tv Bloomberg Markets Balance of Power Bloomberg March 11, 2019 11:00am-12:00pm EDT
welcome to "balance of power." guy johnson in london on the crash of an ep open airline boeing 737, on the looming deadline for brexit, and kevin cirilli from the white house on the budget outline being released by the trumpet ministry 30 minutes from right now. thank you for joining us. guy: what we don't knows what the market is reacting to at the moment. we know a plane went down. the data recorders have been collected. to be honest, we do not know a lot about what happened here. some people trying to make a connection between this crash in the one we saw back in october. with the line air disaster.
know tosimply do not the markets are reacting to that information for we may see a more stable will come through. on to checkuld hold in, over at brussels, on the brexit, where do we stand? >> hey. i know many times we talk about the optics of the deal. people need to see it as a very difficult negotiation. this time, it really is. to strasburg.rip that is where it is now. there is speculation.
also, is there any hope for a breakthrough? friday, theon european union put out some concessions and the delegation was not happy about it. they know very well it doesn't go far enough. it is already a blame game between the two sides. >> some of the reporting, they might have what is called a conditional vote. they will vote on a deal the eu has not agreed to but that was proposed. how it that be received over brussels? is a big question. we know the attorney general, so much depends on this man. very little progress in
the eyes of the european union. the eu will tell you assets down, the deal with the deal we agreed to. eye on this. close they need to ratify the final deal. it is also the eu. it is unlikely to see how the european leaders would agree to something they hadn't signed off previously. i didn't say there is in brussels at one point, the mandate, negotiators of the eu has really run out. it is up to eu leaders if they want to go beyond. that is the big question. , march 21, now seen as the real deadline. reporting fromr brussels. two kevin cirilli from the white house, we are about to get a budget as i understand it. the budget, what do we expect? >> $8.6 billion is what the
president is asking for to restart the site for the border wall. forddition, he is calling $2.7 trillion. discretionary funds. he also part drawing the partial government shutdown come the fall. the president doubling down on trying to get the border wall. issues forsting new the president. $750 billion for defense and to create space force, a new branch of the military could the ecosystem in washington in terms of government contracting, that is good news for boeing, caterpillar, and others that the penalties government defense
contracts. >> thank you so much could we will come back and about 25 minute from right now when we actually have it in hand. thank you for waiting with us. you don't know enough a lot of things but how important is the 737 to the boeing corporation? guy: absolutely critical. these narrow bodies are butter,y the bread and on the wide-body aircraft. this is where the bulk of the flying run the world is done. we will start to see big country users like china grabbing its
aircraft. this is a huge deal. one of the reasons why the stock has bounced back is other airlines around the world and the united its have basically come out and said we are happy to keep on fine. aerospace companies and for the airlines, these are critical. >> the big tragedy, talk about the competitive issues p mentioned airbus. it is up slightly, 1.5% today. boeing comes back a ways to could this be an opportunity for airbus? >> it is hard to see how it would be. the reason is the auto books for both airbus and boeing on these now but -- narrow -- it is enormous. they stretch out year after year to year. for a current customer to say i would like to switch to airbus. it would say i will give up the
-- three or four years time. i will not be able to get those aircraft for another 10 years time. able tofficult to be manage it in that way. you cannot see a wholesale shift away from bowing toward airbus. it is likely boeing will fix whatever problem turns out to be the cause of the accident. there is some suggestion there is a connection to the lion air crash. we don't know that yet. if there is, that will be fixed. dealt with reasonably quickly. it is hard to see how airbus generates a significant competitive advancement -- veryu can't get out of the easily. really appreciate this support from guy johnson in london. let's check on the markets. emma.n to m a -- classic dow jones all positive
at the moment. look at the difference about .2%. the s&p 500 and the nasdaq up over one percentage point. that is all down to boeing. 6%, 6.3%, it was down at the open. it has trimmed those losses quite significantly. for the firstsing time in six days. let's look at a closer look at the s&p 500. green.ector in the you can see the red patch in the s&p 500. that is boeing. number ofoperates a 737. he bit of a tech rally here. let's look at individual movers. apple, facebook, both rising today both on analyst recommendation.
the price target, 210, $180, amazon saying there were reasons to be bullish. the recent pullback in a stock, an opportunity. they have been expecting them both to rise today on the $7 billion deal. analysts saying this sets up a showdown with intel. looking at stocks, the dow jones , the first today time in 12 days. we're seeing delta rising after it was said warren buffett rather than southwest saying delta is the best managed airline in the u.s. earnings2%, ahead of next week. southwest is falling 1.6% today. thanks.any
researchers tracked down flight data and voice recorders from the plane. new government features indicated they may still help support in 2018. retail sales stabilized in january after he pond for prior months. up .2% that beat estimates. turkey has fallen into a recession for the first time in a decade. last quarter for the previous three months. they felt 1.6%. thebritish prime minister european union, deadlocked. they urged the eu to make a last-minute concession to stop a deal from being thrown out by parliament this week. vote for have another
the new deal exit. global news 24 hours a day on air and on tick tock on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. thanks. the democratic field is often running. many said they weren't running that said they would run. he served as director of research for the ted cruz 2016 presidential pain. welcome to both. getting cold feet because they think the left is taking over or are they all waiting for joe biden question mark >> i think everyone is waiting for what joe biden will do. heard sherrod brown said that is not the reason he decided not to run. i do think with his compact --
incredible capacity to earn money with name recognition, any field biden runs, he will take up much of the energy of the moderate part of the country. >> that he was -- he will be a strong part of -- a strong candidate. was basically joe biden and bernie sanders. i see are seeing the democratic he is ase trying,
scioscia -- socialist. he -- it will be really tough to read ila. whether you have vermont or messages bordering it, you can see coming out of island new hampshire, lightning and a bottle, it kind of runs the table. 10 mentioned the role of cruise in 2016, the first , reallyan to announce kind of pulling themselves out. >> a very good point. not just announcing a run but real money they are raising. bernie sanders is raising a lot of money. i understand the socialism label. president trump has tried wherever he can. the passion going up against president trump -- , the same whatw
we have another postapartheid what is interesting to me, republicans -- mitt romney. in hindsight, it may look differently today. the runner-up to john mccain. democrats aren't doing that. they're doing the opposite of donald trump wants to set this seen. up as what can be that is what he wants to paint it as. sanders plays right into that. the democratic party has to hope for joe biden to go in and bail them out of that battle. >> the candidates who may run for president not, what about the freshman in the house? on a settings out -- setting this up for the president?
much in the news in the last week or so, we even had speaker of the house below on friday commenting. this is what she said. i do not think our colleague is anti-semitic. i think she has a different in the words and some of them are fraught with meaning but nonetheless, that we had to address. >> a different experience in the use of words. diplomatically put. is there a larger issue here and perhaps some of it generational question mark >> think it is a larger issue for democrats and they have to look at the numbers here. 25% of the electorate describe themselves as liberal and 33 as conservative. democrats start out underwater when they run these presidential elections are they only win when they appeal to moderates. we just learned they will have the convention in wisconsin in milwaukee. that was one of the states that hillary clinton lost.
that, pennsylvania, those are the voters democrats need to win to recapture the white house. you cannot do that unless you appeal to moderates. they only won the midterms and a house because they appealed to moderates. it is a big red flag for democrats. it is no surprise there talking about it. democrats have to be very wary of this argument. divisions as few well. he will lose this week. does that reflect how the voters feel? his support among the base is still solid. >> it is. the iowa poll illustrated that though you had a number saying they had someone running against them, more iowa voters wanting them to have a contest to get involved. donald trump has solid numbers
there right now. what is interesting about this vote is it is not as much about donald trump and more about pencils of executive privilege. they came out and took strong stands against lawless use of executive orders for the purpose of implementing and bypassing congress. you have a different interpretation of that. i had several clients who i consider to be constitutional experts. they are in disagreement on this. you can make an argument that reason people could disagree as to whether or not this use of executive orders is legitimate or not. i think that is the battle that will come down. less of a division regarding donald trump and more about interpreting the constitution. it sounds dry but does it potentially lead somewhere else question mark does the president play by the rules? does it raise a larger question about character not paying attention to the rules?
this case, it is not an application of that. in 2016, i wrote for ted cruz. there are few people know more about the constitution and he does. he famously memorized the constitution as a teenager and recite it to people. he believes the president has his use of executive privilege in this case is constitutionally viable and reasonable. i would say that is one person i would never argue with on the constitution. i do not think this is a reflection of that at all. >> as a democrat, do you see any chicks in the armor? it seems pretty solid right now? >> of course there is no one else running against him and no one else there. back to this vote in the senate, a loss is a loss. this president ran saying he could compromise and make things happen. he will lose in the senate
controlled by his own party and forced to cast his own veto. no one wants to be in opposition to whether it is constitutional does it or whatever it is, the president will lose on emergency for theing, a problem president in the republican party. >> thank you. great to have both of you on the political panel. still ahead, two crashes of the boeing 737 and five months. we will talk about it next. this is bloomberg. ♪
company is only one in the red and that is boeing. you can see it is 6.5% down 188 points. the dow currently with a points game -- gain of 100. it would be up if it weren't for boeing today. it is also impacting some suppliers and we see a lot of those come back. up around 6%, it gets around 78% of revenue from boeing. it makes fuselages and things like that. other suppliers, iconic was they did see -- they are now back in the green. >> we thought go up a bit, 1.5%. we had guy johnson explain why that did not switch quickly but there is a lot we do not know. asking a piecee of string. it takes a very long time and obviously there is a lot comparing it to that crash five
months ago in indonesia. all caps we are seeing stocks in gaining ground today. a number of countries and airlines say they are not flying the jets anymore. number of people say we will continue to fly them. europe,el company in the region airlines all saying they continue to 5727. david: and that is flying back. up next, the administration is about to release a deadline for the next budget. we know a good part of what is in it and we talked to the former director of the congressional budget office. that is next in this is bloomberg. -- and this is bloomberg. ♪ this isn't just any moving day.
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simple. easy. awesome. stay connected while you move with the best wifi experience and two-hour appointment windows. click, call or visit a store today. david: the white house has released its budget request. kevin cirilli has the details. kevin: a 5% cut in discretionary spending, as well as $2.7 trillion worth in spending cuts.
he is asking for a $.6 billion to fund thellion border wall and asking for an optimistic forecast, particularly at odds with what other forecasters are saying. reaction, it is what you would expect. nancyr of the house pelosi and chuck schumer already releasing a statement saying, "the congress refused to fund at the wall and he was forced to admit defeat. the same thing will repeat itself assure the president pursue this." this is an opportunity for the white house to lay out their vision, as they go into a new political cycle year. it is not really likely that this will get major significant traction. but again, for defense contractors, for boeing and caterpillar and whatnot, it is a roadmap to gauge where the
administration stands. david: it sets of the issues to be debated at the very least. thank you for reporting on the new budget proposal. 5% cuts, but the deficit extending out for 15 years. that is what the outline is from the president. we welcome now douglas , holtz-eakin, former director of the congressional budget office. does this thing have any legs at all on capitol hill? doug: it is dead on arrival in the lingo of the day. it is a funny budget. the most important issue facing congress is the deal for discretionary spending and defense and nondefense. under current law, we have snapped back to the caps, that is about wanted to $25 billion in in -- $125 billion cut spending. this funds the defense
department through a gimmick called the overseas contingency attack -- account. and the nondiscretionary will get cut. it has made them a relevant with the most important issue. -- irrelevant with the most important issue. who dofor those of us not know about the budgeting, when the republicans requested a big tax cut they said it will pay for itself because we will grow the economy faster, and that will give us increased revenue. they are projecting 3% a year as far as the eye can see, a lot of economists do not believe that number, but assume they get that number they will still not balance the budget for 15 years. then't that renege what president said about 10 years? doug: he has never had a strong position and what he wants to do with the budget. what are the goals? we want to eliminate deficits, balanced debt? who knows?
no tax cut pays for itself, instead it increases the debt outstanding and do turn to the task of somehow putting the fiscal path on a sustainable trajectory. to do that you need good economic growth. you will also need to control spending, but not the tiny sliver that is nondefense discretionary. and you will need more revenues. so this is not a budget that is good for setting the terms of the debate for this year, neither is a good for solving problems in the long run. david: at the same time, the burden of taxes is shifting. we can show the percentage paid by individuals and corporations, the corporations percentage is going down, actually. the corporation income tax is not your grandfather's. all of our competitors have relied increasingly on value added taxes. in a global environment,
corporate competition is fierce and that tax becomes an issue. we have seen it overseas and in the u.s., we just have nowhere else to go but income tax and payroll tax. david: the percentage of gdp is increasing again. it went way up after the crisis, they came down. -- then came down. but now it is going up again. when is that going to hurt us? his type of up in t environment is troubling. deficitseen prolonged spending in a full employment economy. that has two costs. one is the big blowup of like greece and portugal. i do not see that as the likely thing. instead, it saps the economy. you are to get capital and borrow from abroad. the bridge as go overseas, not
to the citizens. in two ways, the amount of productivity and who gets the benefit of it, these sap r productivity. david: does the fact we are borrowing that much guarantee we will have a trade deficit? doug: it does guarantee we will have a trade of is that. there has been press that it has gone up, not down. it was an evitable with the tax cuts. you get more imports. you get more borrowing from abroad and that leads to bigger investments. david: in theory, the bond market should discipline on these things. when we brought too much, the yields go up. i have a chart that shows that this is the opposite of what is happening. why is there no discipline being imposed by the bond market? doug: this is not the 90's and people who are running the 90's playbook would be unsuccessful here. when the bond market vigilantes go up, then rates come back down.
the issue is that while we have issues, it is a global capital market and it is our issues relative to the rest of the world. we are looking relatively good and the bond market will not discipline people, so we need some leadership or crisis to get us to put this on a trajectory that we can sustain. david: thank you so much, dough. that is douglas holtz-eakin, former director of the congressional budget office. coming up, one of the most affluent states in the country, but having trouble paying its bills. we talked to the man republic -- talk to the man responsible for paying those bills from connecticut. this is bloomberg. ♪
of power." i'm david westin. connecticut has a debt problem, facing $35 billion in pension liabilities and it needs to fill a deficit in the budget. it also has a new governor, who has a plan. we welcome governor ned lamont of connecticut coming to us from stamford. thank you for joining us. gov. lamont: good to be with you. david: talk about the problems. i must say that connecticut is not alone in this, there are some states in worse shape, but you have a lot of unfunded that theroblems, is biggest problem you face? gov. lamont: it is a big problem and represents about 30% of our budget, when you take the fixed debt and health care cost. this is money that will pay for past due bills, as opposed to investing in the future. the first thing i have to do is underat rising fixed cost
control, flat in that out, so that as we grow revenues the fixed cost becomes a smaller piece of the budget and we are investing more in the future. david: investing in your future, we will put up a chart to show the shrinking gdp of connecticut, which had been doing well, but is now up and down. how much of that is because he you -- is because you have to service the debt? gov. lamont: we have not created many jobs over the last generation. a lot of our industry is a little bit older and we have not invested in transportation and we have the pension overhang. but there is a lot of good news going on, too. advanced manufacturing is really growing. we have tens of thousands of jobs we are having a hard time filling. our job is to train people, make sure that these companies stay, grow and prosper. david: tech about your plan. -- talk about your plan.
what are you proposing will dig connecticut out of this hole? gov. lamont: one thing, i am making a big emphasis upon fixing transportation. if i can get from stamford to new york in 30 minutes as opposed to 15 minutes, that opens up a whole segment of the state. if i can get new haven, bridgeport, better connected, even though we do not have big cities, we will have four smaller cities with their own identity and easy to get around. our strategic location should be an advantage, not a disadvantage. right now with gridlock, it is a disadvantage. david: one thing you proposed is tolls. which roads would it be? if i give them eric parkway, would i pay a toll? gov. lamont: i think we would probably put it there, on 91 and 95. the three or four major arteries. paythe outer stators would
about 45% of the bill, we are paying for the neighboring states. and we have to have a new source of revenue to fix roads and bridges. david: there was back and forth on whether it would be all vehicles, is it all vehicles? gov. lamont: what they've done in rhode island is just trucks. we thought we would have resolution in terms of a lawsuit there on whether that works or not. i do not think we will have resolution, i'm not sure it will raise enough to fix the roads and bridges and accelerate our rail service. so we have both bills in the legislature right now. david: in addition, you are talking about have a local governments share the pension burden, not all of it, but for some of it. what is the reaction from local governments to that? gov. lamont: our local governments have a feisty independence. there is 169 pounds. but i said during -- twoowns.
with said we cannot deal the efficiency in a longer. we spend more money outside of the classroom than inside the classroom. so i am not going to take away anybody's local control of their schools, but it will give everybody incentives to share the back-office costs, which are really draining the treasury. david: can you address pension issues without modifying the benefits being paid? gov. lamont: um, i am not sure. what i have to do upfront is bring down the health care costs. i think he was he transitions on that. we will flatten out liabilities over a period of time so we are not putting a higher proportion of our budget into that. and over time, i have to look at ways to reduce the high costs going forward. people do not understand that the young employees have given up a lot. that is not where the problem is, the problem is we did not set aside a dime for the
retirees, now they are retiring. david: that is not the only state with that problem. it is shared by others around the country. you talked about thriving companies that you want to hold up as opportunities. what would be the effect, if a for thoser plan companies to move to connecticut or away? gov. lamont: we have strong business support behind what we are trying to do, not just on the fixed cost side, but in terms of transportation and workforce development. i think the business immunity, we are partners on this, know how important -- community, we are partners on this, know how important this is. and we have a new collaboration with their business community. i have to make sure that they know they have a friend in the governor's office. david: some people who work for the big companies, we hear about the hedge funds in greenwich, say they are not happy because they cannot take the state and local tax deductions.
a fair number of people take those deductions. is that having an effect on people leaving the state? gov. lamont: so, we have gotten everybody's attention, i can tell you that. income tax revenues in new york are down. salt could be part of the reason that is going on. that is one of the reasons i have said, i cannot eliminate the tax but i am flattening it. we will not have an increased this year. give people some sense of certainty that this is what the budget is going to look like and make sure that people know how conscious we are that taxes is one of the reasons they move. david: it is interesting. as i understand the plan, you would increase sales taxes but not making a more graduated income tax, not increasing the income tax, which is relatively low -- do you get criticism from your own party that that is regressive? incomeave increased our
tax four or five times over the last 12 years, and it is a law diminishing returns. the sales tax is to be the revenue were course of our state, back when the sales tax was applied to 75% of our economy. today, the sales tax is applied to much less than half of the economy. it is the sears roebuck economy, the over-the-counter economy, but the digital economy is tax exempt. we have tried to say we will hold the line on sales tax, not raise rates at but expand the base a little bit. why is it that a main street merchant has to collect sales tax on selling a lawnmower, while the internet retailers have not had to collect sales tax until recently? that will change. david: on the so-called salt deduction, there been efforts by connecticut and others to try to relieve the problem for individual taxpayers. the irs is pushing back.
are you having conversations with the federal government on that? emma: -- gov. lamont: i can tell you that we will have 20,000 state employees retiring over the next four or five years, and i will think about how do we replace them with other state employees, do we work with a non-for profits, maybe there are ways for them to take a lead role going forward, that would be one way to address the salt deduction issue. david: interesting. talk about the interest payments you have to pay. we have a chart that shows the yield curve for the connecticut bonds, and it has been going up. you have a problem not just paying the bills, but paying more and more of the biannual budget in interest. at what point does that choke off what you are trying to accomplish? gov. lamont: it is getting more expensive, it creates uncertainty about our future, so
that is why we have held the line on taxes and we balance the budget without raising rates, but we are looking for new sources of revenue for transportation. what we want to have is new source revenues to speed up our transportation system. i think that the rating agencies will be pleased with the direction we have taken on the budget. david: we have talked about raising revenue, but are there places where you could cut costs that would not hurt the citizens of connecticut? gov. lamont: well, we will have to kind of cut a little bit here. we have been on a bond binge for the last seven or eight years and we will have to go on a debt diet. i will cut $5 million a year out of the bonding authority, so we can start to bring down the fixed costs and get our budget back stabilized. i'm going hard at employee health care costs, finding a way without disadvantaging anybody
to bring down the costs by fixing the amount that we paid each hospital. so i think i am convincing people that over time we are bringing the costs under control. i was at an opening where we are repairing one of our bridges and we are repairing it at half the price it would have been a generation ago by assembling it off-site and then putting it in place. that bridge will be replaced with only two weekends out of service. so we are making real efficiencies in terms of how we do business. david: you mentioned health care costs, that is a problem for the entire country. and there is a quest for bending the cost curves. do you have ideas that maybe we could apply to other places, that could bend the cost curve on health care? gov. lamont: yeah, our state employees can go to any hospital and we will pay whatever the hospital charges them. and we have come up with a
methodology where we will pay up to a certain amount, that gets you into the vast majority of hospitals, but we do not pay whatever they charge. it gives us a leverage going forward. maybe we will pay you $3000 as a state employee if you get your hip replaced at a place that does it for $20,000 less. we will make reforms to bring down health care costs, because they are going up so much faster than our revenues. david: you talked about the business community behind this plan, what about the legislature, because you need legislative support and these things can be very divisive? gov. lamont: it is tough, not an easy vote. i am asking people to suck it up, come to the table. if you have a better idea, tell me what it is. but i have a way to pay for long-term investments that we have to do and all of our neighbors are doing this on the atlantic seaboard. and out-of-staters would pay tolling going forward. it will be a tough vote, but i
need them to step up to the table and it will be a courageous vote. we will get it done. david: fascinating. that is governor ned lamont coming to us from connecticut. thank you. divide has an effect on how americans view the corporate world. on new poll shedding light the state of play going into the 2020 cycle. that is coming up next. this is bloomberg. ♪
david: this is "balance of power." i'm david westin. we want to mention the democrats have chosen the site for the 2020 convention. it will be held in milwaukee. the president shocked the establishment by carrying wisconsin in 2016, the first republican to do so since ronald reagan. and a new poll is shedding light on the red-blue divide and how
americans view some of the biggest names in the corporate world. emma will explain. emma: this is a poll where they asked americans to identify the top two companies, the ones with the best reputations, the worst reputations, and they picked companies and asked a wider group to rank them. democrats had better views of target, kraft heinz. target, 69% approval over all. and 63% for republicans for target. so kraft heinz did better with democrats than republicans. we know it is having issues in their products, maybe not necessarily appealing to many americans. and republicans preferred bp and ups. walmart was in the middle with a
sort of a same approval rating at 60 and amplify percent from the democrats, 69.4% from the publicans. david: how did tech do? emma: it did better with democrats, which i found surprising given all the concerns about privacy, especially google with approval ratings around 80%. facebook was less liked by both of them. and amazon was most popular among independents. take a look at the bloomberg, sector performance since the election and you can see that technology is actually the upper former. so both sides are on to the right thing. david: it is hard for us to know what to do with the information, by would wonder whether the campaigns would know exactly what to do with it, because as we have this big data now, with who likes craft -- kraft ketchup -- emma: the companies might know what to do. i spoke with the ceo of target,
talking about using the data better than they did. david: and if you are a brand, do you want to go for your base, or expand beyond your base -- or do you want to be in the middle like walmart, or have strong affinity? emma: interesting question. for the companies, if you can garner the most people you possibly can, that works, certainly when it comes to political parties it depends on strategy. david: ok, thank you. sign-up for the balance of power newsletter at bloomberg politics.com. that is for the latest on global politics in your inbox every said monday. coming up, the european close. -- your inbox every single day. coming up, "the european close." this is bloomberg. ♪ you.
european trading day. from london, i'm guy johnson. vonnie: in new york, i'm vonnie quinn. this is the "european close." guy: the hours a little different over the next three weeks, nevertheless we will have the close covered for you. european stocks are doing well and banks trading very strongly. banks leading the stoxx 600 higher. we are up. deutsche bank leading the charge. we may come back and talk about that. the german ten-year, we are trading at year lows. and highs in terms of the prices. and the boeing story dominated on both sides of the atlantic, saffron one half of the engine supply company. ge is on the other side of that. safran is trading down. vonnie: in the u.s., analysts urging caution on boeing, well