Vance Says US Headed for Shutdown, US & Israel Agree to Gaza Peace Plan

0:00Donald Trump is rewriting the Washington rulebook and reshaping the global economy. If you're trying to connect the dots behind the headlines, Bloomberg's Trumponomics podcast is here to help. I'm Stephanie Flanders, head of government and economics at Bloomberg. Every week, I'll bring you a smart, focused conversation with reporters and experts from Washington, Wall Street and beyond. Listen to new episodes every Wednesday and follow Trumponomics wherever you listen. Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy.

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1:14All investing and subject to risk, Vanguard Marketing Corporation Distributor. ABC Wednesdays. The Emmy-winning comedy Scrubs is all new. This is a whole new chapter for me. No more sad sack. That's what I'm talking about. I want both of our sacks to be fun. You two idiots are perfect for each other. From executive producers of Ted Lasso and Shrinking. We were all a part of this victory. Now get those nachos out of the preemie warmer. Nachos! Feels like there's more applause for the nachos than my speech. The new season of Scrubs, Wednesdays 8, 7 Central on ABC and stream on Hulu.

1:50Bloomberg 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 the countdown to a government shutdown. With less than 24 hours until the deadline, congressional leaders remain far apart after meeting with President Donald Trump at the White House. Democrats are calling for an extension of health care subsidies in a stopgap spending bill and to reverse the Medicaid cuts that are in the president's tax law. Vice President J.D. Vance says Democrats need to back down. Let's do it in the context of an open government that's providing essential services to the American people.

2:32That's all that we're proposing to do. And the fact that they refuse to do that shows how unreasonable their position is. I think we're headed to a shutdown because the Democrats won't do the right thing. And like Vice President J.D. Vance, Senate Minority Leader Chuck Schumer is placing blame on the other party. We laid out to the president some of the consequences of what's happening in health care. And by his face and by the way he looked, I think he heard about them for the first time. And so he seemed to, for the first time, understand the magnitude of this crisis. And we hope he'll talk to the Republican leaders.

3:04Now, later on Capitol Hill, Senate Minority Leader Chuck Schumer suggested Democrats could budge on some priorities, like extending subsidies for Affordable Care Act premiums and stopping the White House from using fast-track measures to rescind federal funds. But Schumer says Democrats won't pass a stopgap without acting on Obamacare credits. He says millions of Americans are about to get notices of massive premium increases. Government funding without a deal is set to expire at one minute after midnight tonight. Well, Nathan, federal agencies are preparing for a possible government shutdown with detailed plans that call for temporary furloughs but not permanent mass firings.

3:41The White House pressed departments to consider mass layoffs in their contingency planning. At least eight cabinet departments that represent more than two-thirds of the federal workforce are calling for more than 400 ,000 employees to be sent home as non-essential. But those plans contain only one reference to permanent staff reductions. And Karen, as the president negotiates on a possible shutdown, he is also focusing on a ceasefire between Israel and Hamas. Both the president and Israeli Prime Minister Benjamin Netanyahu say they have agreed to a 20-point plan to end the war in Gaza. Bloomberg's Amy Morris reports from Washington.

4:16President Trump says his administration's 20-point plan will end the war between Israel and Hamas in Gaza. And Israeli Prime Minister Benjamin Netanyahu has already agreed to it. I also want to thank Prime Minister Netanyahu for agreeing to the plan and for trusting that if we work together, we can bring an end to the death and destruction that we've seen for so many years, decades, even centuries. Netanyahu says the deal will be done one way or another. This can be done the easy way or it can be done the hard way, but it will be done. Now, if both parties accept this 20-point plan, it would end the conflict immediately, and all hostages, living and dead, will be returned.

4:57In Washington, Amy Morris, Bloomberg Radio. Amy, thank you. Also happening around the nation's capital, President Trump and Defense Secretary Pete Hegseth will address U.S. military officials in person at a Marine base in Quantico, Virginia, today. Last week, Hegseth summoned top military commanders around the world to the base for the meeting. Bloomberg's Wendy Benjaminson says security is top of mind. The fact that hundreds of general officers, including one stars, two stars, three stars, four stars, and their enlisted aides were coming means that there was already security in place. Bloomberg's Wendy Benjaminson in Washington.

5:33A Pentagon spokesman did not provide a reason for the meeting or say what Hegseth planned to tell the high-ranking officials. We've got some developments in the trade front as well, Karen. President Trump has ordered 10 percent tariffs on imports of softwood, timber and lumber and a 25 percent duty on kitchen cabinets, vanities and depolstered furniture. We get more from Bloomberg's Balazs pens. We saw the same thing in the pharma industry. And this follows an investigation by the U.S. government into the market conditions, which means that this is a sectoral tariff. The country that is facing the biggest impact from this is Canada, which accounts for a large majority of the timber sales into the U.S.

6:13Bloomberg's Balazs Pans adds the tariffs are set to go into effect October 14th. Some increases are targeted for next year. President Trump says the actions would shore up domestic manufacturing, but home builders have warned they could also deter investments in new houses and renovations. communications. Well, Nathan, a rally in U.S. stocks risks losing steam due to concerns about a looming U.S. government shutdown. And we turn to the markets now with Bloomberg's John Tucker. John, good morning. And good morning, Karen. Traders have been focused on the jobs report scheduled for Friday, but it may not happen.

6:44And that is clouding the picture for investors. The Bureau of Labor Statistics is going to delay the release of the scheduled Friday jobs report and suspend all operations in the event of a shutdown. This is according to a contingency plan published by the Department of Labor. Next week's inflation data could follow. Also in the driver's seat for investors, Fed policy, and that will depend on the data. At a conference yesterday, Federal Reserve Bank of St. Louis President Alberto Moussala said policymakers can't rush into anything. I'm open-minded to future potential reductions in interest rates.

7:22I do believe we need to tread cautiously. It doesn't stop there. The uncertainty around trade policies also persists, as President Trump did say he'd impose new tariffs through a pair of sweeping yet confusing plans. In New York, I'm John Tucker, Bloomberg Radio. Okay, John, thank you. The Trump administration is ramping up its fight with higher education. The Department of Health and Human Services says it's referring Harvard University for administrative suspension and debarment proceedings. That would exclude the university from entering into contracts with all government agencies or receiving any federal funding.

7:56That includes research grants and student aid. Several months ago, HHS informed Harvard leaders that the university acted with deliberate indifference toward allegations of campus anti-Semitism. Harvard now has 20 days to request a hearing with an administrative law judge at HHS to appeal the decision. Nathan, in Financial Services, Jeffries posted its best fiscal third quarter revenue ever, with total revenue jumping almost 22%. The firm said the last quarter was its best ever for advisory revenue as deal activity picked up and market conditions improved. Trading activity also came in higher than a year ago.

8:32Jeffries CEO Rich Handler says despite uncertainties, businesses are forging ahead with plans for initial public offerings and mergers and acquisitions. And finally, Karen, Boeing has reportedly begun work on a next-generation single-aisle aircraft that could eventually replace the 737 MAX. This is according to a Wall Street Journal report that says the new model is in its early stages, and it comes amid growing concern about 737 MAX's safety.

9:02Time 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 Michael Barr. Michael, good morning. Good morning, Karen. Authorities in Michigan say search crews did not find any additional bodies inside a church of Jesus Christ of Latter-day Saints Chapel, where a Marine veteran opened fire and set the building ablaze, killing four people. Police had fear that they would find more victims in the charred wreckage, but now believe everyone is accounted for after Sunday's attack. Michigan Governor Gretchen Whitmer. This might be a familiar pain, but it hurts all the same.

9:40every time. We cannot keep living our lives like this. Investigators are focusing on what motivated Thomas Sanford to ram his pickup truck into the church in Grand Blanc Township. The suspect was also killed while exchanging gunfire with officers. Eight other people were wounded and are expected to recover. Charlie Javis was sentenced to 85 months behind bars for defrauding J.P. Morgan Chase in its$175 million acquisition of her student finance startup, Frank. U.S. District Judge Alvin Hellerstein ordered Javis to forfeit$22.4 million and to pay$287.5 million in restitution to J.P. Morgan in addition to her prison time.

10:27Javis was convicted by a New York jury in March for lying and faking user data to mislead J.P. Morgan into believing her site had more than 4.25 million users when it actually had fewer than 300 ,000. The site of armed camouflage and masked border patrol agents making arrests near famous downtown Chicago landmarks has amplified concerns about the Trump administration growing federal intervention across U.S. cities. Illinois leaders mourn Monday of a National Guard deployment. Governor Pritzker said he was alerted to federal officers using tear gas, pepper spray, rubber bullets, and flashbang devices on peaceful protesters and journalists in the Chicago suburb of Broadview.

11:13In any other country, if federal agents fired upon journalists and protesters when unprovoked, what would we call it? Memphis, Tennessee, and Portland, Oregon, have also braced for a surge of federal law enforcement. President Trump says it's necessary blasting Democrats for crime and lax immigration policies. Global News, 24 hours a day and whenever you want it with Bloomberg News Now. I'm Michael Barr and this is Bloomberg, Karen. Thanks, Michael. Time now for our Bloomberg Sports Update. And for that, we bring in John Stashauer. Thanks, Karen. We pour into the Miami Dolphins getting their first win, 27-21 over the still winless Jets who had 13 penalties and 3 fumbles.

11:56Denver an easy win over Cincinnati 28-3 both teams are 2-2. The baseball postseason begins today with Detroit and Cleveland. San Diego visits the Cubs the Red Sox and Yankees meet in New York. The Reds play the Dodgers in LA. The Minnesota Twins fired manager Rocco Baldelli. The San Francisco Giants fired manager Bob Melvin. That's your Bloomberg Sports Update. Stay with us more from Bloomberg Daybreak coming up after this. Today's show is brought to you by Vanguard. To all the financial advisors listening, let's talk bonds for a minute. Capturing value and fixed income is not easy. Bond markets are massive, murky, and let's be real, lots of firms throw a couple flashy funds your way and call it a day.

12:38But not Vanguard. At Vanguard, institutional quality isn't a tagline. It's a commitment to your clients. We're talking top-grade products across 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 and subject to risk, Vanguard Marketing Corporation Distributor.

13:17new chapter for me. No more sad sack. That's what I'm talking about. I want both of our sacks to be fun. You two idiots are perfect for each other. From executive producers of Ted Lasso and Shrinking. We were all a part of this victory. Now get those nachos out of the preemie warmer. Nachos! Feels like there's more applause for the nachos than my speech. The new season of Scrubs. Wednesdays 8, 7 central on ABC and stream on Hulu. Hello, I'm Stephen Carroll. I'm in Brussels where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London. We're the hosts of the Bloomberg Daybreak Europe podcast.

13:52We'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 So 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

14:44Coast to coast on Bloomberg Radio, nationwide on Sirius XM, and around the world on Bloomberg.com and the Bloomberg Business app. This is Bloomberg Daybreak. Good morning. I'm Nathan Hager with less than 24 hours to go until the deadline the U.S. government may be careening toward a shutdown. That seems to be the way Vice President J.D. Vance sees it after talks with Democrats at the White House. Vance says the Democrats need to budge on their health care demands. You don't put a gun to the American people's head and say, unless you do exactly what Senate and House Democrats want you to do, we're going to shut down your government.

15:21That's exactly what they're proposing out there. That was Vice President J.D. Vance at the White House. This morning, we're joined by Bloomberg's Rosalind Matheson. And, Ros, I guess it makes you wonder whether all those talks at the White House, after they were delayed by the president for several days, got us any closer to a resolution on just how far apart these parties are right now. Good morning. Good morning. Well, as you say, after these talks yesterday, they do still seem quite some way apart. And certainly there's a lot of bluster going on. You just played the comments from Vice President J.D.

15:56Vance. You also had the Senate Democratic leader Chuck Schumer saying there are still large differences between us. And he was speaking after the meeting. Obviously, the key part of this is the Democrats' demands to extend healthcare subsidies and also to reverse some of the funding cuts to Medicaid that were included in Trump's big tax bill that was passed earlier this year. So the question is, at this stage, is there any room for compromise? And what might that look like? Will the Democrats entertain a compromise? Because the White House is clearly setting up a narrative that any shutdown and its resultant impact is because the Democrats wouldn't budge.

16:38And even if there is something, is it merely a stopgap? Are you just agreeing to keep funding going for a week or 10 days while you try and get a deal done? Is it simply pushing this down the road by a week to try and create some space to negotiate? But it does seem fundamentally there's still that disagreement, particularly around health care subsidies. Now, when it comes to the health care, Roz, are we hearing any sort of wiggle room from the Democrats as far as what aspects of the health care demands they're making that they might be willing to put off until some kind of stopgap is passed? Well, there is some conversation around that.

17:19And there was a suggestion, at least again, from the Democratic leader that they could settle for some of their priorities rather than all of them. And the key one here, the red line seems to be extending the subsidies for Affordable Care Act premiums. And that seems to be the number one. And so can they have an agreement around that and push some of the rest of it down the road? or do they agree to extend those subsidies at least for a certain period and then phase them out in a more staggered fashion down the line? I mean, that seems to be really the red line there that we're seeing. I mean, also we did have J.D.

17:56Vance saying that some of the democratic positions Donald Trump thinks are reasonable, quote, reasonable, and that may be addressing rural healthcare funding as one area from compromise. So there are some little glimmers of hope there so far. on that side, but there's still, you know, fundamentally quite big differences going on. Now, we have had government shutdowns in the past. We've seen them happen for, you know, various lengths of time. But in terms of what we could be looking at around economic impact, the impact on the data, what are some of the scenarios here? Well, we know that it would delay some of the key economic indicators, particularly, again the employment report that's due out on Friday.

18:40You also have the usual thing of hundreds of thousands of federal workers being temporarily furloughed and others work without pay because you do need to keep certain services going. And the knock-on effect of that could be brief or it could be protracted. Shutdowns are those kind of cliff moments where people do end up tending to negotiate. So the question would be how long it went on for. Is it as long as the previous shutdown, which occurred, of course, in 2018, 2019. And that's when funding lapsed for five weeks. Is it as long as that? Do you see a bigger impact on the economy and therefore on markets?

19:20But in a way also for markets, a lot of the decision making has coalesced around the White House and arguably less so in Congress. Donald Trump uses a lot of executive orders on things that impact the economy, including on the trade side in a way perhaps bypassing Congress. But obviously, some of the money that fans out into these programs do go through a congressional route. So the impact on the economy, it's a bit hard to say in advance. Again, it depends primarily on just how long a shutdown would go for. All right. Well, we know that it's not too long until that deadline. So we'll continue to keep our eyes on Washington.

19:58Thank you for this. That's Bloomberg's Rosalind Matheson with us this morning. Now we want to turn to the latest on the war in Gaza, because we've had developments from Washington on that front as well. Both President Trump and Israeli Prime Minister Benjamin Netanyahu, after a White House meeting, say they have agreed to a 20-point plan designed to end the war. Now the question, it seems, is will Hamas agree to this plan? And for more on that, we're joined by Bloomberg Horizons anchor Jumana Bersechi. Jumana, thank you for being with this? I mean, that is an open question, isn't it? Considering that Hamas has walked away from previous peace plans in Gaza.

20:34Good morning. Yes. Good morning to you. Yes, most definitely. We are awaiting an official response from Hamas. One senior representative from Hamas spoke to Al Jazeera channel last night and said that they were reviewing the proposal, that they had not been privy to it beforehand. But the question does remain, are they going to accept the terms of the proposal because this could be quite a watershed moment. And I would say, you know, one of the key characteristics that changes or that distinguishes yesterday's proposal from prior proposals is it does have buy-in from many regional allies. Many Arab states have thrown their weight behind it, including the likes of Qatar.

21:12A very important step was taken prior to the release of this 20-point plan, whereby the Israeli prime minister had a phone call with the Qatar APM extended an olive branch and expressed regret over the attack that took place in Doha. And both sides have now sort of pledged to push on with these mediation efforts. And this morning you got a statement from all Arab states in the region saying that they were behind and putting their weight behind the proposal put forward by the Trump administration. So that does signal that they in turn perhaps will put pressure on Hamas to accept the terms of this proposal.

21:49But of course, it would mean that Hamas would have no rule and no say in future governance of Gaza and also would lead to their eventual disarmament. So we're waiting to hear from them. They have 72 hours to respond. That was a fundamental aspect of what Hamas has rejected in the past, this idea that it would have no role in a post-war Gaza. I mean, how much pressure can the Arab leaders put to bear on Hamas? I mean, who's there to negotiate, given that attack that happened recently on Hamas leaders in Doha? Yeah, well, the attack on Hamas leaders actually was unsuccessful in that it didn't manage to take out the senior Hamas negotiators.

22:31So they're still operating. I will say that one of the points of the plan includes an offer of amnesty to any Hamas operative who hands over their weapons and commits to coexistence. So that's an important line. So we'll see whether that incentivizes them. Ultimately, we've been here before. They've seen proposals like this in the past. But I think the real difference this time around is that you have Arab support behind it. And if you look at the details of the proposal, you know, there are several paragraphs about what post-Hamas Gaza governance will look like, including an apolitical Palestinian committee that will set up.

23:10There will be oversight by what President Trump is calling a transitional board of peace, chaired by none other than himself, alongside the former UK Prime Minister Tony Blair and other heads of state yet to be named. And then it also talks about a security force that's going to be established by Arab states, including the likes of Egypt and Qatar, who will take over some security operations within Gaza until there is a credible Palestinian force that can do the same. But ultimately, there is also a line in this 20-point proposal that is about this maybe, and the may is important here, maybe paving a pathway towards an eventual Palestinian state with the big caveat of Hamas obviously not being a part of it, but then the Palestinian Authority also having to reform itself, which is one of the key parameters that is set by the Israeli government.

24:02Just 30 seconds left. That language about a Palestinian state, could that complicate things for Prime Minister Netanyahu and some of the hardliners in his coalition? Yes, absolutely. Very important question. And there's been a lot of speculation about the wording behind it because it says may, not necessarily will. And so there is some obscurity in the phrasing, but I think it had to be put in there because of some of the efforts that are taking place behind the scene from the Arab states. and to put a line under the Qatar attack. This is something that the Gulf allies in the region had been pushing for.

24:35They would not want to continue with the discussions without some form of a promise or a pathway towards eventual Palestinian statehood. 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.

25:18And 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.