Government Shutdown Takes Effect, White House Pulls Antoni BLS Nomination

0:00Hello, I'm Stephen Carroll. I'm in Brussels where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London with the hosts of the Bloomberg Daybreak Europe podcast. We're up early every weekday keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now. And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break.

0:37So whether it's geopolitics, energy, tech or markets, you're hearing it while it happens. It's smart, calm and to the point. And it fits into your morning. You can find new episodes of the Bloomberg Daybreak Europe podcast by 7am in Dublin or 8am in Brussels, Berlin and Paris. On Apple, Spotify, YouTube or wherever you get your podcasts.

1:02Bloomberg Audio Studios. Podcasts. Radio. News. Good morning. I'm Nathan Hager. And I'm Karen Moscow. Here are the stories we're following today. Karen, we begin with deadlock in D.C. Congress has blown past a midnight funding deadline to trigger the first government shutdown in nearly seven years. Democrats and Republicans remain in a spending standoff, the Democrats want to attach health care and other policy changes to a stopgap spending bill. Senate Minority Leader Chuck Schumer is blaming the majority party. Republicans once again rejected Democrats' proposals to avoid a shutdown, fix health care premiums, and spare Americans the calamity of skyrocketing through the roof health care costs.

1:51Senate Minority Leader Chuck Schumer says unless Congress acts, Obamacare tax credits will expire at the end of the year and premiums will spike. Majority Leader John Thune says Democrats are to blame. Democrats may have chosen to shut down the government tonight, but we can reopen it tomorrow. All it takes is a handful of Democrats to join Republicans to pass the clean, nonpartisan funding bill that's in front of us. Senate Majority Leader John Thune and his fellow Republicans needed at least eight Democrats to support the funding bill. Only three voted with all but one Republican in favor of it last night.

2:25Nathan, the government shutdown means key services for Americans and pay for federal workers are suspended. President Trump is tying the health care funding standoff to immigration. They wanted to be able to take care of people that have come into our country illegally and no system can handle that. And so we're totally opposed on that. But we can't take it. We just can't do it. I'd love to do everybody. I'd love to do the whole world. But our country can't handle people that come into our country illegally. President Trump spoke to reporters from the White House alone. He's suggesting his administration will use this shutdown to conduct mass layoffs of federal workers beyond temporary furloughs.

3:03The Congressional Budget Office estimates about 750 ,000 federal employees will be sidelined each day the government is shut down. And Karen Bloomberg Economics estimates the shutdown could send the unemployment rate from 4.3 to 4.7 percent. That's if it lasts for three weeks and those furloughed workers count as temporarily unemployed. Historically, much of the economic impact from shutdowns has been recouped after it ends. But during the last one, the Congressional Budget Office estimated the U.S. economy failed to recover$3 billion of the$11 billion it lost in overall output. Well, Nathan, U.S.

3:36Stock Index futures are slipping with the start of the first government shutdown in nearly seven years. We get more with Bloomberg's John Tucker. John, good morning. Good morning, Karen. Traders say if the shutdown stretches from days to weeks, it could intensify concern over an economic slowdown and drive treasury yields and stocks lower. The shutdown also means that key economic reports, they're on hold. That includes Friday's critical jobs report, and traders fear that the loss of visibility is going to leave markets in the dark and the outlook for monetary policy from the Fed. Danielle Polly at Oak Tree Capital Management sees it this way.

4:10In the past, shutdowns have had a limited effect on bonds and stocks, But with valuations so stretched in equities today, this time potentially could be different. While non-essential federal workers will be furloughed, the Trump administration has said they're looking to make some of those cuts permanent. And that could create a shock, just as Fed policymakers are focusing on the labor market. In New York, I'm John Tucker, Bloomberg Radio. Okay, John, thank you. And speaking of the labor market, the White House has withdrawn the nomination of E.J. Antony to lead the Bureau of Labor Statistics.

4:45His nomination was seen as an attempt by the president to gain control over the agency responsible for that key economic data, including the monthly jobs report and the consumer price index, which is used to measure inflation. Bloomberg's Miles Miller has more on the surprise reversal. E.J. Antonio was just too partisan from the from the Heritage Foundation, which has a lot of connections to the current Trump White House. And surely that he was just too partisan. And in addition to that, that they did not feel he would have smooth sailing on Capitol Hill. Bloomberg's Miles Miller adds the Senate had not yet set a date for a confirmation hearing.

5:25Nathan, as traders remain in the dark with economic data should the shutdown carry on, they may rely more heavily on Fed speak. And we heard from Chicago Fed President Austin Goolsbee yesterday discussing the impact of tariffs on interest rates. I thought rates are going to come down in that environment. And I was saying I thought they had a fair bit of ways to go when they announced the tariffs at those kind of rates, especially in manufacturing, also in agriculture. It was a hair on fire kind of moment where a lot of folks in the in various manufacturing industries were saying we can't if these are the rates, we're not going to survive.

6:08We're going to see a real closing out. Austin Goolsbee spoke at an agricultural conference hosted by the Chicago Fed. He also expressed concern about some government officials supporting the idea of giving the Trump administration the power to influence interest rates. While the standoff continues on Capitol Hill, Karen, President Trump says his administration is close to ending a standoff with Harvard and finalizing a$500 million deal. Speaking in the Oval Office alongside Education Secretary Linda McMahon, the president explained what Harvard plans to do once that agreement is reached. We're in the process of getting very close and Linda's finishing up the final details and they'd be paying about$500 million and they'll be operating trade schools.

6:52They're going to be teaching people how to do AI and lots of other things. President Trump's deal with Harvard would end one of his highest profile clashes with American universities. It's not clear if a settlement would include an independent monitor. That's something Columbia University accepted in its own agreement. And finally, Nathan and Company News, Pfizer has agreed to cut some prices by up to 85 percent and sell directly to the public in the U.S. The move allows Pfizer to avoid tariffs on the pharmaceutical industry for three years and addresses President Trump's argument that Americans are paying more for medicines.

7:25In remarks heard here on Bloomberg, Pfizer CEO Albert Bourla talked about the deal at the White House. For years, other rich nations refused to pay the fair share for the medical innovation. And as a result, Americans had to assume this proportional cost on their soldiers. This situation, we all knew, is not sustainable. Pfizer CEO Albert Borla was speaking alongside President Trump. Other major drug makers are expected to follow the move.

7:57Time now for a look at some of the other stories making news in New York and around the world. And for that, we're joined by Bloomberg's Monica Ricks. Monica, good morning. Hey, good morning, Karen. A federal judge says the Trump administration unconstitutionally targeted non-citizens for deportation over pro-Palestinian protests. Bloomberg's Amy Morris has that story from Washington. A federal judge in Boston ruled a U.S. policy that targets international students for removal on ideological grounds is unconstitutional, violating the First Amendment. The judge says the policy was arbitrary and capricious and accused Homeland Security Secretary Kristi Noem and Secretary of State Marco Rubio of misusing their powers.

8:37U.S. District Judge William Young also ruled the administration violated the Administrative Procedure Act, so a hearing on that is to be scheduled later. In Washington, Amy Morris, Bloomberg Radio. President Trump says Hamas has a few days to accept a peace proposal he says Israel's already agreed to. We're going to do about three or four days. We'll see how it is. All of the Arab countries are signed up. The Muslim countries are all signed up. Israel's all signed up. We're just waiting for Hamas, and Hamas is either going to be doing it or not, and if it's not, it's going to be a very sad end.

9:13He says the deal would include the release of Palestinian prisoners in exchange for hostages. Rescuers are scrambling now to find survivors after a powerful magnitude 6.9 earthquake hit the Philippines last night. At least 69 people have died. Meantime, forecasters watching two big storms in the Atlantic. Here's Bloomberg's meteorologist Craig Allen. Hurricane Humberto is still in the Atlantic. A Category 1 with 80 mph winds less than 300 miles away from Bermuda, but will ride up and over Bermuda and stay away from the island except for the rough surf and dangerous beach erosion and rip currents.

9:50Meanwhile, Hurricane Imelda has become the more important storm with 85 mph winds and is on a track right now to directly hit the island of Bermuda with winds that could exceed 100 mph may very well be a Category 2. Global news 24 hours a day and whenever you want it with Bloomberg News Now. I'm Monica Ricks and this is Bloomberg. Karen Nathan. Thanks, Monica. Time now for our Bloomberg Sports Update. And for that, we bring in John Stashauer. Thanks, Karen. The start of the baseball postseason, three low-scoring games. And then the Dodgers beat the Reds 10-5 in L.A. They hit five home runs, two by Shohei Otani.

10:25The Red Sox beat the Yankees 3-1. Garrett Crochet at one point retired 17 batters in a row. Detroit won 2-1 at Cleveland. Tarek Skubel struck out 14. The Cubs with back-to-back home runs in the fifth inning beats San Diego 3-1. The Angels, another team that will need a new manager next season. Ron Washington will not return. He didn't manage the second half this past season after heart surgery. That's your Bloomberg Sports Update. Stay with us. More from Bloomberg Daybreak coming up after this. This is Caroline Hyde. And I'm Ed Ludlow, inviting you to join us for Bloomberg Tech, a daily podcast focusing exclusively on technology, innovation and the future of business.

11:04Every weekday, we bring you the top headlines from the world's biggest tech companies. From finance to defence, AI to entertainment and from startups to the magnificent seven. We highlight the latest stories of the people and companies pushing the tech sector to new frontiers and the politics that shape global tech markets. We do this all every weekday, then bring you the most important conversations and analysis in our podcast. Search for Bloomberg Tech on YouTube, Apple, Spotify or anywhere else you listen. Join us every afternoon on your commute home and stay ahead of the tech news cycle. That's the Bloomberg Tech Podcast.

11:38I'm Caroline Hyde in New York. And I'm Ed Ludlow in San Francisco. Subscribe today wherever you get your podcasts.

11:57This is Bloomberg Daybreak. Good morning, I'm Nathan Hager, and for the first time in nearly seven years, a government shutdown is underway in Washington. But even before the funds lapsed just after midnight, the finger-pointing had been well underway in the Senate. The Democrat caucus here in town, in the Senate, has chosen to shut down the government over a clean, nonpartisan funding bill. Republicans are plunging America into a shutdown, rejecting bipartisan talks, pushing a partisan bill, and risking America's health care. And that was Senate Majority Leader John Thune and Minority Leader Chuck Schumer hours before this latest shutdown took effect.

12:38Joining us this morning, Terry Haynes, the founder of Pangea Policy. Terry, good morning. This is the first shutdown in nearly seven years, but certainly not the first government shutdown ever. Will this one be any different? Good morning. Hi, good morning, Nathan. I think it will not be a lot different in the sense that it won't be very long. And in two weeks, everybody will have forgotten what the fight was about. And there was very unlikely to be much economic impact. One major bank came out with a very good study that showed that of the 14 shutdowns that happened since Reagan became president, so 45 years ago, So in 10 of them, the S &P was up from the time that the shutdown started to the time it ended.

13:27So I think it's unlikely to have any lasting economic impact or markets impact, that's for sure. Well, how do you see this playing out? Because in the moments leading up to this, both sides seem pretty dug in, particularly the Democrats when it comes to their demands for health care spending in a stopgap. I think a couple of things. I think that, firstly, as I've said to you before, I think both parties want to shut down for political reasons. And for different political reasons, Democrats need to show some fight and some resistance to the bad orange man. So they're doing that. I also think it's not going to be a long one for a couple of reasons.

14:06One is that all Democrats need. Democrats are the ones doing the asking. So I'm not being partisan here. They have the more complicated position. Republicans just want to keep things open. Democrats want stuff. They say they want the health care stuff. All they need to do to declare victory is get negotiations with Republicans. Republicans have already indicated they're interested in doing that, just not on this bill. So that's a fairly easy win. Beyond that, you can already see the cracks in Schumer's side. You had three defections yesterday, Fetterman, Cortez Masto, and King. who's independent, but caucuses with Democrats.

14:49And the longer this goes on, the more pressure there will be from public employee unions, who are big supporters of Democrats, to want to bring those folks back. So there's going to be a lot of pressure on the Maryland and Virginia senators, who represent hundreds of thousands of those folks, and they'll be pushing for some sort of resolution. After that, you only need one more vote in order to keep the government open. So, So, you know, I think the tide goes out pretty quickly on Senator Schumer unless he tries to declare victory here. You mentioned the Maryland and Republican senators, obviously constituents of a large number of federal employees there.

15:29Do you think this indication from President Trump that he could use this shutdown to enact mass federal layoffs could lead to some cracks here? Is that what you're getting at? Oh, exactly so, yes. I mean, there is a threat to government employees' employment status that hasn't existed before. So far, the administration has not kind of pulled the ultimate trigger on this. Instead, talking about furloughing people instead of riffing or completely getting rid of positions. But that's a distinction without much difference to people who are very concerned about their jobs. You know, I don't anticipate that you're going to have a situation where the four Democratic senators from those two states are going to publicly break with Schumer or anything like that.

16:19But there's going to be an awful lot of pressure brought to bear to try to figure out something that helps and improves the status of those public workers. This is Bloomberg Daybreak, your morning podcast on the stories making news from Wall Street to Washington and beyond. Look for us on your podcast feed by 6 a.m. Eastern each morning on Apple, Spotify, or anywhere else you listen. You can also listen live each morning starting at 5 a.m. Wall Street time on Bloomberg 1130 in New York, Bloomberg 99.1 in Washington, Bloomberg 92.9 in Boston, and nationwide on Sirius XM Channel 121. Plus, listen coast-to-coast on the Bloomberg Business app now with Apple CarPlay and Android Auto interfaces.

17:04And don't forget to subscribe to Bloomberg News Now. It's the latest news whenever you want it, in five minutes or less. Search Bloomberg News Now on your favorite podcast platform to stay informed all day long. I'm Karen Moscow. And I'm Nathan Hager. Join us again tomorrow morning for all the news you need to start your day right here on Bloomberg Daybreak.

17:35This is Special Agent Regal, Special Agent Bradley Hall. The time is approximately 11.15 a.m. About to start a consensual telephone call with Dr. Daiwa Zhang. China's Ministry of State Security is one of the most mysterious and powerful spy agencies in the world. But in 2017, the FBI got inside.

18:15I've never seen that much evidence in my entire career, and I don't think we'll ever see that much evidence again. I now have several terabytes of an MSS officer, no doubt, no question, of his life. And that's a unicorn. This is a story of the inner workings of the MSS. and how one man's ambition and mistakes opened its vault of secrets. Listen to The Sixth Bureau from Bloomberg Podcasts starting on February 13th on the iHeartRadio app, Apple Podcasts, or wherever you get your podcasts.