115. Trump’s Gamble: The Night Before Government Shutdown

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1:22Welcome to The Rest is Politics US. I'm Katty Kay. And I'm Anthony Scaramucci. OK, this has been a very busy weekend in American politics and a not particularly happy or inspiring one. And there is a lot for us to talk about. So we're going to try and cover as much of it as we can, which is the prospect of a government shutdown, the prospect of the president sending troops to Portland. We'll talk about that after the break. And also, very sadly, two shootings over the weekend, which I think are worth covering for us, even from a political point of view, because they get to a sense in the country, this emerging sense of in the country of a lack of leadership and a kind of culture of blame and who is the victim and us and them.

2:05But first of all, Anthony, it was a very good weekend for golf. How embarrassing for the American people. But that's what happens because the fish thinks from the head down or monkey see, monkey do. So Trump goes out there and he riles up the crowd. And then the crowd thinks it's appropriate to throw beer at Rory McIlroy's wife. I don't know. Do you think that was appropriate, Caddy? I find the whole thing to be offensive. As an American, of course, I wanted the American team to win because we have a rivalry and that's a fun thing. And by the way, we could have been talking about the almost comeback of the American team.

2:41I absolutely knew nothing about golf. I have never played golf in my life. But my golfing friends tell me that actually in the last moments, the Americans played very well on the last day. And we could be talking about that, but we're talking about boorish behavior of heckling, being rude to the European players, throwing beer at Rory McIlroy's wife instead. And I think you're right. By the way, this is a ton of play in Europe because understandably, the Europeans look at that behavior and extrapolate from that how America is behaving on the world stage at the moment. And so they're equating the two things, fairly or unfairly.

3:15They see how those fans behave and they say, hold on a second, that's what America is doing around the world right now. I think this was America's terrible weekend. I was driving in from Maryland. We went to see friends in a cabin by the Chesapeake and we drove in and I made my husband and son listen to an hour of political news. And by the end of it, they thought I was crazy to have the job I have and wanted to stop the car and get out and change the channel to anything else because it was nonstop bad news. We also have a shooting in Grand Blanc, Michigan. Four people died at the Mormon church, which is another devastation because it's just inexcusable.

3:50The people are in a house of worship and they're being murdered indiscriminately. That was such an awful attack. And the rescuers are still bringing the bodies out because then the guy who drove his car into the church set fire to it. And the poor churchgoers thought that he was in trouble. And so being good people, they went to try and help him, at which point he turns around and starts shooting them. That was heartbreaking. I don't know if you even saw this, Anthony. There was another shooting this weekend in North Carolina at a bar by a river in Southport. And somebody turned up in a boat, a former Iraq veteran.

4:33It looks like both of these shooters were Iraq veterans in both cases. Turned up, clearly had had mental problems, takes out a gun and from his boat, then starts shooting people at the bar as well. I mean, this was an American weekend, and I found it really depressing that you could have this happen. And I think it speaks to, and I know there were shootings all the time in America. I'm not stupid. I've covered far too many of them. But there was something about the accumulation of events this weekend that felt like a country that's sort of on tenterhooks, that feels very tense here. I don't know if I'm being too pessimistic.

5:11Well, again, leadership does matter. And people know that it matters in a corporation, it matters in a political party, matters at the top of the food chain in politics. Of course, the president is saying it's another attack on Christians, which is not clear because we don't even know what the motive is of the shooter. You just look at the profile of the shooter. It doesn't meet the narrative that the hard right would like shooters to be in America. And rather than saying, wow, this is an intractable problem and I'm the president of the United States, you know, Trump has, as we both know, a very healthy ego.

5:49Why not be the president that fixes the gun problem and does the Richard Nixon goes to China business on the guns and said, hey, I'm going to work with the Democrats on this to get legislation passed that would stop or drive down the volume of mass killings in America. You know, we have school parents buying bulletproof backpacks in America for their school children. We now have desks being made in an elementary school where we're teaching the kids to go under the desk and then to close the bulletproof enclosure while you're sitting under the desk waiting for the cops to come while someone's marauding the school with a machine gun.

6:34So none of this is right. None of this makes any sense. But you and I have been doing this podcast now about 18 months, and I have counted 12 major shootings, school shootings, shootings in churches, shootings in bars. And so we're getting a regularity to this, which is once every six or so weeks, we're getting a mass shooting announcement in the country. And we've had times, Anthony, where you and I have spoken before doing the show and said, OK, we're not actually going to cover that shooting because what more can you say about mass shootings in America? It's all been said before. I think we're mentioning these two because there were two during the course of the weekend.

7:18And a couple of things you said about Donald Trump and the politics of this. I actually think Donald Trump is one of the few politicians that if he decided to could do something about guns in the United States. He went there for a moment during his first term when he talked about trying to have some kind of ban on assault weapons. And then the National Rifle Association got to him and immediately reversed course the next day. But he is somebody who in the past has said before he became president that he would like to see some kind of action taken on guns. And because he is a conservative and he has credibility with conservatives in the country, I actually think he is somebody who could do it.

7:54But what was depressing about the reaction to these shootings this weekend, and you got to it there about the profile of the shooter in both cases in North Carolina and in Michigan, the profile does not fit that of somebody from what the president likes to call the radical left. But what was grim was the way the country immediately went to the us and them. And the president did that, too. Yet another targeted attack on Christians. You know, this is an attack on us by them. And I think that's the fault line that's developed. And we've spoken about it since Charlie Kirk's shooting. And all of it plays into this idea that the country is not at war in a kinetic sense, but at war with itself at the moment, though very quickly, there's there's not a search for solutions.

8:37There's a search for blame and victimhood. What kind of advice would you give to a federal worker? The government's about to shut down. It looks like the government, we said this last week, it looks like the government is going to shut down. I mean, unless some miracle happens, let's hope that a miracle does happen. But Trump has said, okay, great, we're going to be letting people go. But guess what? We're not going to be letting you back, or at least a large swath of them are not going to be allowed to come back to their jobs. I guess this is a way to do some cost cutting, I guess, in his mind.

9:09But we know that that cost cutting ends up becoming an economic disaster. Doge Caddy effectively gave governmental officials seven months paid vacation where they let them go. They paid them severance. And they said, oh, my God, we made such a mistake. You now have to come back to the job that we let you go of. So what do you make of all that? And what kind of advice would you give to a federal worker going into this potential shutdown? And how does it differ in your mind from like a George Bush shutdown or Barack Obama shutdown? Why is the American government shutting down? It does this every now and again.

9:47What happens is that federal funding for the U.S. government expires at midnight on September the 30th. If there is not a new bill extending the federal funding, many agencies will have to shut down. There is a standoff over health care funding. Republicans are pushing for a clean, what's called a clean short term funding bill, a continuing resolution through NOVA 21st. Democrats are saying that that bill must include extensions to the Affordable Care Act and reversal of the cuts to Medicaid. So that's what the dispute is about. Democrats are saying, hold on a second, we're only going to allow you to carry on funding the government if you reverse the cuts to health care funding.

10:32Republicans are saying we're not going to do that. And so we're going to dare you to vote against this, in which case there will be a shutdown. What makes this one different is that Donald Trump has said that during the shutdown, if governments have shut, the U.S. government has shut down before. During this shutdown, he has said that he's going to fire up to 100 ,000 federal workers who would then not be allowed to come back to work. That would be devastating to the Washington, D.C. area because there are so many federal workers employed in this city. By the way, that thing of it costing more when you and I were doing our series, which we've done for our founding members on Reagan.

11:06We talked about that in the context of the air traffic controllers strike where Reagan let a whole load of them go because they'd gone on strike and he said it was illegal. And then it cost the government even more money to hire them back again. So you'd think that governments would realize that when you let a whole load of federal workers go, it can end up costing you more on your budget than you say it's going to save you. This one does feel different because Washington, D.C., where I'm speaking from, has already been very hard hit by the firing of federal workers. And some of them have still lost their jobs.

11:37And some of them, by the way, took this voluntary six month severance payment. if they volunteered to quit early on during the Doge thing, those payments run out, I've been told, this week. And so the city could be hit even more if Trump goes ahead and does let 100 ,000 more federal workers go by. He doesn't care about Washington, D.C. But if you start having really large sections of this population laid off and not earning money, that then has a knock-on effect on other things as well in the economy too. I think the politics of this are interesting because generally speaking in the past, when there's been a federal shutdown, it affects the government in control.

12:20I mean, that was the calculation that Democrats made when they allowed the government to shut down during Bush and that Republicans made when they allowed the government to shut down during Obama was that the party that had power over the White House would be the party that suffered. Republicans seem to think that they have enough us and them-ism in the country right now that they can flip that. I don't know if that's true. Do you think it is? Do you think that the administration will suffer? I'm not sure because federal workers, maybe in Northern Virginia and Washington, DC, who are the people that really suffer from this, they probably are Democrats anyway.

12:53And so maybe Trump feels he can let them go and he doesn't have to worry about it. Well, I mean, I think you're right about that. But then let me ask the follow-up question about the gubernatorial race in Virginia, because it looks like that's going to go to the Democrats, right? I mean, it was probably going to go to the Democrats in any way, because Abigail Spanberger, who's the candidate, who's an ex-CIN analyst from the Democratic side, is very, she's very much a centrist. She's been in a head in the polls the whole way through. But yeah, if you want to, if you want to hand the Democrats a state like Virginia, which has a large number of federal workers have a government shutdown because people don't get paid.

13:32I mean, this is tough. This is very tough for federal workers when the government shuts down. I think it's critical to remind people of a couple of things. One, Donald Trump doesn't care. You want to shut the government down, he'll laugh, he'll fly around, do whatever he's doing. He doesn't care. He'll look for the next sporting event to go to to see if he can make a mockery of it. Secondarily, if you're a politician and looking for Trump's help, let me give you a newsflash. You will get no help from Donald Trump. I know this type of personality. He'll almost want the Democrats to win in certain states so that, quote unquote, nobody has replaced him.

14:12He will be relatively agnostic come 2028, because if he's not going to be in power, what's the sense of having anybody be in power related to him, if anything, he'll just go to show that I was the greatest and the best and everyone else's dog do. So to me, we're in a state of violence. We're in a state of mockery. And we're in a state of indecisive leadership, Caddy. So we've got a situation where America needs to lead NATO as it relates to the Ukrainian war. We're not going to do that. we need America to help lead to a resolution in Gaza. If you listen to Bibi Netanyahu's speech, he more or less says, look, I own this situation.

15:01Trump's going to let me do whatever I want. And this is only going to end when I decide when and if it's going to end. And so now, this stuff, again, not to sound repetitive, but it's very important for people to understand this, This stuff hangs on the market. This stuff puts pressure on risk assets. And when risk assets are under pressure, it slows down capital allocation, slows down hiring decisions. So there's a butterfly effect to all of this. Can I ask you about that? I was having a conversation in the context of Jim Comey, and we haven't even had a chance to talk to that because there's been so much news.

15:39The former FBI director who was indicted by Donald Trump, by the, as you call it, the Trump family law firm on Friday. And I had a conversation over the weekend with a law professor about this, who's very much on the conservative side, but he was saying, you know, OK, yes, he understood the arguments that Democrats had used lawfare. Obama used the IRS to go after conservative organizations. Under President Biden, Donald Trump was prosecuted. That was he was saying a stretch too far, particularly in the case of the kind of the New York documents case. But what he couldn't understand, but he didn't at all like what was happening now.

16:23He said that really is crossing a Rubicon. But he said it's interesting about the markets. And I was going to ask you this. Why aren't the markets responding? I mean, you look at the structural problems that America is facing at the moment in terms of the commitment to rule of law, a government that is shut down, insecurity around the country, the Congress being sidelined, the checks and balances not working as people thought they were going to work, but particularly in terms of rule of law. Why do people keep pouring money into the markets as if none of this matters? Do the markets know something we don't know as political analysts?

17:01Or are they fallible as people were in 1929 and people were in 2008 and they're making a mistake? Listen, I'm not a market timer, so I'm not going to venture out on the limb and say that people are making a mistake. But what I can tell you is if you look at the metrics of the market, the market looks overpriced. What I can tell you is people like Warren Buffett have taken$300,$400 billion out of the market over the last couple of months. You know, I would say in the last eight months, he's reduced his positions in things like Apple Computer, some of the bank stocks, etc. And what I can tell you, Caddy, is that the top 20 largest companies in the U.S.

17:48have a market capitalization now equal to U.S. GDP. And so that is bad news because those companies only have combined profits of about$200 billion. And so when you think about the nation's GDP of$27,$28 trillion, it's just a price earnings ratio that's also out of whack. So if you said to me there's going to be a 15 % or 20 % correction possible, I think the market sentiment, though, is that there's room to cut rates. But again, if you look at the inflation numbers, it does look like Powell is right to be cautious on cutting rates because he doesn't want to overheat the inflation situation. And last but not least, and I'm not trying to make this, this is the rest of his business, but it's all tied together.

18:38Gold. Gold is up 43 % this year. Gold over the last five years, Caddy Kay, has outperformed the S &P 500. So you take the 500 greatest companies in the country and a cube of gold. Well, the cube of gold has outperformed all those men and women working together, generating those profits. Why? Because of the pressure on deficit spending and the fear that people have on inflation. Can I quickly ask you one question on that? You mentioned deficit spending and inflation. You don't think that the stress on the American system when it comes to issues like rule of law, free speech, expansion of executive power, that those things are also putting some stress and investors might be thinking, is America as stable as we thought it was?

19:30Or do we need to go to a safe haven like gold? Well, listen, they definitely have. That's the reason why gold is up. But you also look at flow of funds data. If you went to, not to get overly wonky, but if you went to a Bloomberg terminal and looked at flow of funds data, incremental funds are flowing away from the U.S. from international capital allocators. You could see it in the returns of the DAX. You can see it in the returns of the FTSE. But again, I want people to think about this. The US dollar has lost 28 % of its value since 2020. So said differently, you had a dollar in 2020, you went to sleep, you woke up in 2025, you have 72 cents of purchasing power.

20:14And if you don't think that scares the daylights out of people, it does. And so what are they going to do? They're going to push money into stocks. They're going to hope that stocks will act as an inflation hedge. Those companies will have some pricing power. It'll drop to earnings and protect them. They're going to push money into gold because if they see gold as a store of value, they'll push money into Bitcoin. They see that as a form of digital gold. But yeah, the stock market is still humming because there's a tremendous amount of capital out there. And even though these things are going on, it's like the age old thing with the rock caddy.

20:51My dad was in the construction business. You hit the rock once, nothing happens. You hit it again with a sledgehammer, nothing happens. On the 100th time, you hit the rock, it shatters. And it's an accumulation of everything. But it's at that moment, it shatters after everything compounds in terms of blasting the rock. So I wouldn't be surprised if we're sitting here with a fairly steep correction by the first quarter of next year, which will put pressure on the Republicans or the midterms. The Republicans six months ago said, whoa, they're running the card table. They're even going to win the midterms.

21:27And then they did the big, beautiful spending bill. Then it looked like they were going to lose the midterms. Then Charlie Kirk, unfortunately, tragically died through assassination and murder. And it looks like the Republicans have coalesced again. And now I think it's even money as to who will potentially win the midterms. But if you looked at Trump's behavior, Donald Trump's behavior, and you looked at what's gone on in terms of no one liking the big, beautiful spending bill, you would be shocked at the Republicans or even in competition to win the midterms, Gaddy. But they are because of the disarray of the Democrats.

22:04That and there's a kind of AI sugar high that is driving markets and making people feel frothy. OK, we're going to take a quick break and come back and talk about the other good news in the country, which is the possibility of National Guard troops being deployed in Portland, Oregon.

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23:35Welcome back to The Rest is Politics US. Amongst all the other news last week, and there was a ton of it, Donald Trump said that he was ordering the deployment of National Guard troops in Portland, authorizing full force. That was his quote, if necessary. He says that he's directed these troops to be deployed in the city in Oregon in order to protect what he's calling the war ravaged Portland, saying that immigration facilities are under siege from attack by Antifa and other domestic terrorists. Of course, we saw a shooting at an ICE facility that was in Texas last week. So this order comes after that.

24:16He has been toying with the idea of sending National Guard troops into other cities, into New Orleans he's talked about. He's talked about Chicago. Obviously, we had them here in Washington, D.C. But this move into Portland, Oregon seems to be the most concrete. What I found interesting about this, Anthony, is that Portland immediately sued the White House over this. And they're using very similar language to a suit that was used by California, which California won against the White House. and do we think that the White House, do you think, since you play a lawyer on television and now we're actually educated as a lawyer, unlike me, do you think the White House has grounds, legal grounds to do this?

25:08Because what the White House is saying is, okay, we know, seems to be, tell me if I'm wrong, we know that there are legal questions about the White House's ability to use troops as law enforcement in America. But if we say there is an insurrection or a riot or something that is critical, almost like a rebellion, then we can get away with it. But actually, in California, they didn't get away with it legally. So explain to me what's going on. Okay. So yeah, exactly. So the president is using something called the Insurrection Act. He says there's an insurrection going on, so we have to deploy the National Guard.

25:43He's also following up with something called the Stafford Act, which is for national disaster. So he's saying the crime rate is staggeringly high. It's not a Hurricane Katrina or something like that, but he's saying these are the reasons to bring the guard in. And so, I mean, this is a weird thing to bring up, but I'm going to bring it up anyway. It's a legal term called posse comitatus. Posse comitatus. What does that basically mean? You can't use the military in a domestic situation for law enforcement. That is causing a militarization or a potential martial law. And it's well grounded in the Constitution that the founders certainly didn't want that.