed that advice. those files are under a six-month review. gun yet to smoking satisfy conspiracy theorists but a british newspaper said they received a call to be on the lookout for big news from the united states. this is bloomberg. julie: thank you. silicon valley goes to had capitol hill next week. representatives from facebook, twitter, and google will testify before the senate judiciary and intelligence committees. are revelations that russia exploited their platforms to interfere in the elections. will the self policing be enough for lawmakers? we are joined by megan murphy. erilli.in c
facebook says it will disclose more about political ads and disclosuresring its more in line with television ads. from what you have heard, is this enough to satisfy lawmakers? kevin: absolutely not. i interviewed senator amy klobuchar, a bipartisan co-author of legislation put forth by senators john mccain and lindsey graham. they would essentially make these disclosures much more public and in line with what print advertising has to do, radio advertising, television advertising. what the senator told me was that you would not be driving down the interstate ahead of the iowa caucus and not looking at a billboard with an ad put forth i vladimir putin. at bloomberg, we cover
coverage of a financial institution and they send their ceo to testify on capitol hill. the fact that mark zuckerberg or sheryl sandberg is not testify next week has drawn intense scrutiny from both democrats and republicans. david: what does this signal about the relationship between washington and the silicon valley. it seems to be uneasy at times. what are the hearings next week going to do to that relationship? megan: there is the galvanizing force which is potential russian interference with the election and what social platforms they might have used. there is also a greater issue and that is as they as closer to being labeled as a content equivalent ofthe a media company with the same , that is theies
alarming thing. deal with theto russian situation in terms of how they were used and have announced some changes but that is the holy grail for many increasing number of lawmakers is penetrating much more deeply into their distribution mechanism. it's interesting you don't see sheryl sandberg were mark zuckerberg. they have dramatically ramped up their lobbying efforts in washington. facebook is always had a strong presence there. particularly with twitter, it's one we should watch. they have been the least prepared. they have been struggling to get up to speed as they deal with this. platform thate actually had the most import in
terms of looking at the election. julie: we should also mention that the backdrop for this is that it's been a huge earnings report for these tech companies. the tech stops are rallying big today after stronger-than-expected earnings reports. it was the same for twitter. gan: senator klobuchar is thought of as a potential presidential candidate and let's not underestimate the pollux. -- underestimate the politics. the banks want to score political points. congress wants to demand more out of tech companies and more responsibility. if itashington does this,
gets the full bright lights on you, that is difficult to crack and that's one thing washington is still effective at. david: an incredible busy week next week and we expect to hear onm president brady and then november 3, president trump goes to asia. our lawmakers seeing that is a good thing that the house will be out of town? house speaker paul ryan took the question yesterday and was joking about the notion that the lawmakers will be able to effective form about the president. we are anticipating that federal reserve chair position announcement next week before the president goes and route to asia. tax bill.lso the that will come from the house on november 1 so it's a busy week in washington on all fronts. silicon valley will be touching down. then testg names and
bed -- the tax reform bill. there is never a dull moment here. it's a beautiful day, julie. julie: thanks a lot. but thee out of town, president will certainly have his phone with his twitter account. david: there will be a time difference. : i feel like the tax reform is already happened. have a great weekend. coming up, what's the difference between the ceo and the president of a company? differencest the next. this is bloomberg. ♪
david: this is bloomberg markets, balance of power. ofsident trump ran a message running the country like a business. was a 2016 gop candidate. government and business are different in some substantial ways. we have three co-equal branches of government, something that presidents sometime forget but there is a congress and executive branch and judiciary. that's clearly different. on the other hand, i think what business is due is focus on results. on actually producing results. i think the american people are frustrated because we figured out that for quite a long time results don't seem to be
the most important thing in washington sometimes. sometimes the most important thing is winning again. sometimes the most important system aseserving the it is. sometimes the most important thing is giving a speech, not solving a problem so people want results and businesses focus on results. david: ceos are judged by results. really good ceos limit the number of results they will go for because a company needs to the head it's hard for of the company to focus on to me things at once. is this president properly focused on a number of objectives question mark >> we will see because in the end, the most important thing the president can do is produce results. it's why he is in the white house or he needs to produce results. tax reform is important not just to keep the stock market going but because it would be a and benefit to
american companies and the american people. david: was the health care reform a detour on that route? to belth care needs reformed desperately. i thought the democrats made a huge mistake when they passed health reform on a purely partisan basis. sadly, think republicans made the same risk -- made the same mistake. ist both parties did make sure the american people were involved in the plan. the american people didn't even understand the plan for reform so it failed. david: you say tax reform will be very important. a formerok at that as ceo, what matters the most? what would change the way you did business if it were implemented question mark >> first of all, predictability, we cannot have one year changes or even five your changes. andou know, big companies
not so become his plan over multiple years. predictability and stability would be helpful. the other thing that would be helpful would be to lower the rate. there are unbelievable gyrations that companies go through, loopholes they try to take advantage of in the code. to try to lower their effective rate. simple find the code i think is usually important. it's important for smaller companies and families. that complexity favors companies that can hire accountants and lawyers. even a big company is spending enormous amounts of time and energy trying to make that complexity work for them and finally, it's been talked about a lot, allowing companies predictably and for a long-term future to repatriate cash. ofpanies are doing all kinds things to keep money out of this tax system. david: that takes us into technology.
that's a big issue for tech companies who have so much money offshore. when you look at the earnings from yesterday from the likes of google and amazon, what do you make of the tech sector at this point? it seems to be on a tear. >> it is on a tear. i think with these mega-tech companies now need to think about what the american people need to think about, and i'm no fan of regulation, the power they are amassing is enormous. the power to influence in all kinds of ways. i frankly find a disingenuous for facebook to say we did not know our platform is being misused. these companies have amassed enormous power and i think they have to be thoughtful and careful about that and consumers need to be thoughtful and careful about that. in washington, republicans and democrats are starting to pay attention to that. david: we see a push for possible regulation in europe and the united states. if you are running a big tech
company today, how would you get in front of that so it was ok for your business and still comply? >> the first thing i would do and that's what i tried to do at shilique packard -- and it's what i try to do at hewlett-packard, i would be open and collaborative. pull up theust drawbridge and say we don't want to talk about it and you don't understand and there is no problem. that will not work, not anymore. the first thing i would do is come forward and say let's try to work together around the sources of concern because there are real sources of concern. julie: that was former hewlett-packard ceo carly fiorina. moving to our stock of the hour is in technology with intel. they are advancing the most in three years. the chipmaker reported higher profits and sales than estimated. handra is here so what does the market like? emma: the market is reacting
very well with the -- with the stock up over 7%. we have a chart to show you revenue and profits more than estimated. like the fact that you are starting to see intel move into being a service business. we got numbers to show you when you look at revenues. the internet of things grew 23%. intel is trying to turn around and make this shift and achieve when it comes to those things. it's worth noting that the data center into the older part of the business is still at 7%. julie: we should note that the
legacy business is still the biggest part. emma: it else. julie: the other is a growing quickly but it's still the bulk. emma: they like that the new part of the business is growing quickly. david: we are seeing tech do well across the board today. emma: intel is leading the s&p 500 tech index today. everybody else is having a really good day having beaten on all kinds of measures when it comes to earnings. take a look at this chart. this shows the one-day price change for the whole tech sector. if you look at that spike on the end, that is today and that's the best day in 20 months for tech. david: thank you very much. intel is in the nasdaq and is helping the benchmark index gained more than 2% today.
julie: this is bloomberg markets, balance of power. david: venezuela is taking a step back from the brink of default. their oil companies had made a crucial principle payment on its bond due today. it's the first of several hurdles to clear in order for the country to avert a default. this is a country that's been under a great deal of stress with new sanctions and yet it hasn't defaulted. how is -- how has it managed to prioritize things? it's certainly a conundrum
-- they are are the a popular socialist country but they satisfied bondholders in making those payments. it's been a thing of national pride first with argentina. to thented to sick it capitalist and the venezuelans have made it an issue of national pride and have done everything they could to make it happen. that means blowing to reserves, prioritizing debt payments over imports because they have little cash coming in from the oral exports. death from their oil exports. it has become a humanitarian crisis as a result. it's not only because they are brighter -- pray orton bondholders but the whole picture has become gruesome and that's when the sanctions come in. there is also a deterioration of democracy there. julie: where did the money come from this time to make this debt payment? >> that's a great question. we don't really know.
they have $10 billion in reserves. they have blown through their reserves to meet payments in the past and have done other interesting things like liquidated gold reserves. they've done some very dubious transactions including one with goldman sachs to get more money. or this one, we don't really know. many people in the market behind -- they have been on several debt payments lately, like $500 million in payments. one speculation is they have been saving that money and using the grace period so they can make this payment and now they have another one next week which is much bigger. it's $1.2 billion. we need to see how they get the money for that and if they are able to make that. david: how bad are things there? you said the humanitarian side is that. the imf as an estimate for inflation for next year that's
2000% of their. it's not good at all. there's absolutely no stability. it's one of those things where if you have the money and the access, if you are in the inner circle, you're doing just fine. it's kind of a push and pull. you don't know when the and will come because some people are happy. u.s. imposes the further sciences as a result of , therections recently are stark fraud allegations. julie: ifpdvsa defaults, does that mean the government defaults? how much worse can the situation there get? >> it depends on the nature of the default.
we were looking at a technical default today which is they can't make the payment on time and there is no grace period so they trigger a default. s&p sailor inand default. they came out and said they were paying. butere kind of anticipating the money still has not made it to the accounts of recent have to see. no would anticipate venezuelan default. if the situation gets so dire that they cannot make the payments, we would anticipate they come out and say listen, the imperialist regime of donald trump has made it impossible for us to pay our bonds and we are defaulting across the board are not paying for now. that would be a situation that's not what we are seeing but potentially might happen down the road. david: thank you very much. julie: we want to check the rally one more time.
big one in u.s. equities particularly in the nasdaq. it's at the height of the session, up 2.2%. the level we are seeing for the nasdaq is the highest ever and the biggest one-day gain since november 7, 20 16. the earnings news is helping amazon, microsoft all rising. david: coming up, a statement at 815 p.m. about the referendum. catalonia was voting in favor of independence. you can catch all of our interviews on bloomberg. this is bloomberg. ♪ retail.
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welcome to bloomberg markets. ♪ we are live at 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. a profitable quarter for internet giants, including amazon and alphabet, giving equities a big boost. the nasdaq 100 soaring to the best performance in eight years. ine retail giant amazon targeting health care. industries might be considering a defensive response. and a lobbying frenzy on capitol hill next week. a sweeping bill excepted in secrecy. we have u.s. market closing in two hours time. taylor breaks -- taylor riggs is here with us now. >> you mentioned it. it is all about the nasdaq and nasdaq 100. you we are also seeing record