Senate Passes Russia Sanctions Bill Championed by Graham — Balance of Power 8/7/2026

[00:00:00] Speaker 1: WALL STREET CELEBRATES THE INCREDIBLE SHRINKING JOB MARKET. WALL STREET CELEBRATES THE INCREDIBLE SHRINKING JOB MARKET. [00:00:14] Speaker 2: WALL STREET CELEBRATES THE INCREDIBLE SHRINKING JOB MARKET. WELCOME TO THE FRIDAY EDITION AS THE JULY EMPLOYMENT REPORT BRINGS A SURPRISE DECLINE IN PAYROLLS EVEN AS THE MARKETS EXPECTED AN INCREASE OF TENS OF THOUSANDS. WALL STREET CELEBRATES THE INCREDIBLE SHRINKING JOB MARKET. THE FEDERAL STREET CELEBRATES THE INCREDIBLE SHRINKING JOB MARKET. [00:00:39] Speaker 3: THE FEDERAL STREET CELEBRATES THE INCREDIBLE SHRINKING JOB MARKET. THE FEDERAL STREET CELEBRATES THE INCREDIBLE SHRINKING JOB MARKET. THE FEDERAL STREET CELEBRATES THE INCREDIBLE SHRINKING JOB MARKET. THE FEDERAL STREET CELEBRATES THE INCREDIBLE SHRINKING JOB MARKET. THE FEDERAL STREET CELEBRATES THE PROGRAM. THE FEDERAL STREET CELEBRATES THE INCREDIBLE SHRINKING JOB MARKET. THE FEDERAL STREET CELEBRATES THE INCREDIBLE SHRINKING JOB MARKET. [00:01:07] Speaker 2: THE FEDERAL STREET CELEBRATES THE INCREDIBLE SHRINKING JOB MARKET. THE FEDERAL STREET CELEBRATES THE INCREDIBLE SHRINKING JOB MARKET. THE FEDERAL STREET CELEBRATES THE INCREDIBLE SHRINKING JOB MARKET. THE FEDERAL STREET CELEBRATES THE INCREDIBLE SHRINKING JOB MARKET. THE FEDERAL STREET CELEBRATES THE INCREDIBLE SHRINKING JOB MARKET. [00:01:23] Speaker 3: THE FEDERAL STREET CELEBRATES THE INCREDIBLE SHRINKING JOB MARKET. THE FEDERAL STREET CELEBRATES THE INCREDIBLE SHRINKING JOB MARKET. THE FEDERAL STREET CELEBRATES THE INCREDIBLE SHRINKING JOB MARKET. THE FEDERAL STREET CELEBRATES THE INCREDIBLE SHRINKING JOB MARKET. THE FEDERAL STREET CELEBRATES THE INCREDIBLE SHRINKING JOB MARKET. THE FEDERAL STREET CELEBRATES THE INCREDIBLE SHRINKING JOB MARKET. THE FEDERAL STREET CELEBRATES THE INCREDIBLE SHRINKING JOB MARKET. THE FEDERAL STREET CELEBRATES THE INCREDIBLE SHRINKING JOB MARKET. THE FEDERAL STREET CELEBRATES THE FEDERAL STREET CELEBRATES THE FEDERAL STREET CELEBRATES. [00:01:47] Speaker 2: THE FEDERAL STREET CELEBRATES THE FEDERAL STREET CELEBRATES THE FEDERAL STREET CELEBRATES THE FEDERAL STREET CELEBRATES THE FEDERAL STREET CELEBRATES THE FEDERAL STREET CELEBRATES THE FEDERAL STREET CELEBRATES THE FEDERAL STREET CELEBRATES THE FEDERAL STREET CELEBRATES THE FEDERAL STREET CELEBRATES THE FEDERAL STREET CELEBRATES THE FEDERAL STREET CELEBRATES THE FEDERAL STREET CELEBRATES THE FEDERAL STATE [00:02:11] Speaker 4: when it comes to a full vote. Yeah the jet fumes are in the air they might want to just get out of Dodge. We'll get to all of that this hour of course but we begin with these jobs day markets and for that we turn to Charlie Pellett. I thank you very much Kaylee and happy Friday to you both. Employers unexpectedly cut jobs in July hiring in the prior two months was revised lower suggesting that the labor market is weaker than previously thought after surprising strength earlier in the year nonfarm payrolls down 23000. stocks higher oil also higher right now. Let's begin with crude because West Texas intermediate back above 78 a barrel 78 13 right now up 1.1 percent barrel of Brent 83 38 heading into the weekend up now by 1.1 percent. S&P is a baseline at 77 44 up 34 points up about five tenths of one percent. The Dow higher as well up 78 points now up about one tenth of one percent. We've got Nasdaq up 254 up one percent. Nasdaq one hundred up by nine tenths of one percent. Big move for the socks today. The Philadelphia stock exchange semiconductor index up now by 2.1 percent. The 10 year currently yielding 4.65 percent. The two year 4.20 percent and the 30 year 5.20 percent. Gold up $93 the ounce to 43 32 up 2.2 percent. And again WTI up by 1.1 percent 78 12 a barrel. Earnings news. We've got sweet green shares plunging down by 8.4 percent. The restaurant chain the salad chain did cut its annual outlook due to reduce consumer demand for fresh prepared foods during the cyclists for a outbreak. Also we've got united armor under armor. Under armor I should say forecasting a sharper revenue decline than previously expected after earnings under armor shares down now by 4.1 percent. Recapping stocks higher S&P on this Friday up now by five tenths of one percent. For on demand news 24 hours a day. Subscribe to Bloomberg news now wherever you get your podcast. And that show Matthew is a Bloomberg business flash. And Kylie Limes too. There you go. [00:04:21] Speaker 3: Thank you very much Charlie Pellett bringing us through these markets as we close out the trading week and it looks like we maybe are on track to close out this week in Washington in the United States Senate unless this does bleed into a Saturday session as they've been taking care as best as best they can of a number of different agenda items. And if you've been listening or watching this program this week you know that included the confirmation of Todd Blanche to be the next attorney general. There was very much a question as to whether or not they could get to the requisite amount of votes to get the president. His nominee confirmed as they already lost Senator Susan Collins of Maine who's up for reelection as of 6 a.m. this morning they had also lost the vote of Senator Lisa Murkowski of Alaska. And those were the only two votes they could afford to lose. A third would have tanked the nomination for the first time we've seen in decades. So it was all up to Senator Bill Cassidy of Louisiana who took to the Senate floor in dramatic fashion to announce that indeed he would be a yes. [00:05:21] Speaker 5: Mr. Blanche is not perfect and he will tell you this but the choice is not between perfection and Mr. Blanche. It is between Mr. Blanche and another acting attorney general who may not run the department effectively under President Trump and who indeed may not be as good as Mr. Blanche. [00:05:42] Speaker 2: That's where we start our conversation with Josh Wynn Grove. Let's get the latest from the White House right now Bloomberg White House correspondent live on the North Lawn. Josh it's always great to have you. Was that the decision that lawmakers had to make approve Todd Blanche in case or to keep the president from appointing someone worse. [00:06:03] Speaker 6: I mean it's one way to frame it I suppose you know as we know the backstory here is Cassidy has been a foe of the president. The president's gone after him supported a primary against him and it really has not bit the president very much yet. Of course we saw the same thing in Texas with John Cornyn. And so the question was Cassidy didn't really have a lot of reason to go to bat for the president. And that's what made today's announcement pretty surprising. Senator Cassidy kind of choked up towards the end of it to give you a sense of at least the weight of the moment that he felt. But Trump world had been pressing for this both sort of acknowledging that Blanche has been at risk but also expressing confidence that in the end he would be confirmed including of course after that deal to get him out of committee and so in some ways I think they'll be taking a victory lap here but not be too surprised on it. Of course income what appears to be our new permanent attorney general or confirmed attorney general former lawyer of the president and just goes to show you that Congress continues to back essentially the Republicans in Congress in particular of course back what the president wants to do. So it's a surprising one. I suppose you could say in some ways Murkowski's announcement nodded to it in that she might not have come out with her no vote had she not known that she had the wiggle room to do that. But that's just pure speculation on my part as I melt here like an ice cream cone on the north lawn here on this Friday. But yeah certainly they're going to be celebrating in the business in the building behind me. [00:07:31] Speaker 3: Yes indeed we appreciate you suffering the elements for us and next or one wing of the building behind you of course is not visible to our audience on television and it's not visible unless from above there's just a giant hole in the ground where the east wing used to be. That of course is where the president wants to construct his ballroom and the judge today ruled if he wants to continue to do that above ground he must get the authorization of Congress. Cue President Trump taking to true social Josh to pledge to take this case all the way to the Supreme Court. What do you make of that. [00:08:01] Speaker 6: I think he continues to be very focused on the renovations on this building not only that but the helipad which we saw reporting of course this week that has been they've been kind of ripping it up to go restart what he's doing. The risk for the president here is this is muddying his message right so he's going to take this to the Supreme Court essentially keeps the fight going. He's talking about it on the stump. I was with him when he gave a speech in Vegas a couple of days ago and that speech really focused him on you know what he casts as the strength of the economy. He's talking about Iran and hoping it will end soon. He veers into the renovation projects regularly including the ballroom. And the question is whether that is you know ultimately what will get what voters will respond to right polls are showing voters are very frustrated with the state of the economy that Trump is under water on his handling of the economy which is normally a strong suit for him in polls. And that his overall approval rating is at or near all time lows. Trump dismisses these dismisses these polls as fake. But I just think what we're going to continue to see as this legal fight drakes on is just a profile from it whether it's those or the reflecting pool I should add. And the president just continues to be very interested in them. So I don't think I'm not surprised that he's going all the way to the Supreme Court. We'll see what they say. They've given him a lot of leeway to date. And so you know read into that what you will but the the saga on the ballroom will continue to go and the president just keeps wanting to talk about it. [00:09:20] Speaker 2: So we asked quickly about jobs. Josh this is a big story today and we're about to talk to Jared Bernstein who you used to speak with pretty often in the Biden administration to get his take on these numbers. I haven't seen anything maybe I've missed it from the president. Are they celebrating this report to the extent that Wall Street is. [00:09:38] Speaker 6: Yeah. I mean Jared was stood here often during the Biden administration. So I'm trying to keep his podium warm here at the Bloomberg 10. They are essentially shrugging it off right now with saying look these these are high variance numbers. This is an operation. They noted that the consensus estimate was higher. So she's saying that's a good thing that maybe the experts are right. Of course by the way when the numbers beat consensus they say yeah the experts don't know anything. So they could pick their pick their lane on that one. We'll see. But right now I think Trump one revealing comment from has it today is that one of the only economic indicators he says he's looking at is that unemployment rate. Kaylee I believe you alluded to that earlier. I think that that is telling right now. Trump likes to talk about the strength of the stock market all time highs all that. But his one of the top economic advisors saying they're really watching that employment rate. And so I think that that is telling. There continue to be mixed signals at best in the economy. Of course if you listen to the president's speech you wouldn't necessarily hear that. [00:10:35] Speaker 3: All right. Josh Wingrove will let you get into the air conditioning. Thanks for joining us Bloomberg White House correspondent live from the hot North Lawn for us on this Friday. 63 percent humidity. Yeah that's that's brutal. I don't I don't envy Josh right now. We're in a nice air conditioned studio ourselves. We have we have the good gig today. And of course as Josh alluded to Jared Bernstein has played braved those elements on the north lawn of the White House many times during his tenure in the Biden administration as the chair of the White House Council of Economic Advisors. He's now distinguished policy fellow at the Stanford Institute for Economic Policy Research and is back with us on Bloomberg TV and radio. Jared good to see you as always here on balance of power as Josh was touching on on the end there. The White House says just look at unemployment 4.1 percent. But I wonder in your mind how much that lower unemployment rate has to do with the state. 60 1.4 percent labor force participation rate and whether or not that actually is cause for concern. [00:11:27] Speaker 7: First of all it sounds like the labor force participation rate is awfully close to the humidity rate on the White House. I don't know that those two numbers together. The reason they like the unemployment rate this morning is because it take down a 10th if payroll jobs had been strong. They would have said they like that. So that's all just spin. One of you made I think was I think was Joe a second ago said something to the effect that the unemployment rate take down for the wrong reasons. And that's correct. And it's important. The unemployment rate can go down for two reasons. One people looking for jobs leave unemployment. They get a job. Two. They give up. And that shows up as the labor force contracting. That's what happened in July. We saw a lower labor force. And we also saw lower employment not just in the payroll survey. But in the household survey as well. The survey that measures unemployment. And that's actually been a sequence lately. So we've seen quite weak numbers on the household survey. And you know that's that's obviously a sign of increased lack. That said 4.4 percent. [00:12:34] Speaker 2: 4.1 is still pretty low unemployment. So no reason to panic. But certainly a soft report. Did they give up Jared or did they just go away. When you see a participation rate falling to it's actually 61.4 percent lowest since the 1970s when you exclude the pandemic. We've heard a lot of explanations here. That include even the impact of the president's immigration policy. Where did everyone go. Or are they on the couch giving up looking for. Yeah. [00:13:08] Speaker 7: Well the problem with using the top line number. And we all do it. And it's right there staring you in the face. As soon as you open up the report. Is it also includes a lot older people. Who have left the labor market. Because we have an aging baby boomer workforce. I can speak from personal experience in that regard. But if you look at what we call prime age 25 to 54 year old. We got a big tick down in the employment rate. Or the labor force participation rate in June. And a lot of people thought well that's surely going to correct in July. Because these numbers are noisy month to month. It corrected a tiny bit. But I think if you look at the trend. Year over year. Or again look at the prime age rate. You see some softness there. And so this remains to be a no hire. No fire job market. With pretty weak job creation. Relatively low unemployment. Not a ton of layoffs. But real fragilities under the hood. [00:14:04] Speaker 3: Well and you have some softer wage growth as well. Jared. And obviously that has implications for the American worker. Which is facing inflation. And may not be seeing their wages keep up. But also. Does it not have impact on the way in which the Fed is considering inflation here. If you're not seeing. The kind of wage price. Side of things that you might expect. [00:14:31] Speaker 7: All really interesting and important questions. That I dove into. In my write up this morning. 3.2%. That's the year over year wage growth. That's the lowest we've seen in nominal. Yearly wage growth since the pandemic. And by the way. If you stack that number up with a bunch of other wage reports. As you should. Again. These can be noisy numbers. But if you take an average of everything out there. You're not seeing the kind of wage price. Everything out there. You get the same pattern. And so the folks at the Fed recognize that whatever inflation we're seeing. Isn't coming from the labor market. It's not coming from the wage side. But we know that the more hawkish contingent over there. Which seems to be growing. Are well aware of that. And they're still nervous about high and sticky inflation. That means that it's largely coming from the supply side of the equation. The tariffs. The war. Along with some pressure from AI picks and shovels. The question for them is can they really look through that. Or after month after month. Year after year. Of missing their target. Do they have to worry about this pattern. Dislodging inflationary expectations. In which case they would hike. But I don't want to let the consumer. Get lost in this picture. I mean you guys started off talking about Main Street. Wall Street. Boy are they going in different directions right now. 3.2 percent wage growth is almost certainly below inflation. Which has been tracking well north of 3 percent. And we know that labor share of national income. Actually hit an historic low in the productivity report yesterday. So there's not going to go. If they're missing their target. Do they have to worry about this pattern dislodging inflationary expectations. In which case they would hike. But I don't want to let the consumer get lost in this picture. I mean you guys started off talking about Main Street, Wall Street. Boy are they going in different directions right now. 3.2 percent wage growth is almost certainly below inflation. Which has been tracking well north of 3 percent. And we know that labor share of national income actually hit an historic low in the productivity report yesterday. [00:15:59] Speaker 2: There's a real split between macro and micro these days. The huge split. Jared it's good to see you. And thanks for weighing in on all of this. I'm glad you're not sweating it out on the lawn today. Jared Bernstein Stanford Institute for Economic Policy Research. Of course it's going to be an interesting opportunity here Kaylee to get the take of a fixed income specialist. Tom Cinsuris managing director head of fixed income at Baird Strategas joins us right now from world headquarters in New York to talk a little bit more about the market reaction and expectations for the Fed. Tom thanks for being part of our conversation today. [00:16:35] Speaker 8: What does this mean for Kevin Warshin. Does it take off the pressure that the conventional wisdom is implying today. Yeah. Well good afternoon. Thank you for having me here. Yes. Absolutely. If you take this report at face value then absolutely this takes that September and very likely even in October December rate hike off the table. But as a previous guest mentioned you kind of have to look at this report and say well there's some potential here that you got some some variables moving in one direction. You got unemployment rate dropping but it's dropping for the wrong way. It's a lot of variance in this report. So for now if you just look at this for what it is you'd say OK we got wage growth of 3.2 percent. That is certainly not inflationary. You have essentially job losses that would be consistent with the Fed on hold in September at the very least on hold in September. [00:17:25] Speaker 3: Well if the Fed does hold in September because you aren't seeing the pressures on the labor side of the equation that would look to them to be concerning if they were to tighten policy but you still see sticky inflation if that's what we end up seeing in the CPI report could that just continue to fuel the narrative Tom that the Fed under Kevin Warsh may be willing to let inflation get away. [00:17:49] Speaker 8: Well for those who want to sell that narrative that will definitely fuel it but for those who look at this and say OK well why do we have somewhat stickier inflation. Well we have goods inflation and over time I hate to use this phrase but goods inflation over long enough periods of time does tend to be transitory. It does tend to average about zero. I'm still worried about the service sector inflation. So I would look at this report and I'd say OK we have a somewhat of a supply shock. It is predominantly driven not by tariffs but by energy prices and you don't tighten into a supply shock. That's a policy mistake. We've learned that time and time again. So if you're Kevin Warsh you look at this and say OK I have goods inflation driven by energy prices rising. That is not something that is not something that I'm going to tighten into at this point especially with a labor market it looks like on the surface it's softening. [00:18:39] Speaker 2: Yeah. What's the bond market telling us more broadly here Tom. We're down a couple ticks but it was just a week ago the 30 year crossed 5.2 percent and heads exploded in the market. Remember that day the Dow was down over a thousand points. That was the Fed day. That's when there was great concern about Kevin Warsh's posture. We're still above 5.2 percent here and the stock market is cruising along like it's not happening. What is this telling us about future prospects for our economy. [00:19:06] Speaker 8: Well what it's telling us is that we have a Fed chair who is finally willing to put the power of the purse back in the hands of the bond market for the last decade and a half. We've had essentially a bond market that has been put into for lack of better term a medically induced coma where there's been no real ability to push back on fiscally imprudent policy. Now Kevin Warsh is and he's the first Fed chair we've had really since Greenspan who is willing to say listen the Fed's balance sheet is too large. It has resulted in a blank check to government and that has to stop. So the bond market is saying Kevin Warsh if he gets his way is going to at some point in time begin to shrink the balance sheet either in absolute terms or at least relative to GDP. And what that means is vigilantes are unleashed. Yeah vigilantes are unleashed and that's bad for both both political parties especially especially in 2029 and beyond. But as of right now the bond markets got to look at this and say OK well we've got to start building some risk premium into longer duration treasuries because the balance sheet is not going to be a source of stabilization for long term interest rates. That's really what is being said. That's what the market's saying. But there's this narrative that he's losing control of the bond market. Well the Fed should have never had control of the bond market in the first place. The bond vigilantes the way I like to think about it is the bond market has always been the final check on bad government whether it was be by dictatorship or democracy. Let's put it back in the hands of the bond market and not in the hands of policymakers in D.C. [00:20:35] Speaker 3: Well so does the market actually force lawmakers to get the fiscal house in order because I hear what you're saying on the balance sheet but there's no sign that the treasury is going to be pulling back on issuance anytime soon. [00:20:46] Speaker 8: We're still going to have to borrow to finance pretty much everything. Well I mean this is a slow process. It's not going to be all of a sudden that the checkbook gets ripped up. But if you were to look at this and say what could Warsh achieve it may take three to five years before the balance sheet even in nominal terms I should say relative to nominal GDP has shrunken enough so that the bond vigilantes can really push back. So it's not going to be an immediate phenomenon. But what you're seeing is it's a gradual creep higher. And where are you seeing happen. Well it's been happening in the 20s and 30s. Tens are still below their cycle highs but 20s and 30s are inching higher and higher because there's less demand in those portions of the curve 20s in particular. There's just it's just a weak portion of the curve. So that's where you're going to see it the most. Will the consumer price report next week codify this trend that we're talking about. So here's here's the interesting thing. I think today's jobs report is a temporary reprieve from the September rate hike outlook. outlook. I think that inflation report next week is going to say the opposite. And that is is is that you're seeing inflation gradually trickling higher because of the second or third wave of of we'll call it of energy price escalation here. So that CPI report next week should be stronger or higher than expected. And that should bring the September rate hike right back onto the table. All right. [00:22:07] Speaker 3: Thompson source joining us from bear strategies. Thank you so much. He's in our world headquarters in New York joining us to break down these Friday bond markets after this jobs report and more holistically consider what things are going to look like under the chairmanship of Kevin Warsh at the Fed as it has only just begun. The United States Senate just passed as we told you was on track to do so the Russia sanctions bill that of course was championed by the late Senator Lindsey Graham. This is obviously no longer just a Russia sanctions package. It has been expanded to include Iran at the request of the president and passage in the Senate does not guarantee its passage in the House, which wouldn't happen, of course, until after the August recess. But nonetheless, an important signal that Washington is sending in terms of its willingness to apply apply greater economic pressure to the U.S. adversaries in Russia and Iran. And of course, it had to get over some hurdles, Joe, in order to get to this point, including a commitment that the U.S. Trade Representative Jameson Greer had to make to Democratic Senator Raphael Warnock about the tariff authority that this gives the president. Part of this package is that the president can apply tariffs on buyers of Russian and Iranian energy, that the tariffs eventually would have to come down for countries that are no longer in the top five purchasers. [00:23:19] Speaker 2: Yeah, this was a difficult decision for some. There was a time when it was thought to be a possible candidate for unanimous consent, knowing that it had been named for the late Senator Lindsey Graham. 86 to 11 the vote count, according to the cloakroom here in our reporters on Capitol Hill. Let's play this to the panel. Not what we thought we'd be starting with, but it's breaking right now. And we have Bloomberg politics contributor Jeanne Shanzana with us, a democracy visiting fellow at Harvard Kennedy School's Ash Center and Republican strategist Maura Gillespie, founder of Blue Stack Strategies. Great to see you both ladies. Thanks for coming along. Maura, you worked on the Hill when Lindsey Graham's career ascent was taking place. And this, of course, is seen by many as his crowning achievement, considering the time that he put into supporting the war effort in Ukraine. 86 to 11, what do you think of the turnout and some of the concessions that were made, as Kaylee mentions, when it comes to expanding the president's tariff authority? [00:24:20] Speaker 9: Overall, I think this is a victory for Lindsey Graham's legacy in terms of what he was working on up until his untimely death. You know, he really he was just getting back from a trip where he was with Zelensky, president of Ukraine, working on this and really trying and working with with the president to try and remind him of the threats that Russia poses. And pushing forward this bill, working across the aisle to get this bill forward and to get the votes for it. And so I do think with with there being the added Iran war contingency there, I think it still is a victory for Senator Lindsey Graham's legacy for sure. [00:24:55] Speaker 3: Well, Jeannie, come in here on the concern that some Democrats had who, yes, did want to make sure that the United States was applying more pressure to Russia, but also were very, very concerned about extending more authority for President Trump to be able to enact tariffs and tariffs at a large scale. We're talking 500 percent in some instances, 100 percent in others in this legislation. How easy could it be for President Trump to abuse this authority, even with the concessions that some Democrats were able to extract? [00:25:25] Speaker 1: Yeah, I think there's still concern. Obviously, this was in this Senate, of course, a bipartisan win. You know, you only had the 11 Democrats, the one Republican fall off and that that that is bipartisan for sure. But the concerns are very real. You know, you were just talking about the economy. There are Democrats and Republicans who are concerned that this is what they call a prescription for bedlam. It's going to fuel inflation domestically, giving the president who loves tariffs more than anything else. He tells us this unchecked authority to weaponize tariffs. That's a big concern. You had Gregory Meeks calling it a Trojan horse. He was concerned about the bill's national security waiver. So there are a lot of concerns out there. You had some Democrats who wanted to wait until after the midterms. But by and large, this was a bipartisan victory. And I think the big question is now is Donald Trump going to push this in the House because for it to pass in the House where there is even more concern, he is going to have to get on the phone and make some phone calls and twist some arms to get this over the hump. I think he will likely do that considering it extends his tariff authority. But it's going to have to wait until they come back from recess. [00:26:45] Speaker 2: Pretty scary reporting, Jeannie, in The Wall Street Journal today. The U.S. intelligence reports posit that Vladimir Putin could try to test NATO's resolve with a limited assault on an allied country in the next few years. The U.S. had previously assessed that Putin would not provoke a NATO country while at war with Ukraine. But that assessment has changed as Putin becomes more cornered. Does legislation like this make him a greater risk? [00:27:17] Speaker 1: I think legislation like this certainly does. I think you add to that the way we have overextended ourselves in Iran and you have people in the DOD world now saying that we do not have the capacity to defend our interests in places like Asia. That makes what is happening around the world, whether it's in Russia, whether it's in Ukraine, whether it's in Asia, whether it's in the Middle East, all of these things come together and make it harder for us to defend our interests, to help our allies and to secure ourselves. And so I do think that is one of the concerns about this sanctions bill. But I think it is become more volatile and more likely considering our defensive weapons and our munitions are at what seem to be a historic low at this point. And the reporting the president has pushed back on many people behind the scenes are saying he knows full well that we have a problem there. So, yeah, I think this does give people like Putin, King Kim Jong Un. I think it gives China if they want to do anything in Taiwan. I think it does give them an opening to take those steps. [00:28:29] Speaker 3: Well, on the munitions question, Maura, this is part of the reason why the Pentagon is asking Congress for more money and they're supposed to be some 70 billion dollars for the Pentagon in the budget reconciliation package. Assuming that it can make headway in the Senate, it's not entirely clear what will be action before they break for recess or what will become of things come September. But especially if they are willing to pass a continuing resolution to fund the government and to keep funding levels steady. I wonder, Maura, what you're thinking about in terms of this Congress giving this White House and this DOD what it wants in terms of not only supplemental funding to refill our munitions stockpiles, but also the one and a half trillion dollar defense budget that they've asked for. [00:29:16] Speaker 9: I think the problem comes with transparency. I don't think Secretary Hegseth has been transparent remotely enough and giving Congress answers they've asked for in terms of where the money is going, where it's being spent and what the real state of things are at this current moment. I mean, when the president talks about having interest in so many places, right, Jeannie mentioned what's happening in Iran, what's happening, you know, in Ukraine and Russia, but also what's happening in the Middle East. What's happening in Venezuela, what's happening in the waters, that they've been that this conversation isn't just there. What our interests are in Greenland, what our interests are in Asia. There are so many different areas that the president has mentioned, talked about, true social about. And Secretary Hegseth has shut down the Pentagon's press, essentially, and the opportunity for them to ask questions. And so I think before Congress, they need to be demanding those answers, demanding transparency and the numbers from Pete Hegseth on, well, where the finances are going before they write him another blank check. I think that's going to be really crucial and a hurdle that's going to be big for him to go over, because right now Pete Hegseth feels pretty empowered by the president to stiff arm Congress, but also the press. [00:30:22] Speaker 2: You know, when we pull out and look at the situation with Iran this week, Jeannie, it's now Friday. We started this week with the president of the United States taking credit for canceling a wave of attacks that he said it would have decapitated the regime last weekend at the request of Iran's neighbors, suggesting that within one to two days, a deal would be had. He said this is going to go quick. We're not going to let this last forever. This is the 13th time he's done this. Now we're at Friday. The president says talks are moving along, but we have no news. How important will it be for him to announce a breakthrough this weekend? [00:31:03] Speaker 1: It would be wonderful if we saw a breakthrough, but I don't think we can hold our breath on that. I mean, the talks going on now that are moving forward are talks between Iran and Oman. It's unclear where the U.S. is on those talks, except in all likelihood, the best deal we get is going to be reopening the strait with Iran having more control over it than it did prior to this war. And for all the president's bluster. And if you listen to the Iranian media, you can hear the way in which they are making fun of the president for all of his bluster. How can we attack Iran if we don't have the defensive missiles to defend ourselves, our soldiers, our assets and our allies in the region? We simply can't. The president knows that. So sure, we could use dumber weapons. But when you use dumber weapons, that means you send U.S. forces, U.S. military soldiers potentially closer to Iran. And the president knows we cannot get in a ground war with Iran. The president's hands are tied on this. He doesn't like the word. This is truly a quagmire. And his best bet is going to be getting the strait reopened, easing some of these sanctions on Iran if we need to, and trying to press forward on a nuclear deal. And he'll be lucky if it's anywhere close to what the Obama deal looked like that he rescinded. I mean, this is truly a disaster foreign policy for the president at a time when he has in five months gotten our munitions capacity as low as it is, that we are now vulnerable around the world, as are the Ukrainians who are depending on us to assist there. [00:32:47] Speaker 3: Maura, we have less than a minute left. But when it comes to the war in Iran, if senators are able to get out of town today, and the House obviously has been out of town, what are they all going to hear about it at home? [00:32:58] Speaker 9: Wondering why the gas prices are where they are and what the plan is. I think there's a lack of understanding about what the plan is. And Jean just laid out what she thinks is the best case scenario for an outcome here. But there really is no semblance of an idea of what we would want to get out of this and what the president says we are getting out of it. Right. I think that he and Secretary Hegseth have not delivered a clear message to the American people and members of Congress are going to hear it. [00:33:24] Speaker 3: All right. Maura Gillespie and Jeannie Shanzano, our political panel on this Friday. Thank you so much for joining us. And of course, it's not just any Friday. It's a jobs Friday. It's potentially the last Friday before the recess here in Washington. It's also a Friday that brings the debut of a new podcast here at Bloomberg. Our town is a new investigative podcast series about a small Tennessee town at the center of a fight over American identity. And as we've been discussing a lot on balance of power in recent weeks and months due to the ongoing conflict with Iran and the increasing focus that has been put on the United States' military capabilities and supplies of critical munitions. A really important conversation happened earlier today with the U.S. Secretary of the Army, who sat down with our colleague Tyler Kendall, Joe, to talk about effectively what the Army is trying to do to speed things along in terms of not only getting these things produced, but also testing them as they try to brace themselves for the wars of the future, wars, as we're seeing in the present, that include more and more drone technology that, of course, is cheaper than what a lot of our interceptors have been costing to this point. [00:34:44] Speaker 2: Yeah, this is all about accelerating the procurement process. And by way of testing, this is one way they can get to that. There are a lot of different ways that we'll be talking about expanding the defense industrial base, but testing these new ideas and this new equipment is awfully important right now. So the Army is opening up, Kayleigh, five ranges to private industry for testing drones, counter drone technology, other weapons we probably haven't even heard of yet. And, yes, Tyler got on an airplane and she flew to Michigan to sit down with the secretary of the Army, Dan Driscoll. They sat down at one of those training facilities called Camp Grayling. It's an Army base in Grayling, Michigan, to talk about this new program. Let's watch and listen. [00:35:26] Speaker 10: This is a really big deal. It was a couple of months ago I was out at one of our test ranges, and what I heard was that industry, on average, was having to wait between 12 and 18 months sometimes from the moment they wanted to get on our test range until we could give them access. And fundamentally the problem with this is if you think of these innovative companies, if you think of the primes, everyone needs to be able to test their product. And they need to be able to learn from that. And the innovation loop that comes from actually using your thing in the real world makes all the difference. And so when we slow things down in the innovation loop by 12 or 18 months at a time, that is just bad for soldiers, it's bad for taxpayers, and it's bad for companies. And so what we're announcing today is basically a new front door to access all of the U.S. Army's or many of the U.S. Army's ranges. We're layering in international partners. We're going to give concierge access, and we are going to aspire to get these companies onto our range within 30 days every single time. [00:36:25] Speaker 11: So then after they're on that range, I think a lot of these companies are probably wondering how quickly can they get into business with the U.S. Army? If you like what you see, how do those purchases work from there? What sort of timeline are you eyeing for that? [00:36:37] Speaker 10: So under President Trump, what we've been able to do is we've been able to reallocate dollars we already had. And so we created almost a $750 million venture-like model that has allowed us to get industry on contract sometimes in under 30 days. That is unbelievable. I mean, I think if you looked historically, the fastest time I had heard anyone ever referenced was like nine months. But on average, it could be up to two years sometimes. And so our commitment to industry is we know that they need dollars from the U.S. Army in order to continue their innovation. We know that if we're asking them to come out and spend time with soldiers, get their products in the dirt and the mud, and to innovate, we have got to be there for them on the other side with actual hard dollars. [00:37:18] Speaker 11: How are current conflicts highlighting the need for initiatives like this and for the U.S. Army to scale? Is there a new urgency here? [00:37:26] Speaker 10: I think if you look at what's occurring in Ukraine, they have this existential risk to their nation that allows them to innovate very quickly. You would never want to have that risk as a nation. So what we're trying to do is synthetically create the conditions for innovation that can get as close to matching that environment as possible. And so one of the things we're doing here at Camp Grayling in September is we're creating an electronic warfare in a EW environment that is as close to what Ukraine has as we can create. We're inviting in small, medium, and large businesses from across our country. We're having soldiers come down. And we are trying to empower these incredible American innovators to do what they do best, which is to out-innovate the rest of the world. [00:38:09] Speaker 11: So the Army lives off of annual budgets, right? How do you ensure that you're able to scale and grow initiatives like this in what is, I think it's fair to say, a pretty unpredictable funding cycle? And how much weight maybe does that put on the $67 billion supplemental package in terms of what the Army needs to get done? [00:38:30] Speaker 10: So the quirk of the design of our democratic form of government is our funding is annual. It is oftentimes continuing resolutions, which means we can't do new starts on our spending. And that is full stop bad for soldiers. That is bad for our national security. And we must, as a nation, fix it. That being said, what we have tried to do is just accept that that has been the reality. I think 18 of the last 21 years we've had continuing resolutions. And so what the United States Army has been trying to do under Secretary Hex's leadership is innovate as fast as humanly possible with what we do have. And we feel very good that working with Congress and Senate and consolidating down some of our budget line items, we are getting more flexibility than we have had in the last couple of years, not as much as we had a couple of decades ago. And we are taking that and earning back the trust of Congress to give us even more going forward. [00:39:21] Speaker 11: But is that putting any more weight on the supplemental funding request, the $67 billion? [00:39:26] Speaker 10: I think we need the supplemental, we need the reconciliation, and we need the budget to be passed on time. That will lead to the most secure country that the United States Army can possibly give it. [00:39:38] Speaker 11: So today is a lot about these low-cost interceptors, drones, counter drones. Can you talk to me about how you assess what that mix should look like when it comes to the higher-end interceptors in U.S. stockpiles? [00:39:51] Speaker 10: So one of the big takeaways from Ukraine is the very first thing you must do is create a data layer. And what you want in your data layer is you want as many sensors and radars as humanly possible, and you want them to be able to fuse into tracks. And so practically what that means is you want to be able to give yourself and your allies as much warning as humanly possible. And so what the United States Army has been focused on in the last couple of months is what we're calling Operation Jailbreak, which is basically we have said we are no longer going to allow any sensor, any radar, any piece of equipment that we own to have data that is siloed. All of it is getting broken out, and all of it through APIs and SDKs is going to be able to share the data and receive data or actions. That is step one. Every new thing we're buying is already open source, so we're good. So once we have this data layer, and anywhere American soldiers exist, we want that data layer to be as robust as humanly possible. The next step is to layer in effectors or interceptors, and you want as wide of a range of options as possible. On the cheapest, lowest side, you want a 50-cal round that might cost a dollar, and you want to be able to shoot that at something that's really close. On the highest end, you might want a PAC-3 that's now $4.2 million or $4.4 million a shot. The key to defense in this layered concept is you want as many options as humanly possible, all tied into an agentic solution with a human in the loop, that can choose between the right option at any given moment. And so the answer is actually, there's no one perfect answer. Variability is the key to success for conflict going forward. [00:41:27] Speaker 11: In the final minute that I have you, how much will initiatives like today compress timelines? Can you give us any context on how many years you're looking at when it comes to the Army building up these stockpiles? [00:41:40] Speaker 10: So I think if you take the math of what we believe for a lot of these most exquisite interceptors and most exquisite offensive weapons, if it was taking 12 to 18 months each time to come to the range, and we're consolidating that down to, I'm saying guaranteed, but I don't mean we will pay if we miss, but that is what we will hold ourselves publicly accountable. If you can get to the range every 30 days, what we hope to do is cut out at least a third of the R&D time, which will make a huge difference for soldiers. [00:42:11] Speaker 3: All right, that is Army Secretary Dan Driscoll sitting down with our colleague Tyler Kendall in Michigan earlier today. Really just underscores the sense of urgency around the defense industrial base and the procurement process that we've been talking about for some time. Who was it, Joe, that this week called it a bipartisan scandal that the U.S. finds itself in this position in regard to our stockpiles and our defense industrial base? [00:42:35] Speaker 2: Pretty strong words here. I have, we talked to too many people for me to bring that back, and the scary things, I think that was yesterday. [00:42:41] Speaker 3: Was that yesterday? [00:42:42] Speaker 2: Yeah, it's a good thing it's Friday. The colonel will shed some light on this for us, I think. [00:42:45] Speaker 3: Indeed, he will. Wayne Sanders, of course, is joining us, Bloomberg Intelligence Senior Defense Research Analyst and retired colonel as well. Wayne, welcome back to Balance of Power. As we consider what the Army is trying to do here and effectively accelerating as best they can, the ability for companies to test these new technologies, be it anti-drone or others. How far does this go? You heard what he said there about the realistic timeline compression to solving the issue the Pentagon largely finds itself in with time. [00:43:20] Speaker 12: I think this is a great and positive step when you start looking at trying to change the ecosystem as a whole. So, Secretary Driscoll really is trying to take requirements, turning them into outcomes. You know, he talked about the different types of authorities have been granted. You've seen a lot more of OTA contracts other than transitional, transactional authorities. Those type of contracts allow them to put stuff on contract early so that it doesn't end up being a new start during the next continuing resolution. So, by doing those and having these multi-year framework agreements, creating the demand signal that's long enough, you're starting to actually be able to move the procurement needle and the scalability needle that's necessary, especially given the way we find ourselves right now for missile depletion. [00:44:04] Speaker 2: You know, we were talking to Richard Haas yesterday, Colonel Sanders, yes, of Council on Foreign Relations, President Emeritus. He was the one who, I had to, I had to think about that for a minute, a bipartisan scandal. I'm wondering your thoughts on that, because both political parties have played a role in this to get us to the extent where we need such dramatic attention paid to our defense industrial base. How long will it take to make up for what he calls a bipartisan scandal? [00:44:37] Speaker 12: Yeah, I would say probably about three years. The direction that everybody is going right now, especially when you look at the primes as well as the disruptors, they're moving in the right direction now. It has started. Yes, it has been a bipartisan problem. Even when I was at the Pentagon a few years ago, you know, there were these programs where everybody's saying, hey, we need additional capability. No matter what type of warfare we've been fighting over the last six months, we should not be out of the munitions that we are low on or anything else like that that you've seen reported up until this point. So what's happening right now, though, is those ramps are turning into agreements. The long demand signals that Secretary Driscoll talks about is saying that it's getting beyond the FIDEP, the five-year development plan where these businesses normally come in and say, I'm not willing to invest $10 or $100 million into additional production lines. Because you may change your mind in two years. And so now these demand signals that go out seven years and beyond with some level of make-whole provisions that are built into the contract to say, if we change our mind, we still owe you a certain amount of throughput as part of this. So I think that you're going to see a condition of this. Lockheed talked about tripling their PAC-3 interceptors, quadrupling their THAD interceptors. And then the PRISM is another one that's come up in the news lately as well, another long-range capability that they need to create an additional demand signal for as well. [00:46:02] Speaker 3: We are out of time, Wayne. We just have about 30 seconds left. But as we await word from the president on whether or not there is a deal to reopen the Strait of Hormuz, and it's unclear what role the U.S. blockade will or will not continue to play, if we are short of munitions, how long can we keep up our current posture? [00:46:19] Speaker 12: Yeah, the interceptor part is something that I am concerned about. Obviously, we know that we're low. It's just a matter of how low. And for national security purposes, I'm glad that the government's not talking about that part. So from that piece, but from a long-range precision munition perspective, we have plenty of gravity bombs and all sorts of things to continue to take the fight to Iran if necessary. [00:46:40] Speaker 2: Colonel, it's great to see you. Welcome back, as always. Wayne Sanders, Bloomberg Intelligence Senior Defense Research Analyst. We always appreciate the insights. Alongside Kayleigh Lyons, I'm Joe Matthew. We'll both be back here for the late edition of Balance of Power, wrap up the week on Wall Street, and we'll see if there's any breakthrough in talks in Iran. That starts at 5 p.m. Eastern, only here on Bloomberg TV and radio.