Trump Tax Bill Passes Senate as Republicans Notch Major Win

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1:54Masser and Tim Stenevek on Bloomberg Radio. Carol Masser, along with Matthew Miller here in our Bloomberg Interactive Broker Studio. You know, another busy day out of D.C. President Donald Trump's$3.3 trillion tax and spending cut bill passing the Senate earlier today after a furious push by Republican leaders to persuade holdouts to back the legislation and hand the president political. When we did see the Bloomberg dollar spot index initially climb to a session high after that bill passed the Senate. It was falling for six months through the end of June. The package, informally known as the One Big Beautiful Bill, includes the entirety of the president's legislative agenda in one single package.

2:34And we did see the president personally lobbying lawmakers to quickly move the legislation through Congress. It's a great bill. There's something for everyone, is what President Trump told reporters earlier. So is it, let's ask someone who provides U.S. and international macro policy and political forecasting for financial markets and prominent investors, and is definitely a well-known voice to our Bloomberg audience. With us from Washington, Terry Haynes, founder of Pangea Policy. Terry, good to have you here. So is it a great bill? Is there something for everyone in your view? Well, thanks for having me, Carol.

3:11I appreciate it. And yeah, there's so many things for so many people. But I would take issue. I know this is you're you're quoting other people here, but I would argue even with the White House that this is the entirety of the president's agenda, because what they're going to want is, you know, this is a this makes a lot of important changes. It makes permanent the 2017 tax cuts. It's a big deal. It creates new incentives for manufacturing and onshoring, very big deal, including for defense. And it deals with the debt ceiling, debt limit problem, which is a very big deal. So markets have anticipated this and largely priced it in.

3:57But nonetheless, for markets, it's a very big deal because it provides a great deal more economic certainty. That said, what you're going to see is kind of the rest of the story in the fall when you're going to get spending bills, fights, and a bunch of other things that are going to try to rationalize debt and deficit a little bit more and right-size that, which Secretary Besant says is going to be a three - or four-year project. By the way, speaking of Secretary Besant, we had him on yesterday, and I was so hoping to ask him, Like, what happened to 333? You think that was just sort of campaign promises?

4:37Or does the Treasury secretary really believe that, you know, in his lifetime, we're going to get back to 3 percent deficits? Does he believe that in this term we're going to get to 3 percent growth or that we're going to produce three million barrels more of oil a day? I think Besson, I think, would tell you all those things are aspirational. But yes, he's very serious about it. And they're very serious about the manufacturing as well. I mean, one of the Terry, this bill includes four and a half trillion dollars of tax cuts and only one point two trillion dollars of spending cuts. I mean, you don't need to have an MIT PhD to get that.

5:24This is likely to add to the deficit. Well, I think it probably does add to the deficit, but I would take issue. And a lot of people think would take issue, but not incidentally, Barack Obama. with the idea that taking CBO scoring wholesale is the only way to judge the yardstick here. Besson would tell you, Worry on right now, that CBO scoring, the static model, doesn't take into account growth. It doesn't take into account revenue from tariffs. It doesn't take into account an awful lot of things. The Wall Street Journal lead editorial today points out that using CBO analysis of this legislation, the$40 ,000 self-cap is actually a deficit reducer, which is about as ridiculous as you can get.

6:17But it tells you kind of the perverse incentives that are built into the model. So, you know, I tend to be and not for any partisan reason, but I tend to be somebody who thinks, well, you know, CBO has not got all the answers and there's an awful lot that's relevant that's relevant to markets that they're leaving out. That's fair. By the way, since you brought it up, you have a lot of experience in Washington, appointed by the president to run things. And I think a couple of congressional committees you ran as well. Yes. Yes. In terms of the SALT deduction, that's that was part of U.S. policy for like over a century because this country, there's a balance, right?

7:06We don't want undue federal overreach into a state's autonomy to tax. And does anyone care at all about states' rights anymore? Or are we all OK with like this centrally powered federal swamp? Well, you know, there's a there's a lot of different ways that flash through my mind to answer that question. One of them is if you're feeling like you want to read a court case to look at a look at a nearly century old Supreme Court case called Wickard versus Filburn, in which the Supreme Court essentially said that, yes, federal government can use the Commerce Clause to bigfoot anybody on anything at any time, pretty much.

7:54it is states states rights have gotten a lot less important over the years and and you see that in this bill in a lot of different ways you see the yeah and you point out i think properly so about the balance the old balance on salt that doesn't really matter so much anymore not only because it's a blue versus red issue but because it was a revenue raising issue but you also see things like the AI moratorium on state regulation that happens. And so there's a, for a long time now, and there's a lot of streams into this, civil rights being one of them, frankly, the federalization of rights. And as a result of what state policies are, aren't yet a lot less important.

8:41Where they are important in places like Medicare, Medicaid, and the like, it's because there's a defined role for the state and there's a defined role for the federal government in terms of the revenue streams that go into creating the program. Terry, are these policies ultimately that will make America great again?

9:07Let me answer this way, and I'm not going to duck the question But let's say let's put it this way. What what they hope, what they intend is to have is to have an economic policy that frankly serves the United States geopolitical policy and maximizes U.S. economic strength as part of U.S. geopolitics. So what they want in the short term here, this is why the July 4th bogey, July 4, July 9 bogey is so important. What they want is they really want a triple boost to the American economy through the tax legislation, through bilateral trade deals, through showing that they're not going to go crazy on reciprocal tariffs, for example.

9:53And then they'll start dealing with the spending issue. What they hope to do through all this, including the manufacturing reshoring for what Secretary Besson calls critical industries, including defense, is that they think they are reindustrializing and reorienting the American economy to make it much stronger for the long geopolitical conflict that's following. So, you know, they think this is a way to make America greater. Certainly. Yes. Do you think it is? And what about your clients and those folks that you advise? Let me let me just put it this way. Sitting sitting on sitting on the status quo, sitting sitting in the status quo before 2025, I think, was very bad for the country for a lot of different reasons and and didn't serve us well and put us on the back foot on a lot of things.

10:50So, you know, what they're trying to do is put put things on the front foot. And, you know, as a citizen, I support some of it. I'm not crazy about some of it. But but you didn't have me on to talk about that. The fundamentally, you know, they actually do have a plan. They're actually trying to execute it. They've actually been reasonably successful in executing it so far. And the markets seem to be going along with it, judging by what's happened in the second quarter of this year. It is impressive that they're able to push this through. No, I mean, considering the opposing forces. Yeah. Is there something, though, you know, only 48 percent of Americans have heard anything about the so-called Big Beautiful Bill.

11:28I mean, where do they live under a rock? Well, I don't know, Terry. What does that also tell us about Americans? And like what? I don't know. Like these are programs that. Well, you know, they get you and I, particularly me judging by hair color. um the uh you know think about the legacy media more than we should uh no offense but we do we do and uh people get their information from lots of different ways and they get it they get it in different piece parts and kind of different shards i think of it as shards i've never heard that anywhere else but different shards than uh uh than you and i might you know, almost meme like, you know, but they get it from Chinese social media sites.

12:17Yeah, yeah. My daughter will tell you all about some movie and she's not, you know, but she's never seen the movie. She's seen, you know, parts of the movie through memes or whatever. But like, oh, yeah, that's you know, that, you know, that's from this or that or the other movies. Like, have you seen that movie? No, it's not a picture. You know, I think the I think the important question here and just in 30, 40 seconds, is this going to come back to bite the Republicans in the midterms when those people who don't watch the news realize they no longer have Medicare coverage? Are they going to vote against Republicans?

12:48Well, yeah. And you saw march on me a little bit. The answer I went to law school, I learned there's only three things you learn in law school. One of them is to say it depends as much as possible. But thank you for laughing at my little joke. But it actually does depend. I mean, if they put their reputation on the line, among other things, making sure that the health care programs still work properly. So if they don't, that's going to redound negatively on them, just like it did after the Affordable Care Act with Obama when they couldn't even get a website. Listen, Terry, so good that we could spend some time with you.

13:25Terry Haynes, founder of Pangea Policy. Bloomberg Businessweek Daily is brought to you by HPE, bringing you the self-driving network. A network that's self-optimizing, self-healing, and self-protecting, and only continues to get smarter. Learn more at hpe.com slash networking. Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version.

14:03So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com by selecting Work Mode, available on Plus and Pro plans. This is Robert Smith from Business History. If you're listening to this, there's a good chance you're a small business owner. And like every small business owner, you started with a dream to do what you love and watch it grow. What you probably didn't dream about? Keeping up with cyber threats.

14:36That's where MasterCard can help with access to tools that help identify cyber threats to better protect your business. Building your dream business? Priceless. For cybersecurity in a changing world, there's MasterCard. Learn more at MasterCard.com slash small business. us. You're listening to the Bloomberg Business Week Daily podcast. Catch us live weekday afternoons from 2 to 5 p.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app or watch us live on YouTube. Hey, listen, our heads are spinning a bit today when it comes to Tesla news. We've got a longtime Musk Lieutenant leaving in a high profile departure.

15:16Tesla's latest quarterly sales update that's coming this week, too. And then there's this great ongoing spat between the leader of the free world and the world's wealthiest individual, although I need to check on that. We are talking about Trump versus Musk. Earlier today, President Trump did say he would look into deporting the billionaire in response to a question about the ally turned critic of the president's signature tax and spending legislation. I checked for you, by the way. You might have to put Doge on Elon. You know what Doge is? Doge is the monster that might have to go back and eat Elon.

15:50Wouldn't that be terrible? I think what's going to happen is Doge is going to look at Musk. And if Doge looks at Musk, we're going to save a fortune. Thank you very much, everybody. I don't think you should be playing that game with me. All right. That, of course, is President Trump earlier today and then about a week or so ago talking about Elon Musk. What did you say about Elon Musk? I checked for you. I typed rich go on the Bloomberg terminal and he is still the richest man in the world by over a hundred billion dollars. So he's not worried. $362.7 billion for Musk. Coming in at second, Mark Zuckerberg with$260 billion.

16:23Not too shabby, not too shabby. By the way, that was President Trump all from earlier today commenting on Elon Musk. All right, there's a lot of ways we could go here. What we wanted to really tackle, though, is what the political fallout of the apparent relationship fallout between President Trump and Elon Musk. So let's get into it. With us is Ed Ludlow. He's co-host of Bloomberg Technology on Bloomberg TV. Catch him at 11 a.m. Wall Street time, Monday through Friday. He's out in our San Francisco bureau. And then in our Washington, D.C. bureau is Mike Dorning. He's Bloomberg News team leader for the Capital Influence team.

16:55I want to get to you, Mike, in just a moment. Ed, first up, though, we do want to talk political influence. But I got to ask you, Tesla shares are down. What news is it on? Because there is a lot going on with Tesla right now. So just lay it out quickly for us. Yeah, it's a version of the Trump trade, right? that prior to November's election, the Trump trade as it related to Tesla, at least like the public proxy was that close proximity to the administration would yield policy and regulation results that would be to Elon Inc, but particularly Tesla's benefit. But trades can go both ways. And you know, I think that the market's super fixated on the idea that a deteriorating relationship between the president of the United States and Musk is not a good thing for that company, necessarily.

17:41The president also had specific commentary around electric vehicles as it relates to the big, beautiful bill, the tax bill. And we can get into like, they're shouting like two different things at each other. Something really amazing, like if you'll allow me to just real quick, like I'm not a credit guy. I don't really know the credit markets, but we have this headline as well that even XAI's bonds moving in the session day, like a few cents. But clearly, you know, if you're an investor of some kind in an Elon Inc company, you're looking at this and thinking, is this a good thing or not? It's interesting to me that this kind of moves the needle to some extent because, you know, Joe Wiesenthal had Jim Chanos on his Odd Lots podcast yesterday, and he asked about, you know, the underlying fundamentals of the company.

18:30Listen to what Chanos had to say. Do you have a Tesla thought of the day? Nobody cares. That's my elon you know robbing a brinks truck with a mask on whatever oh that's elon it's a unique animal where people say oh well of course yes but you know rosie the robot's going to serve me my breakfast and it's going to tesla trademark on it so you know it's worth a trillion dollars i mean nothing matters it's all a dream ed tomorrow tesla comes out with sales figures but right it's not a trillion dollar company on selling two million units a year right I go back to Carol's original question as well. There's key man risk.

19:11The key man risk is codified in Tesla's annual regulatory filings, where they basically say Elon Musk has a special value to this company, and if anything were to happen to him, that would be bad for Tesla. What we reported, Carol, to your question this morning is that after the aftermath of recent departures from Tesla, Elon Musk now oversees sales in both the United States and Europe. And that's really important because as the data is expected to show, sales are under pressure right now. And we can get into the political background of why in Europe in particular that's because of Musk's relationship with Trump.

19:46Well, I want to get into the political fallout of this apparent relationship fallout between President Trump and Elon Musk. Mike, come on in on this, because what, you know, Matt brought up a good point, too, like, how significant could this be for the GOP if indeed Elon backs off of his financial support? We saw it big time in this last presidential election. So it could be significant, particularly if he were to go and back other candidates with a lot of money. Remember, Elon Musk was the largest donor ever in U.S. history in the last election. But you can see today with this Trump tax bill in Congress, it passed with no problem.

20:34Even though Musk was intensely criticizing it, they were still able to get reluctant Republicans who had reservations about the bill to side with President Trump. So that just shows that for actual Republican lawmakers who are up for reelection, they'd much rather be with Trump than with Elon. You know, I was reading Eric Wasson's story today about the holdouts. OK, Joni Ernst eventually went for the bill, but she was concerned about a reduction in solar and wind credits that would hurt Iowa. And I thought she doesn't necessarily have to kowtow to Donald Trump just to get his support. Like there's there's someone else in town who could bankroll her reelection campaign.

21:22I'm not sure if she actually needs one, but you understand my point, right, Mike? Elon Musk being anti-Trump does give Republicans who no longer want to be like sycophantic yes-men for the rest of their careers an alternative option. An alternative option, but one that's maybe not so attractive if you've got to win a primary. because the Republican Party, particularly the people who are active enough to vote in primaries, are increasingly just a Trump party. It's less moored to traditional Republican philosophy and more the Trump worldview. And so Trump has a lot of influence, especially with primary voters.

22:07Now, whether that'll be the case in three years, we don't know. But right now, it sure feels like that to the actual elected officials who may have to run for re-election soon. Ed, what have you heard about how much Elon liked being in the Oval Office and having such close proximity to Donald Trump? Yeah, I mean, what we consistently kept hearing right, and Musk said as much himself on the Tesla earnings call prior to the start of Doge, that the whole point was to kind of get some kind of benefit, right? Like robo-taxis, probably the easiest example where Musk was trying to and we reported was literally himself lobbying on the passage of legislation that would govern, give a federal framework for robo-taxis.

22:51And he kind of went into the White House for that and has come out without it so far. What I find so astonishing about all of this is you have to give credit where credit's due. And actually, Elon Musk has been very consistent about all of this. He's very worried about the national debt pile in the lead up to November. You know, that was kind of what he was on the road campaigning with Trump about to a certain extent. But the president's commentary and post is like Elon's upset about EV subsidies. Well, again, to his credit, Elon Musk has been relatively consistent saying, actually, if you did away with particularly consumer facing credits or incentives, we'd be fine with that because we feel Tesla is better placed than other automakers in America if that environment didn't exist anymore.

23:35So, you know, again, it's not clear, like they're not speaking the same language here necessarily, but what the specific point of grievance is with one another. Mike, I'm also curious how much President Trump likes having the world's richest man and his millions and billions nearby. And also when it comes to the GOP, when it comes to influence, what areas or sectors of our economy, what in the GOP world really has the most influence? Well, first off, President Trump loves having rich people around him, adoring him, because he sees that as a marker of success, of how smart someone is. really he keeps score by how much money someone makes.

24:23And for the richest man in the world to be kind of like a dog coming around and being very happy to be around Trump all the time is tremendously flattering to him. Now, there are lots of wealthy people who do back the Republican Party, and a lot of them are going to be even happier now that they have this tax bill today. that is well on its way toward getting passed. There's a lot of sectors of the economy, particularly wealthy investors who are going to benefit from this. One industry that you can see has a huge influence with the Republican Party is the oil and gas industry. And you can see that in the tax legislation, which essentially has really rolled back clean energy subsidies while doing things like making coal a clean energy benefit.

25:23So that's one place where you can see a strong influence in the Republican Party. Mike, President Trump talked about turning Doge, which he termed a monster, against Elon Musk. It didn't seem very useful when it was used against the federal government. How much did Doge actually save? And Mike, forgive us. We just have about 30 seconds. OK, well, it didn't save a lot of money, but it sure crippled some regulatory agencies that, you know, Elon Musk and others might not like. For instance, the Consumer Financial Protection Board, which could have regulated some of these tech finance companies. And also it did pull back government from some areas like foreign aid.

26:09So it wasn't a huge savings in terms of money. Right. But it did pull back the government in some areas. Ed Ludlow, 10 seconds. When do we get those sales numbers from Tesla? Be quick. Well, I expect pre-market tomorrow and it'll be poor relative to the same period last year.

26:45Matt Miller here at Bloomberg headquarters in New York City. As you know, the Senate passing that $3.3 trillion tax and spending cut bill a 51 to 50 vote. VP J.D. Vance casting that tie-breaking vote. The bill includes provisions to also raise the debt limit, cut Medicaid and other social safety net programs, provides also tax breaks. We talked about this earlier for some groups, but has been criticized for its potential to increase the deficit and harm low-income Americans. We wanted to dig into maybe how companies are seeing it and maybe some of the things that they might have to do as a result.