Will the Shutdown Lead to DOGE 2.0?

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2:01This is Everybody's Business from Bloomberg Businessweek. I'm Max Shafkin. And I'm Stacey Vanek-Smith. Stacey, have we got a story for you. It is about the wildest, weirdest, most interesting man in crypto. His name is Justin Sun. We'll tell you all about it. Okay, I'm looking forward to that. Before we get to that, we've got, of course, the big news of the week, Max, government shutdown. Oh, Stacey. We're doing this again? I know, I know. government shutdowns, they happen periodically, but this time I think is different. We've got Justin Wolfer's An Economist here to help us break that down. And Stacey, the underrated story of the week.

2:35I've got two words for you, little tease, Splenda Daddies. Splenda Daddies? All right. I'll hang around for that.

2:45Okay, Max, this week, the news has been completely overtaken by the government shutdown. It's all the headlines. It's everywhere. It's all anybody can talk about. Well, Stacey, there is one very, very positive economic indicator that we need to discuss. Yes. Tell me. I want some positive economic indicators. Life of a Showgirl, the new Taylor Swift album hitting on Friday, tomorrow as we record this, today as you listen. You know, Taylor Swift, obviously huge mega phenomenon. She crisscrosses the country, raising hotel rooms. Hit pause on the podcast and just go listen to that. No, but I mean, seriously, this is, it does feel like a big cultural moment.

3:25You know, Taylor Swift, obviously the biggest pop star on the planet right now. She's had this amazing run. She's been mentioned in the Beige Book as one of the forces that has moved local economies when her concerts come through town. Yeah, that's what I was alluding to. Like the Heiress tour, when it would hit a town, like hotel room prices would go way up. You know, restaurants would sell more food. I think there were literal earthquakes that happened because people were moving around so much in these stadiums. So you're saying this is this moment is the shutdown versus Taylor Swift. Can she do enough to salvage the U.S.

4:02economy from the government shutdown? Donald Trump and Chuck Schumer, they all have their calculations about where Americans are going to fall and how much pain are people going to be willing to accept. but they haven't counted on the fact that everyone's going to be distracted for like the next month listening to this album. And dissecting all the lyrics. Indeed. That aside, Stacey, I mean, the shutdown is happening. Yeah. And like this sense of chaos, political chaos, that then kind of tries to spill into the business world, that's continuing this week. And I feel like that's maybe where we need to start.

4:35Yes, indeed. And in fact, I was at the University of Michigan earlier this week. I got to drop in on economist Justin Wolfer's Econ 101 class, which was delightful. It's a class of 500 students. And at the end, I tracked some of them down and asked them how they were feeling about the economy and like what their worries were about the economy at this moment. Here's what they said. What scares you about the economy right now? The cost of living. Like I have like a girlfriend. And when we talk about like our future, it's like, are we going to be able to get a house or like, what are we going to do?

5:07I think it's a lot harder for people to get jobs. I think that's just a bigger worry in a lot of students' minds. I mean, I would agree. I've applied to a bunch of jobs like Panera Bread and things like that, and I haven't heard back at all. I was originally given a Pell Grant, and then it got taken away. Wait, how? I don't know. Just like the current administration announced that they would be repealing certain student... Your Pell Grant got taken away? Yeah, just literally gone. There wasn't a notification or email or anything. It just was gone. That scares you about the economy right now. I would have to say the tariffs.

5:40That's really terrifying because President Trump does state that the other countries will be paying these taxes. But as we've also learned in Econ 101, American consumers will probably be paying a lot of the tax for it. The cost of food. Remember, like, back in the day, like, you could get a candy bar for 99 cents. You know, you get king-sized candy bars going up to, like,$3,$3.50. Like, at the stadium, a bottle of water could be, like,$5,$6. What? Oh, is this when you guys go to games? Do you all go to games? Yes. Yeah. Really? University of Michigan, Big Ten school, they all go to the games.

6:13You know what I love about that? And I say love, but I mean, what I appreciate about hearing those voices. We live in an era defined by kind of like reality television and social media. Yeah. Where like presentation is everything and our politics is playing out essentially on screens. And you have these two sides like trying to spin stuff. But all these policies, all the stuff that's happening in the economy, it has consequences. And that woman talking about the Pell Grant is a consequence. I mean, sounds really bad. It sounds really tough. And I do wonder as we think about how the consequences of this government shutdown that we're entering right now are going to play out.

6:52Those are the kinds of stories that are going to define like how we experience it. Not like what Trump says on TV, not what Schumer or whoever says on TV. It's going to be stories like that. And I don't know. I just feel like we have to keep talking to those people. So good job, Stacey. The teacher of these really lovely students is economist Justin Wolfers, and he is here today to talk government shutdown. Thanks again for letting me sit in on your class, and welcome. Hey, Stacey. Justin, what did you think of what your students had to say? Well, they're brilliant, aren't they? I think well-trained, articulate.

7:31And I think it's so lovely to hear young voices engaging in our economic debates. We're fighting about the future and that's who they are. A's all around. That's what I say. Oh, you're up for great inflation now. But Justin, we brought you on to talk about the government shutdown, that terrible moment when politics and economics meet and it is a mess. And right now we are in the middle of a shutdown. Before we kind of jump into the more granular issues, what do you see as going on here? Mostly politics. I understand that people's first instinct at a moment like this is to call an economist because it feels like a big deal economically.

8:14I think the reality is if we think about the macroeconomy, the ups and downs of GDP and unemployment and recessions and booms and stuff like that, it's just not that big of a deal. So for folks who are not working in or very closely with the government, what I think the appropriate status is is sort of disappointed parent. But 750 ,000 people are not working today because of this. That feels like a big economic deal. Absolutely. Although, Stacey, there's 140 million people who are. And 140 million is substantially bigger than 750 ,000. We're probably talking about a matter of weeks rather than the full year.

8:53And so you start to do this sort of math and it starts to become fractions of a percentage point. Look, two things are true and I want to be really clear about it. And I thank you for drawing it. It can be that something's not a major macroeconomic issue, yet still is a dumb and horrendous and pointless waste. And were I president, it wouldn't change the reality that a billion dollars is both a tiny fraction of GDP and a s*** ton of money. and wasting it for no reason whatsoever feels utterly, utterly pointless and utterly dispiriting. So, Justin, you're saying it doesn't matter economically, or at least on a macroeconomic point of view.

9:37And I feel like Stacey and I talked about this. We've both been business journals for a long time. These shutdowns come with some frequency, right? The last one was in 2018. We're constantly hitting the debt ceiling. And if you've been through this a few times, a dozen times, however many it's been, you basically just start to feel like, eh, like this is like they're going to get it figured out. This is a sort of a manufactured political crisis. The only thing that matters really is who gets blamed. Right. I do wonder if this one is a little bit different only because this is coming in a larger context, which is that the Trump administration has been since the beginning, since January, just trying in various ways to kind of kneecap parts of the federal government, right?

10:24And to me, this really feels like an almost repeat of Doge, which might seem weird to say, but like we had during the first couple months of the administration, Elon Musk going around sort of purporting to close various federal agencies, laying people off. I think it's yesterday as we record this on Thursday, October 2nd, that the workers who took deferred resignations are in fact leaving the government. It's like another 100 ,000 workers. And when you listen to what the Trump administration is saying, and we listen to what Russ Vogt, the head of the OMB, is saying, they see this as an opportunity not just to furlough workers but to attack parts of the bureaucracy permanently.

11:05Yes. So much there, Max. So full of ideas. Let me start with the first one. You're like, oh, another government shutdown. Who cares? The problem with that thinking is the thing that eventually ends the shutdown is people are like, holy cow, this is terrible. And it causes political pain for one side or other of politics that causes enough that it pushes them back to the table and they sort it all out. But if we all sit around and take people like me seriously and say, hey, it's not that big of a deal, then actually it will never resolve. and so I think your point that we're all sort of a little bit indifferent right well battered bruised and used to large-scale shocks to how the government works right now this would have been outrageous six years ago and you and I I think our blood would have boiled and this might be the 13th worst thing to have happened so far in October that removes the urgency and if you remove the urgency, that then creates the possibility that this one actually runs on a whole lot longer.

12:11So the last one went 34 days. When I say government shutdowns are not a huge event, I should say, one, we already shut down most of the government two days every week. So if we made it a third, it wouldn't be a big deal. So the government gets shut down. Right now, it's not that huge of a deal macroeconomically. And potentially, you know, thousands of people will lose their jobs. Wait, Stacey, can we just hold up? Because I want to get the premise right. So what has historically happened is non-essential employees are told not to do any work. The government remains shut down for two weeks. Then non-essential, and then the shutdown ends and they come back to work.

12:51Right. And usually in every past case, Congress has passed a law saying, even though you didn't do any work for those two weeks, we're going to pay you anyway. So no one historically was losing their jobs through this. And then there's the essential workers who keep working, but they keep working without getting paid and then they'll get repaid later. Right. So there's no job cuts that are essential to this. What this gets to, though, is Max's earlier point, which is this is a political escalation at the current moment. This one's different because normally presidents are embarrassed by their inability to keep the government open.

13:26Right. This is like a shameful moment. Like, oh, you couldn't get it together and make a deal again. And what we have is escalation certainly in claims. The president says he's going to go after Democratic priorities. He's going to definitely not collect the trash from outside Max's house and so on. This president saying, well, you guys are doing me wrong. I'm just going to fight back. Sort of sounds like when my kids were five. He has no new powers to fire people right now that he didn't have yesterday. So if there was whole departments he wanted to shut down, if he could do it, he could do it two days ago.

14:03And he could still do it in two days' time. So the president's claim that this brings on an escalation. There's no structural change that creates that escalation. So the escalation, though, is that he would be taking advantage of the political moment, that somehow the press and the people would let it slide, that he's going to do something that in other times we would find repugnant. You know, I spent earlier this year a couple of months reporting on Russ Vogt, who I said, head of the OMB, super interesting character. He wrote part of the Project 2025 thing. He was involved in the last government shutdown, in fact.

14:37And he was kind of like hanging behind the scenes with Doge, right? I described him as like, you know, I can't remember the words I actually used, but like the real mastermind or the ideological mastermind or something like that. And what's interesting is vote had been saying for like a decade, basically, that if we could, we should just like cut all these woke agencies, defang the deep state, massively cut back on the government and that that was like a political end in itself. And that's what we saw essentially with Doge a couple months ago, right, where where they did this and then discovered, oh, crap, it's unpopular.

15:11Elon Musk suddenly had people protesting outside of his dealerships. People were suddenly putting bumper stickers on their cars, you know, trading their Teslas in. People hated this because, you know, for all the times we sort of complain and grouse about the ways that the government doesn't work, like, it actually does work pretty well. That was one of the things I think we learned with Doge. And now they're kind of trying to run it back, but this time blame the Democrats. And like you said, Justin, nothing's really changed from a legal perspective, although I'm sure there might be arguments to be made about, oh, maybe it's an emergency or something like that.

15:46But really, this is about can we pin this on Chuck Schumer? And I don't know what the answer to that. I don't think any of us actually know what the answer to that. I'm not even sure Russ Vogt, Donald Trump or Chuck Schumer knows the answer. I'm not a very good political scientist. So I'm far less interested in who we pin it on, although that's ultimately going to be what resolves this, right? One side or the other will find the situation's not working well for them and it's better for them to end it. There's a deeper economics here, which is why was Doja failure and why would the same logic fail at the current moment?

16:22So many of us have an image in our minds of the federal government as big and bloated and pointless. And last time I went to the DMV, I thought the person behind the counter might actually have been a sloth. There's a kid's movie where it's a sloth. Zootopia? It is Zootopia. Yeah. I got three little ones. I've seen that movie about 20 times. It's a wonderful movie. But yeah, you walk in and like literally the DMV is run by a sloth. And I've been in that DMV and the sloth isn't even cute. They're resentful and middle-aged and slow moving. And we take that experience. What's wrong with that? I'm just kidding.

17:01we take that experience and we project it on the rest of government. There's a few things to recognize here. First of all, most of our experiences with government with these annoying offices are actually state and local. I was just going to say, you're talking about a state agency. That's a problem for Michigan. Absolutely. But we all have that idea. And that's why there's a strong current, particularly through Republican politics. Oh, let's run the government like a business, or let's choke it, or let's get rid of all these useless employees, which is what you're hearing a lot of right now. That's the wrong model for the federal government.

17:29There's an old saying about the federal government. It's an insurance company with NAMI. What do I mean by that? The federal government, most of its spending is on what we call insurance programs. It's unemployment insurance. It's Medicare. It's Medicaid. It's social security. And those are like not at issue here at all. I mean, those are mandatory things. That is not, this is what always blows my mind about the shutdowns. It's not about the big stuff. You know, I looked into this. I got really interested in how big a share of the federal budget went to federal workers. And so I actually looked this up.

18:00And as it turns out, if you if you count the military, salary benefits, everything adds up to about seven percent of the U.S. budget. And if you don't count the military, it's about five percent. So this is a very small part of the budget. And then this this health care subsidy, the thing that's become a big point of contention between the right and the left, these sort of extra subsidies that got rolled out during the pandemic to help people afford health insurance. I mean, that is like 0.2 % of the budget. That's really little. And it's just really striking to me that so much is happening over something that is such a small part of the$7 trillion budget that we spend every year.

18:37The federal government, it's a small share of the economy. Much of its function is printing Social Security checks. Those checks are still going to go out. There are important things the federal government does. Some of them will be shut down for a small number of weeks, Yes, maybe. I just want to come back to this is not a macroeconomic moment. Every dollar we waste is a dollar we didn't have to waste. And it's all for political posturing. So it's as if we've just given several billion dollars to both Democrats and Republicans to spend on political advertising so they can yell at each other. And the billion dollars, is that the cost or what is the cost here?

19:13It's going to be several billion, which, again, is a real amount of money. I hate wasting a billion. We could spend that billion building schools or feeding the hungry or giving tax cuts to people whose yachts are not big enough. Gilding the White House. That's right. Probably gild another whole room with that. One part of the story we haven't told is the public servants, right? These are real people who I teach. The other job I have, you started with my economic students. I also teach in the Ford School of Public Policy. These are bright young things in their early 20s who answered Kennedy's call to ask not what your country can do for you, but what you can do for your country, who believe deeply and profoundly in public service and have gone off to school to become smarter at it and can't wait to go back out there and serve the greater good.

20:04And they're being treated appallingly. They're being treated as if they're the public enemy. For the generation of students I'm teaching right now, there may not be jobs for them. For the folks who are currently in the federal government, which includes many of my former students, they're being asked to go without pay for as long as the politicians decide. And that's the thing I will just tell you, this is not being an economist, this is being a person. I find it utterly dismaying the extent to which we are using people as pawns in greater political games. And I've seen more of that since January of 2025 than I've ever seen in my life.

20:39And every time I see it, it churns my stomach a little. Wow. Justin, thank you for being here. Thank you, Justin. Thank you very much.

21:15across the board of over 80 bond funds, actively managed by a 200-person global squad of sector specialists, analysts, and traders. These folks live and breathe fixed income. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself at vanguard.com slash audio. That's vanguard.com slash audio. All investing is subject to risk, Vanguard Marketing Corporation Distributor. The news doesn't stop on the weekends. Context changes constantly. And now Bloomberg is the place to stay on top of it all. Hi, I'm David Gurra. Join us every Saturday and Sunday for the new Bloomberg This Weekend.

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23:06And we're not just lawyers. We're also husband and wife. It makes for some pretty entertaining episodes. Listen to Legally Brunette on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts. Okay, Max, at the top of the show, you promised that we were going to hear about the most interesting man in crypto. It is time to deliver. Yeah, but we need to back up, and I just need to explain a little bit about Trump and crypto, because I think that's what the big issue here is. Okay, I do feel like the first six months of the Trump presidency, There's been a lot of crypto news. Some of it I followed, some of it not so much.

23:41So what is going on right now with Trump and crypto? Yeah, this is an industry that Trump seemed to despise during his first term. It's also one that I'm sure most listeners know, lots of controversy, lots of allegations, some big ups, some big downs. And many of the leading lights, you know, going back a few years ago, were either criminally charged or convicted or the subject of SEC cases. And basically, Stacey, with a couple of exceptions, all those cases pretty much are gone now. They've been dropped, paused. Well, and the president has his own coin, zeal of the converted. Indeed. Yeah. He's in the crypto business now.

24:18And there's an amazing Business Week story out right now that kind of explains this. It's focused on Justin Sun, who is, like I said, this wild figure in the industry. He's the founder of the blockchain network Tron. We'll explain what that is in a second. He owns that big famous banana or the banana that was duct taped to the wall. Oh, the art piece. Is he the guy who ate the banana? He ate the banana. And the best thing about this story is that it was written by our colleague Zeke Fox, who wrote a book about crypto. It's called Number Go Up. It's really like the best book that I've read on the subject.