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It is a St. Patrick's Day celebratory

day with a number of events held at the

White House including a bilateral

meeting between President Donald Trump

and the Irish Te-Shock. Uh and of course

a that meeting in the Oval Office

earlier was open to the press in which

the president and the T-shock for that

matter fielded a number uh of questions

from reporters and in the presence of a

European leader. President Trump had

many critical words for Europe itself,

specifically our NATO allies who have so

far not answered his call to help reopen

the Strait of Hormuz. Here's a taste of

the rhetoric from President Trump.

>> So, uh, I think NATO is making a very

foolish mistake and I I've long said

that, you know, I wonder whether or not

NATO would ever be there for us. So,

this is a this was a great test cuz we

don't need them, but they should have

been there. The other thing is, uh, and

I think, you know, very important, uh,

we didn't have to be there for Ukraine.

saying we didn't have to be there for

Ukraine. And essentially, I guess

connecting the dots between this

conflict and that one. Let's see what

Tyler is hearing. We go to the White

House now. Bloomberg's Washington

correspondent Tyler Kendall is on the

north lawn where yes, the fountain is

dyed fluorescent green. Tyler, you would

just It's not quite in your shot there.

It's It matches the lawn. Tell us what

the president is talking about here and

whether there'll be some sort of

punitive action that follows this for

our NATO allies. Well, President Trump

Joe at the moment says that he doesn't

have any punitive action in mind. But I

will say that our own analysts at

Bloomberg Economics have pointed out

that our European allies in particular

are in this tough spot because they are

constrained not just by politics but

also by capabilities. But there is this

growing fear among allies that the White

House could disengage from the war in

Ukraine if they don't engage when it

comes to the conflict in Iran. [music]

And President Trump there bringing up

Ukraine almost unprompted when he is

talking about what has been at this

point a long strained relationship

between the US and traditional allies

particularly around defense spending uh

in the region. And now it appears that

President Trump is actually abandoning

his call for our allies to surge

resources to help secure the straight of

Hermuz, which is really what this comes

down to with him telling reporters just

moments ago, quote, "We don't need too

much help. We don't need any help at

all. Actually, now President Trump of

course was addressing what has appeared

to be weariness from our allies at best

when it comes to his demand for them to

send naval escorts to help secure the

critical waterway. Take today for

example. We heard from the French

president Mron confirming that his

country will not send military assets to

secure the strait but that they uh stand

ready at this point to help once the

situation gets a little bit calmer.

Because Joe and Kaye, we have now

repeatedly heard from our allies that at

this point they're they're not a party

uh to this conflict and that NATO is

this defensive alliance. It is raising

questions though after President Trump

yesterday signaled that Secretary of

State Marco Rubio could announced a

coalition tasked with securing the

strait. When asked directly which

countries the US is currently talking

about with this, he sort of sidestepped

the question, but did highlight

bilateral ties between the US and many

many Middle Eastern countries currently

uh embroiled in the conflict. All

right, Bloomberg's Tyler Kendall live on

the north lawn of the White House. Thank

you so much. And we go to the other end

of Pennsylvania now is joining us live

from Capitol Hill is Congressman Michael

McCall of Texas who of course is the

chair ameritus of the House Foreign

Affairs Committee. Congressman, welcome

back to Bloomberg TV and radio. It's

good to have you, sir. Uh I I would love

to begin with your assessment as to

whether or not you believe that we need

allied help uh in the Middle East with

the straight of horror news right now as

the president contends we don't need

anyone's help. If that is the case, why

is the straight not open for transit?

>> Well, we can't do it alone, Kaylee. I

was in the White House yesterday, but I

think the president's point is we're

always there for NATO. We're always

there for our European allies, and they

should be there in our time of need. Uh,

but if I could take that further with

your business audience, you know, the

United States is a net net gain producer

of energy. Uh it's Europe that needs

this probably more than we do. Uh

certainly China needs it a lot. I mean

their majority of their oil comes from

Car Island and and from Iran. Uh but the

um the the Hormuse Straits are being

cleared currently by our military. The

sea mines, the drones are really the

biggest problem in the asymmetric

warfare. But I think in terms of cost

sharing, burden sharing in this

conflict, um you it seems to me our

friends and allies ought to be a part of

this operation.

>> You know, it's interesting. Uh Mr.

Chairman, welcome back. It's good to see

you. You've you've been walking through

modeling and and possible scenarios like

this I know for a lot of years. And

there were a lot of questions about what

the president should be focused on. As

he just said, we're resetting the

meeting with China. The word he used was

reset. Looks like it'll take place in

about 5 weeks. Do you worry that whether

it's South America, the Caribbean,

Greenland, now Iran, that the president

isn't focused on the biggest threat to

the United States, which is China.

>> I think u and there's a valid point

there when it comes to our military

resources. we are moving like for

instance the Arthad defense system out

of South Korea moving that

[clears throat] to uh the Middle East.

So I do have some concerns along those

lines. On the other hand, I think if you

look at it from a geopolitical

standpoint, the pressure that's being

put on on the countries that are so

dependent on Iranian oil like China, uh

when they see a free Venezuela and

American companies controlling that,

when they see Cuba on the horizon, uh

when they see their adversary alliances,

you know, China, Russia, Iran, North

Korea, Venezuela, Cuba, all in this

together,

that is now being impacted by energy and

and so I think going into these talks to

answer your question Joe is that um you

know Kisa Rice once told me you want

everybody to like you they're not always

going to do that you want them to

respect you and if they don't respect

you you want them to fear you that is

something that President Trump carries

very greatly into these these talks

there's no question that the dictators

in the world today whether it be Putin

or chairman she or the Ayatollah the new

one now have great fear about President

Trump because he is he is unpredictable

he will negotiate but if you don't

negotiate in good faith there will be

consequences

>> well let's talk about one of those

dictators you just mentioned for

Vladimir Putin and for Russia has

President Trump actually handed you an

incredible gift with the relief of

sanctions and higher oil cases.

>> I and I I I disagree with that action. I

personally uh I have a sanctions bill

ready to go with Lindsey Graham uh once

we get the nod, you know, that it's time

to to do it. This is a setback for that

legislation. Uh because we've lifted

sanctions on Russia. Why am I against

that? for this point. Primarily, Putin

and Russia are providing the Iranian

regime with military intelligence to

take out American targets and kill

Americans. Why in the world will we be

rewarding that kind of behavior by

lifting sanctions for a temporary

decrease in gas prices? We can do that

by other means. I think we need to put

more pressure on Russia, not less. And

these these shahed drones, by the way,

that Iran have been threatening our

American troops with were basically

given to Russia, have been co-produced

in Russia now with the Iranians, and now

are being used to kill Americans. So, it

it just is your friend and who is your

enemy? Russia is not our friend. They

are an adversary. They always have been.

and uh I don't think we ought to be

letting up pressure on them right now.

>> To that end, do you worry that the

president might condition our support

for Ukraine based on the way NATO

behaves with Iran

>> to some extent and and let's not forget

Ukraine volunteered its expertise to

deal with this asymmetric warfare with

the drones. They have the best

capability in some respects better than

we do. Think about this. We pay millions

of dollars for an interceptor to take

out a $2,000 drone. Ukraine for four

years now have developed very innovative

technology to counter these shahad

drones in a very effective but also very

coste effective way. Uh I applaud

Ukraine for helping the United States

out and I think the United States should

reward that behavior uh not punish that

behavior.

Mr. Chairman, I'm sure uh you've seen

the news today that Joe Kent has

resigned as the head of counterterrorism

at the DNI under Tulsi Gabbard. Uh and

in his uh resignation, he in part

suggested that there was no eminent

threat posed to the United States by

Iran. I wonder if the briefings that you

have received would dispute that and

what you make specifically of him

pointing the finger at Israel,

suggesting it was Israel uh that that

[clears throat] made President Trump

take this action.

Well, I think this is a bad appointment.

The National Counterterrorism Center, I

mean, if anyone should understand the

threat level, you know, the fact that

they've tried to assassinate the

president, uh Mike Pompeo is under

indictment. I'm under indictment in Iran

because of Solomaini. There are sleeper

cells here. Uh I think he was uh part of

this wing in my party that's

isolationist

uh that's becoming increasingly uh sort

of anti-Israel if you will and I

disagree with it. Um and I'm I'm frankly

it's time for a new leader at NTC NCTC

u and I look forward to that. So you

know I disagree with his assertions. I

think the threat level given the

conflict in Iran right now is on high

alert as you've seen demonstrated with

the last four attacks. One in my

hometown of Austin, one with a Boston

bombing type style attempt in New York

of Virginia in a classroom and then in a

synagogue and and I think you're going

to see more of these. So for the guy

who's supposed to be connecting all the

dots to say that there was no imminent

threat, I would I would respond to him,

there's been an imminent threat since

1979

when the Ayatollah took over Iran and in

a dark veil of terror descended on the

Middle East, spreading terror through

its proxies for almost 50 years. I think

it's high time that I applaud the

president uh for this very difficult

decision because no other president's

done it uh since President Trump.

>> Jerem, we've got to ask you about Cuba

while we have you. Uh and our remaining

question, there's a nationwide blackout

and it looks like a regime that's about

to fall. The president says, "I do

believe I will be having the honor of

taking Cuba." That's a direct quote. I

think I can do anything I want with it.

uh as remarkable as that rhetoric is,

what should he do with it?

>> Well, you know, the president always

speaks in very bold, you know, terms,

but I think what he's saying is there

there's there are winds of change uh in

the air. There are winds of freedom

after Venezuela fell, the people in Iran

rose up to the Ayatollah, and the people

in Cuba have attacked the Communist

Party's headquarters. uh in Cuba. Uh we

have another opportunity, I think, with

Cuba for freedom, you know, and

democracy that we haven't seen uh in a

long time. You know, John Kennedy had

the Bay of Pigs operation that failed

miserably. I don't see a militarystyle

invasion, but rather, as we talked

about, the global markets of energy.

Cuba now has been cut off of their

energy supply from Venezuela and Mexico.

and now importantly Iran. So their

economy now I I believe is going to is

going to be decimated and will provide

the ingredients are going to be ripe for

a revolution and an overthrow of that

communist dictatorship. That could be

another yet hugely profound and historic

geopolitical moment.

>> Wow. Really important conversation with

Michael McCall, congressman of course,

Republican from Texas. uh but also chair

emeritus of the house foreign affairs

committee. Mr. Chair, thank you so much.

Uh really interesting Kaylee what we

learned there. We want to play this to

the panel now. Bloomberg politics

contributors Jeannie Shanzeno and Rick

Davis are back with us. Rick is our

Republican strategist partner at Stone

Court Capital. Jeie is democracy

visiting fellow at Harvard Kennedy

School's Ash Center and again a

Bloomberg Politics contributor. Uh Rick,

what did you think about that? I I I

want to talk about Iran, but I have to

ask you about what the chair just said

about Cuba. Can we do better than the

Bay of Pigs this time, Rick?

>> Yeah. Well, it's nice to see someone on

Capitol Hill giving us a little straight

talk about these issues that you just

fired off at him. I thought it was a

terrific interview. Uh look, I mean uh

Cuba's economy has been decimated for

decades and uh what we have done by

cutting off the supply of oil uh from

these um uh competitors in the region uh

is is just to you know put it over the

brink. Uh the reality is it was an ins

unsustainable political system uh for a

long long time and it's now collapsing

under its own weight. My hope is that u

uh exactly what Congressman McCall said.

The the people of Cuba uh say we've had

enough. They've been protests in the

past and have been put down by military

strongarming and it's about time that

all that becomes a reckoning. I actually

applaud uh Donald Trump's efforts to try

and get the current government to step

down. Uh a bloodless coup in essence

would be probably the best thing that

could happen for the Cuban people.

All right, Rick Davis and Jeannie

Shanzeno are going to be sticking with

us. We'll hear from Jeannie in just a

moment as we continue on here on Balance

of Power, focusing not just on Cuba, but

of course the ongoing conflict with Iran

now on day 18. We'll have more on that

up ahead when Alan Goldenberg, the

senior vice president and chief policy

officer at J Street joins us as to where

this conflict goes next. Keeping in mind

President Trump did say at the White

House that we're not ready to get out

yet, but he suggested getting out could

be soon.

>> Stay with us on Balance of Power. We'll

have much more coming up after this.

>> You're listening to the Bloomberg

Balance of Power [music] podcast. Catch

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Bloomberg 11:30."

checking on the markets for us and of

course checking on oil as we see Brent

crude above triple digits above $100 a

barrel. Uh again could close at that

level for the fourth day in a row. We

haven't seen a streak like that in some

time as we consider that the straight of

Hormuz is still effectively shut to

transit including for energy flows

despite the efforts of President Trump

to try to get allies and even some

adversaries alike on side to build a

coalition to reopen the straight of

Hormuz. obviously expressed great

displeasure uh both yesterday and today

with NATO allies specifically who have

not agreed to do so. And as we consider

the situation in the strait in this war

with Iran more broadly as we are now on

day 18, we turn to Elon Goldenberg who

is senior vice president and chief

policy officer at J Street. He also

served as an adviser, a special adviser

to Vice President Kla Harris on the

Middle East uh in the early months of

the war between Israel and Gaza in the

aftermath of October 7th. Welcome uh

Elon to Bloomberg TV and radio. It's

great to have you and I was struck uh

yesterday specifically by a post uh on X

that you made uh basically with your

observations of this war now nearly 3

weeks in, including uh your suggestion

that the options for ending it are now

all bad. But I was especially struck

with the fact that you years ago said

convened a group of and this is I'm

using your words here security energy

and economic experts to walk through the

scenarios for a US and Iran war and the

implications for global oil prices. You

said what we're seeing now was

considered one of the least likely but

worst outcomes. Do you think this

administration was prepared for it and

what do they do now?

>> Yeah, I don't think they were and thanks

for having me. uh the scenario that we

ran looked at kind of small level war,

mid-level war or something really

significant. And the conclusion was only

when you really threaten the Iranian

regime with regime change and really

make it existential for them are they

going to start doing things like

shutting down the straight of Hormuz.

They want a way out of it. They didn't

really want a direct fight with the

United States because we are much

bigger. We are much stronger. At the end

of the day, things will be worse off for

them than they are for us. Uh but if you

push them into a corner and give them no

options, this is where they go. And the

challenge we have specifically with the

straight of Hormuz is it's a very small

area right next to Iran. So it's very

easy for them to disrupt it. All they

have to do to successfully disrupt

shipping is have a small boat go in

there every once in a while, drop a

mine, have fly a UAV in and and hit a

ship. All you need is a couple of ships

to explode and suddenly nobody is

pushing anything through the straight

and you're talking about millions of

barrels of oil who aren't getting

through. I actually think the one thing

about this scenario that nobody really

expected is one of the other reasons

people thought it was unlikely Iran

would close the street is that's how

Iran gets all of its oil out. But what's

been kind of crazy about this scenario

and people didn't anticipate is they're

still pushing their oil out. They're

just not letting anybody else push their

oil through.

>> That's right. We see that they have in

fact do have been doing a little traffic

control in the straight. Elon, the head

of the international maritime

organization. Arsenio uh Dominguez was

speaking to the Financial Times and said

military assistance is not a long-term

or sustainable solution to open up the

straight. Do you believe that diplomacy

is the only way to keep it open or

should our NATO allies be showing up to

help us out?

>> Uh I think at the end of the day, you're

going to need a deal. you you can have

short-term military escorts going

through the straight and get more ships

in. Uh but the problem is that takes a

huge amount of ships to actually be able

to uh do do something like that for a

sustained period of time. You know, our

NATO allies don't have that many ships

that are capable of doing that. We don't

have that many ships that are capable of

doing that cuz you know, ships go out

for a couple months at a time. On top of

that, then they have to tra, you know,

transport back home. Then you have to

spend time at home. You're already

seeing this if if you've seen stories

about the the Ford, which is an aircraft

carrier that's going to be at sea for

almost a year now. Things are starting

to break down. Ships need time at home.

And so I I think that's becomes very

expensive very fast when you're also

looking at things like a scenario of

China and Taiwan and trying to secure

the Indopacific, you know.

>> So

>> yeah, uh it's an in No, it's incredible

to see the military presence that we

have uh built up despite of course

President Trump suggesting that he

didn't want to start any new conflicts

in the Middle East specifically. And it

was for that reason perhaps or at least

in part that the director of the

National Counterterrorism Center Joe

Kent handed in his resignation today

saying he cannot support this war in

Iran. But his his reasoning here and I

I'll quote him directly from his post on

X. Iran posed no imminent threat to our

nation and it is clear that we started

this war due to pressure from Israel and

its powerful American lobby. Now Elon,

obviously we've seen even the secretary

of state Marco Rubio suggests that uh it

was it was clear to the US that Israel

was going to make a move on Iran uh and

that the US was going to have to

participate. I wonder your assessment

here of to what extent Israel did force

the hand of the United States when

President Trump had suggested it was he

that forced Israel's.

>> No, the buck stops with the president of

the United States. When the president of

the United States puts American troops

in harm's way, he is the one who's

responsible for that. you know, you

know, Netanyahu wanted to conduct

strikes on Iran during Biden's

presidency, during Obama's presidency,

uh, even like the previous Israeli prime

minister pushed for it in Bush's

presidency. And US presidents said no

and Donald Trump said yes. So, I think

really the responsibility has to be

ultimately on Donald Trump in the United

States. And the other thing about this

is I actually think specifically Kent's

Joe Kent's uh uh statement in his letter

actually started to border on kind of

anti-semitic tropes when he's talking

about you know the the media influence

and you know Israel tricked Donald Trump

into this war and Israel caused the Iraq

war. That's some conspiracy level theory

level stuff. And look, I work for an

organization that [snorts] pushes for a

complex, nuanced conversation about uh

Israel. We don't need to just be

supporting Israel no matter what

blindly. We can have disagreements. We

can have real discussions about policy.

But for me, Kent went too far, way too

far, even if I agree with him on the

fact that the war was a bad idea and the

in blaming this on on Israelis when

really ultimately it's up to the

president of the United States.

>> Interesting. Just lastly, with all of

that said, Elon, we're looking at a

massive investment, $21 million that

Apac has has spent in four open Illinois

congressional races. This is primary

day. It looks like uh Apac could see

only one of the four turning uh to its

favor as it tries to install a group of

of pro-Israel Democrats in in blue

seats, in this case in Illinois. How

important is that investment and how

concerned will you be if they don't pay

off?

>> Uh look, I'm the organization I work

for, J Street, is pretty much opposed to

what Apac is doing completely. We are,

you know, very much, you know, we are

one of the candidates that Apac went

after. It's a grandson of Holocaust

survivors in, you know, running in

Illinois who is deeply loves Israel as I

do and is also critical of the Netanyahu

government. This is the problem. What

Apac has done is they have defined

pro-Israel as pro- Netanyahu and it's

been very clear from the way Netanyahu

has conducted this war in Gaza uh the

way he has behaved in terms of

intervening in American politics that

there's no love for Netanyahu is

incredibly unpopular among American Jews

and among you know American voters. And

so if definition of supporting Israel is

supporting Netanyahu, that's a that's a

down that's a that's a terrible narrow

definition. That's not where 70% of

American Jews are. And that's why J

Street exists to make the alternative

case that you can be pro- Israel and

critical of Israeli policies just like

you can be pro America and critical of

Donald Trump's policies. Those aren't

the same thing.

>> Yeah, Elon, thank you. We appreciate the

conversation. Elon Goldenberg, J Street,

he is chief policy officer. Thanks for

joining us on Bloomberg. As we play it

to the panel now, Bloomberg politics

contributors Jeannie Shanzeno and Rick

Davis are back with us. Uh, Genie, I'm

not sure your thoughts on this because

we could we could take this in a lot of

different directions here, but now that

it is primary day and you have a spend

on this level from Apac, what do you

make of Elon's response there from J

Street?

>> I think he's underscoring what a lot of

people have been talking about. There

was this fascinating piece in Punch Bowl

this this morning about $21 million

spent by APEC and to your point just one

candidate likely to win. Those are not

good odds. But it goes along with what

we have been seeing and I think Elon

beautifully underscored this which is

the idea that Americans and many Jewish

Americans and many people in Israel

differentiate between the regime

Netanyahu's government and support for

Israel itself and the Israeli people.

And you have in the United States this

real concern about the lobby, the

ability of APEC for many, many decades

going back to fund candidates in

campaigns who were do their bidding in

government that has made the United

States almost inseparable from a policy

perspective as it pertains to foreign

policy. And I'm not saying that is true.

I'm saying there are concerns out there,

which is why I think his argument is so

important. The buck stops with the

president of the United States. And I

want to underscore what he said. Israel

Netanyahu rightly tried to get Joe Biden

twice to go into Iran and Joe Biden said

no. Same thing with Obama. And you can

go back presidents. That's absolutely

Netanyahu's right to do that. He should

be doing that in the interest of his own

country. But our president should be

doing our bidding and what's in our

national interest. And the problem we

have with this war is the president has

yet to articulate clearly how any of

this is in our best interest as gas

prices soar and we are all scratching

our heads wondering why we are there.

>> All right, Rick Davis, we've got a

minute left. Would love your response as

well.

>> Yeah, look, I mean uh the reality is uh

Israel has been our greatest ally in

that region for decades. It's the only

democracy there. Uh and they have been

enormously helpful to our national

security and it is in our security

interests for the preservation of the

Israeli state. Uh which Iran has been a

vowed to destroy uh since uh the

Ayatollah Kani took over 47 years ago.

So I don't think there's a much of a

debate uh as to uh why we are in this

war or why we think it's in our national

interest to defeat the largest terrorist

regime in the world. I think the issue

is uh in this case I would say domestic

politics uh how you frame that is going

to be totally different.

>> All right, Rick Davis and Jeannie

Shanzeno, Bloomberg politics

contributors to both of them. Thank you

for joining us on Balance of Power

today. And we still have more ahead as

we turn next to Maya McGinness, the

president for a committee for

responsible federal budget.

>> Stay with us on Balance of Power. We'll

have much more coming up after this.

You're listening to the Bloomberg

Balance of Power podcast. Catch [music]

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p.m. Eastern on Apple CarPlay and

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>> As we talk politics here in Washington,

and there is a direct connection today,

certainly has been the last 18 days,

Kaylee, with our eyes of course on

energy prices. And there's a big

question about the cost of this war

beyond our investments and beyond the

loss of life, never mind the more than

140 wounded uh Americans that we've

learned about. The war we know cost one

or make that 11.3 billion in the first 6

days. That was the report from the

Pentagon to Congress following some

briefings on Capitol Hill. Based on

reports that we have seen since then,

we're approaching $16 billion. This is

day 18. And of course, there's no sense

of how expensive this conflict could be

in the end.

>> No. And of course, it it's also about

our stockpiles, right? We are expending

a massive amount of munitions, not only

to strike thousands of targets in Iran,

but also to act defensively as Iran is

sending out drones and missiles of its

own, even though that activity has

indeed slowed down with the success of

some US strikes against those

capabilities. But to your point, Joe, it

all comes at a cost. And while the

Pentagon has a massive, massive budget,

>> there is percolating here in Washington

an idea that the White House is getting

ready to come to Congress with a

supplemental funding request in regard

to this that we've been told could be to

the tune of 50 to even hundred billion

dollars.

>> Yeah, that's right. We haven't heard the

number yet. A lot of lawmakers are

already pledging to vote for it without

hearing that number because uh it's an

effort to support the troops. But

Kaylee, we're looking at the first

trillion dollar defense budget in

history. And the president is projecting

a 50% increase for next year.

>> $1.5 trillion. It's a massive price tag.

And of course, as we consider uh massive

federal spending, we turn to a voice we

talk to about that particular subject

quite often. Pleased to say Maya

McInness is back with us here on

Bloomberg TV and radio. She is president

of the Committee for a Responsible

Federal Budget. And Maya, it's been a

while. It's great to have you back on

Balance of Power. When we consider this

supplemental idea in particular, it also

is worth pointing out that even when

this request does come, it might have a

very difficult time getting to 60 votes

in the United States Senate where you

would need a significant number of

Democrats uh to support it and they are

all largely against this war with Iran,

[snorts] which then points us to another

potential budget reconciliation package.

How nervous does that make you?

>> All of this makes me nervous. The

national security situation makes me

nervous and the fiscal situation makes

me nervous and certainly uh what's going

on right now is revealing huge new costs

that we're undertaking and also probably

future costs that we're going to have to

deal with the both from some uh

vulnerabilities that have been revealed

and bringing down of some of our weapon

systems we're going to have to build

back up. So yes, this has become a huge

political hot potato. Democrats who are

feeling left out of the process are

likely not to support a supplemental and

so it may have to go through

reconciliation. But you're hearing a

great deal of concern from even within

Republicans that reconciliation may not

be the way to go. Um there's another

little piece of this which is in OB the

big tax bill a lot of defense spending

was also included in that bill about

$150 billion

on top of the normal appropriations. So,

we know that there's more set aside for

defense already. What we don't know is

how it would be spent, how it's going to

be spent, if there's money there that

could be used before there's a

supplemental or reconciliation. So, I

think the big question is not only is

what is the strategy of this war that

we're in, but where are the needs and

where are the plans for spending the

money we already have before we put in

place new dollars? And I think everybody

would agree national security is sort of

the first most important claim on

budgetary dollars. Um but the defense

budget is big and complicated and the

money may already be there.

>> Maya, it's great to see you. You issued

a statement following the president's

state of the union that said the state

of our union is more indebted than ever.

Ultimately, you wrote, "The president's

agenda thus far has added significantly

to the national debt, and we will be

spending even more because of our past

refusal to pay for our priorities." You

point out, "Interest payments on the

debt will total nearly 17 trillion

between now and 2036. That's before a

protracted war in the Middle East. How

much worse could this get?"

>> There there is no ceiling on how much

worse this could get. Uh first, this is

one of those moments that reminds us how

dangerous it is that we're already

spending more on interest payments than

we are in national defense. This is why

we don't want to be in that situation.

Second, situation like the one we're in

could have huge costs in terms of if it

costs a billion dollars a day or

anything close to that, those costs

could sky skyrocket so quickly. Also, it

could have profound pronounced economic

effects. what we're seeing all the time

and talking about all the time right now

which could have a hard-hitting effect

on the US economy and this could get

worse before it gets better. One of the

main reasons you want a strong fiscal

foundation is to be ready for moments

like this. And the big concern is that

the US has borrowed so much just for

consumption, just for things we didn't

want to pay for that when real

emergencies come along, we are not in

good shape to respond to them or have

the fis fiscal flexibility to do so that

we should be able to uh if we had been

in in better fiscal shape.

Well, so when we consider emergencies,

uh the committee for a responsible

federal budget put out a a new break

glass plan essentially uh how you

withstand an economic shock without

having to contribute more uh to the

deficit uh like we have seen with shocks

in the past like COVID for example and

stimulus checks. Um, I wonder if you see

us as getting closer to that kind of

break glass moment, especially with a

war in the Middle East that uh could

potentially have dire economic

consequences with a supply shock and and

potential reinflationary uh effects. Are

we on that trajectory right now?

>> Yeah, exactly. When we released this a

week or so ago, u maybe a couple weeks

ago, we certainly didn't think that an

emergency would be hitting us quite so

immediately. Um, and the concern is that

if we have to borrow for an emergency,

if it's a supplemental for the war that

we're going through right now, if

there's a recession, if there's another

kind of emergency that's unanticipated

or a pandemic, we don't have the same

fiscal space to borrow that we have had

in the past because our debt is at near

record levels. And so what we're

recommending is that if we do borrow, if

we do borrow 50 billion for what's going

on right now or even more, we need to

offset those costs. Not immediately, not

in the same moment if you're in a

recession, but you need to have a plan

not only to borrow the money for the

emergency, but how to offset it. And

more than that, we think you should

offset it by $2 to one so that we would

start putting de down payments towards

deficit reduction. Put in place

automatic changes to the budget. put us

on a trajectory so we would bring our

deficits down to the goal that so many

people are starting to think makes the

most sense, which is 3% of GDP compared

to the 6% where we currently are. But

don't use an emergency or don't let an

emergency create an even more indebted

situation than we currently have. We

need to agree that whenever we borrow

for an emergency, we're also going to

have the plan to offset or pay for those

costs and use it as a moment to get our

fiscal house in better shape than it

currently is. I hope your testimony put

this in place. I'm sorry.

>> No, we saw your testimony to this end

before the Senate Finance Subcommittee

on Fiscal Responsibility and Economic

Growth. Maya, uh the idea of a $1.5

trillion Pentagon budget, of course,

that would I guess presumably go through

regular order uh to get a number of that

size. Uh that a 50% increase would would

mean what for our national debt? We are

talking trillions more. We are talking

multiple trillions more just from that

increase. And it's not to say that we do

or don't need that. One of the things

about our group, we don't we don't

really weigh in on the policies. What we

want is to be able to have a national

security budget that reflects the risks

of the world that we're in. We don't

want to be deciding national security

based on our budget. And we have

switched to that's where that's the

situation. Now, that sounds like a huge

increase. Given that we can't even audit

the defense department, we need to

understand the money that's there

already, and there are certainly savings

to be had in the procurement process in

paying for outdated weapon systems.

Right now, we have basically a defense

posture that's set up for last century's

threats instead of this centuries. We

really need to rethink all that. There

will be new costs and there's probably

trillions of dollars of savings we'll be

able to get over time. But if there are

needs for defense increases, we have to

budget for them. We have to be willing

to figure out where we're either going

to pay more in taxes or reduce spending

in other parts of the budget. But right

now, this off-handed sort of approach of

we can just increase the defense budget

by 50%. There's no room in the budget

for that. And this is the moment that

people have been warning about that the

world is very risky and we have a budget

that now makes us very vulnerable.

Well, and Maya, on this idea of finding

other offsets elsewhere in the budget,

we've all seen the pie chart. When you

look at US federal spending, we spend a

lot on the military. Non-defense

discretionary spending is a pretty small

slice of the pie. Is the money even

there to offset if we're going to

increase this by 50%. Well, the money is

there, but it's not in places where

people are willing to talk about it. One

of the things we talked a lot about in

this hearing was the fact that we spend

$6 per senior on every $1 we spend on

children. Is that a budget that makes

sense? Is sending checks to people who

might not need them the top priority

when we should be making sure that

programs like social security don't

become insolvent in 6 years which is

going to happen. But we need to look at

all areas of the budget. We need to put

everything on the table. Look at our

healthcare. Look at our retirement. look

at other areas of defense non

non-defense discretionary we're not

going to be able to find the savings if

we don't look at all parts of the budget

doge for instance I think focused on

very tiny slivers and miss some of the

areas like healthcare for instance where

some of the most savings can be found

we're going to have to get serious the

the situation that we're seeing right

now in the Middle East that's kind of

the wakeup call but this was true even

before this we have got to get serious

we're going to have to look at every

single one of the slices of that pie

chart

Do you worry, uh, Maya, and I don't know

what you're hearing from lawmakers on

this, but the idea of a supplemental

becoming a reconciliation bill?

Essentially, the president asks for more

money uh to prosecute the war against

Iran, and lawmakers say, "Fine, but I

need to have mine, too." And this turns

into a very well-decorated Christmas

tree by the time it reaches the floor.

Lawmakers see an opportunity, a vehicle

to attach stuff to it. They may not need

a reconciliation bill. Is this going to

be the next train like that that leaves

the station?

>> I so worry that everything can become a

Christmas tree right now. There is no

there's no norm anymore that we

basically budget. We barely put out

budgets, right? Regularly the budget

committees don't put forth budgets and

they're almost never adopted. We don't

deal with the tradeoffs. And basically a

lot of lawmakers have figured out that

the best way to kind of uh pander to the

public is give more things without

having to pay for them. And so then it

becomes a race for who can borrow more.

We're seeing this in the talk about how

to make things more affordable for

instance. So yes, any supplemental is

almost surely going to have other

unrelated items piled on. The

supplemental will probably be too large

and other items that are unrelated will

probably be thrown in. Sort of that

horse trading of trying to get other

people's votes. We need to bring back

some real structure to the budgeting

process. We know emergencies will

happen. For instance, we should set

aside resources in advance each year in

the b in the budget so that there's

already an emergency savings pool set

aside rather than having to borrow more.

But you bet I worry about this right now

before a midterm election where things

are getting political as if they they

ever aren't. Um we will surely see

people bidding up the cost of any any

emergency bill that they start to

discuss, whatever form it takes.

Maya, we just have about 30 seconds left

here, but obviously all of this is on

the spending side. On the revenue side,

if the administration were to decide to

pursue a say gas tax holiday because of

of the higher energy prices emanating

from this conflict, what revenue impact

would that have?

>> Yeah. So, the gas tax depending on how

many months one puts out, it's quite

costly. You're talking about tens of

billions of dollars adding up very

quickly. And importantly, it doesn't

actually end up making the costs

cheaper. Those things lead into more

demand for the product, [snorts] which

actually pushes up the cost of gas. So,

I know it's not what what people want to

hear, but gas tax holidays aren't

effective and they are expensive.

>> Sounds like we're going to need a bigger

piece of glass to break. Maya, she is

the voice of reality here in the

nation's capital. Maya McInness, it's

really great to see you. Uh, Maya,

president for the committee for a

responsible federal budget, uh, with

some sobering truths there that most

lawmakers don't want to deal with right

now.

Thanks for listening to the Balance of

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