United States Ratings Cut to AA1 From AAA by Moody's | Balance of Power: Late Edition

>> THIS IS BALANCE OF POWER ON BLOOMBERG TV AND RADIO. ALONGSIDE JOE MATHIEU, I'M KAILEY LEINZ IN WASHINGTON. MOODY'S ANNOUNCING IT IS DOWNGRADING THE U.

S. TO A AA ONE CREDIT RATING FROM AAA, CITING WHAT WE HAVE BEEN SEEN PLAYING OUT BETWEEN CONGRESS AND THE WHITE HOUSE. MOODY'S NOTING SUCCESSIVE U.

S. ADMINISTRATIONS AND CONGRESS FAILING TO REVERSE DEBTS. THEY DO NOT BELIEVE THE CURRENT FISCAL PROPOSALS WILL RESULT IN SOLVING THAT.

JOE: HOURS AFTER THE BUDGET COMMITTEE FAILED TO CLEAR THE ONE BIG, BEAUTIFUL BILL PRESIDENT TRUMP SPEAKS ABOUT. PAYING FOR THEM HAS BEEN A MAJOR QUESTION ABOUT THAT. THIS IS WHY WE SAW MEMBERS OF THE FREEDOM CAUCUS VOTING AGAINST THAT WAY.

KAILEY: WE SHOULD ALL KEEP IN MIND MOODY'S WAS THE LAST ONE STANDING. OTHERS HAD ALREADY DOWNGRADED IN THE DEBT CEILING FIGHT. THAT IS THE CONTEXT WITH WHICH WE TURN TO BLOOMBERG'S EDITOR MICHAEL MCKEE AS WELL AS ROMAINE BOSTICK JOINING US FROM NEW YORK.

ROMAIN, JUST TO BEGIN WITH YOU, WHILE THE REASONING MIGHT BE UNEXPECTED, TIMING IS CERTAINLY A SURPRISE. WHAT IMPACT SHOULD WE EXPECT ACROSS ASSET CLASSES? ROMAINE: MY FIRST THOUGHT WAS GOING BACK TO 2011 WHEN WE TALK ABOUT THIS IDEA OF THE S&P, WHEN THEY MADE THAT BIG DOWNGRADE AND THIS OF YOUR MARKET REACTION WE SAW.

WE SHOULD POINT OUT RIGHT NOW MOST OF THE MARKETS WERE CLOSED. YOU DID SEE A BIG LEG DOWN IN TREASURY FUTURES AND THE TLT WHICH PRIMARILY TRACKS LONGER DATA TREASURY PRICES. YOU ARE ALSO SEEING EQUITY MARKETS STILL TRADING.

ALSO MOVING SLIGHTLY LOWER. THE DECLINES ARE FRACTIONAL, TO BE SURE. BUT AGAIN, IT IS LATE ON A FRIDAY.

WE COULD SEE MUCH MORE OF A REACTION MONDAY MORNING. THIS GETS TO THIS IDEA OF SOMETHING THE MARKET HAS BEEN PUSHING BACK ON. DEBT SERVICING COST LEVELS.

WITH THIS BILL, THERE WOULD POTENTIALLY BE PUSHED BACK THE MARKET. I WAS A LITTLE SURPRISED THAT WE GOT THE PUSHBACK FROM ONE OF THE RATINGS COMPANIES. JOE: THIS COMES MORE THAN A YEAR AFTER MOODY'S CHANGED ITS OUTLOOK TO NEGATIVE.

WHAT HAS HAPPENED IN THAT PERIOD OF TIME TO LEAD TO THE ACTUAL DOWNGRADE. MICHAEL: I SUPPOSE I COULD SHORTHANDED BY SAYING NOTHING. MOODY'S AND OTHERS HAVE BEEN CONCERNED BY THE U.

S. DEBT PROFILE THERE WERE SUGGESTIONS IT COULD BE COMING FOR -- FROM QUITE SOME TIME. THE ISSUE MAY BE THE BIG, BEAUTIFUL BILL.

MOODY'S LOOKING AT THAT. THEY SAY THEY DON'T THINK IT IS GOING TO DO ANYTHING TO LOWER THE U. S.

DEBT SITUATION SO THEY FEEL LIKE THEY COULD CUT US ONE NOTCH. IT MEANS THE U. S.

HAS BEEN DOWNGRADED BY ALL THREE AGENCIES. THAT PUTS US BELOW, THERE ARE 10 COUNTRIES LEFT THAT HAVE AAA RATINGS. THE U.

S. IS NO LONGER A AAA RATED COUNTRY EVEN THOUGH IT IS THE LARGEST ECONOMY IN THE WORLD. KAILEY: WHEN WE CONSIDER AS I SIT HERE ON BALANCE OF ABOUT THE RESPONSE WE MIGHT SEE FROM AN ADMINISTRATION THAT HAS ARGUED SUGGESTING IT IS NOT ACTUALLY THE DEFICIT LEVEL THAT MATTERS, IT IS ALL ABOUT DEBT TO GDP AND THAT IS NOT THAT BAD.

IS THIS MOODY'S SAYING THAT ARGUMENT DOES NOT HOLD WATER IN THE CURRENT INTEREST-RATE ENVIRONMENT? MICHAEL: ABSOLUTELY. MOODY'S IS LOOKING AT PROJECTIONS THAT THE U.

S. DEBT TO GDP RATIO IS GOING TO RISE OVER THE NEXT FEW YEARS, MAYBE AS HIGH AS 140, 150% ON THE PATH WE ARE ON. THEY SAY THAT SUGGESTS A LEVEL OF FISCAL YOUR RESPONSIBILITY THAT JUSTIFIES THE DOWNGRADE.

THE QUESTION IS HOW DOES THAT IMPACT THE U. S. ITSELF BECAUSE IT WILL LIKELY RAISE INTEREST COSTS WHICH YOU'LL -- WHICH WILL INCREASE THE DEBT BECAUSE THE GOVERNMENT WILL HAVE TO PAY MORE FOR ITS BORROWING.

MARKETS ARE LARGELY CLOSED. WE WILL SEE SUNDAY NIGHT, MONDAY MORNING WHAT THIS LIKELY MEANS. IT DOESN'T MEAN FORCED SELLING.

A LOT OF BOND CONTRACTS WERE CHANGED, THEY TOOK OUT REFERENCE TO THE AAA RATING AND THEY PUT IN U. S. GOVERNMENT DEBT.

BECAUSE OF THE SIZE OF THE TREASURY MARKET THAT HAS GENERALLY BEEN CONSIDERED A REFERENCE TO THE DATA AND IT MEANS THAT JUST BECAUSE THERE IS A DOWNGRADE DOESN'T MEAN A LOT OF PEOPLE HAVE TO SELL, BUT IT CERTAINLY MEANS HIGHER INTEREST RATES. JOE: MIKE MCKEE AND THE CLOSE COANCHOR ROMAINE BOSTICK WITH REACTION TO THIS IMPORTANT HEADLINE. WE TURN TO THE CHIEF U.

S. ECONOMIST, A VETERAN OF THE FIRST TRUMP ADMINISTRATION. JOE, GREAT TO HAVE YOU BACK.

WAS THIS DESERVED? >> NO, I DON'T THINK IT WAS DESERVED. YOU SAID IT.

THE TIMING IS VERY STRANGE. THE BILL IS WORKING ITSELF THROUGH THE CONGRESS. WE HAVE TO SEE WHAT IT LOOKS LIKE.

THE CBO ESTIMATES OF HOW THEY SCORE I HAVE REAL PROBLEMS WITH. THEY ARE ASSUMING GDP OF LESS THAN 2%. I DON'T KNOW WHAT MOODY'S IS ASSUMING.

WE HAVE 100% DEBT TO GDP. THAT IS NOT UNUSUAL ESPECIALLY AFTER A PERIOD OF VERY LOW RATES. DEAR YOU ARE, YOU ARE DOWNGRADING THE COUNTRY THAT HAS THE RESERVE CURRENCY, DOWNGRADING THE COUNTRY THAT HAS THE BEST PRODUCTIVITY PER CAPITA OF ANY COUNTRY.

TO DO THIS, I'M COMPLETELY NONPLUSSED BY IT. AND TO DO IT ON A FRIDAY BEFORE EVEN SEEING A BILL WHICH I THINK, I'M AN OPTIMIST, DO SOME GOOD STUFF ON THE SPENDING AND CERTAINLY RAISE REVENUES. I'M GUESSING THIS IS BEHIND MOODY'S ANALYSIS.

WHEN YOU ASSUME THAT THIS IS SOMEHOW GOING TO ADD TO THE DEFICIT, IT IS FUNDAMENTALLY WRONG IN MY OPINION. IT IS VERY POOR FORECASTING SO I HAVE A BIG PROBLEM WITH WHAT MOODY'S DID. KAILEY: I WILL GIVE YOU SOME OF THEIR REASONING DIRECTLY FROM THE STATEMENT, OVER THE NEXT DECADE WE EXPECT LARGE DEFICITS AFTER ENTITLEMENT SPENDING RISE AS WELL GOVERNMENT SPENDING REMAINS LARGELY FLAT.

WHAT PART OF THAT THINKING DO THEY HAVE WRONG? IS IT THE REVENUE SIDE OR ENTITLEMENTS GOING UP? JOSEPH: IF YOU LOOK AT THE CBO SCORING, IT IS ACTUALLY BEYOND THE NEXT 10 YEARS WHERE MEDICARE AND MEDICAID ARE DRIVING IT, BUT THAT IS WAY FAR OUT.

THE REVENUE SHARE OF GDP, WE HAVE RECENTLY HAD A REALLY EXCESSIVE SPENDING. WE HAVE TO SEE WHAT THE SPENDING LOOKS LIKE. CONGRESS IS WORKING TO PASS A BUDGET.

WE DON'T KNOW WHAT THE SPENDING IS GOING TO LOOK LIKE. WE KNEW THIS WAS GOING TO HAPPEN, THE LONG-TERM TRENDS LOOK FOR BY SOME ESTIMATES. WHY WOULD YOU DO IT NOW WITHOUT EVEN KNOWING WHAT THE BUDGET LOOKS LIKE?

BY THE WAY, 10 YEAR YIELDS WERE RECENTLY UNDER 4% AND THEY HAVE RISEN UP TO THE 4. 45% TO 4. 5 PERCENT RANGE BECAUSE THE U.

S. ECONOMY LOOKS HEALTHY. HIGHER IS STILL LOWER THAN WHAT IT WAS IN JANUARY.

WITHOUT GOING INTO ALL THE DETAILS MOODY'S CAME UP WITH, THEIR ASSUMPTIONS TO ME I DON'T AGREE WITH. I DON'T AGREE WITH THEM. JOE: IT IS REALLY INTERESTING.

WHEN THEY POINT TO $4 TRILLION BEING ADDED TO THE FEDERAL DEFICIT, ARE YOU TAKING ISSUE WITH THE REASONING OR THE TIMING? JOSEPH: THE REASONING. I'M ASSUMING THEY ARE USING CBO ANALYSIS.

THAT IS RIDICULOUSLY LOW. THE DIFFERENCE BETWEEN 1. 8% GROWTH, I THINK WE COULD BE A THREE.

THE REVENUE DIFFERENCE ON THAT ALONE. THAT IS $4 TRILLION IN WHAT WE WOULD GET BASED ON JUST THE GROWTH. THEY ARE ECONOMICALLY DOOM AND GLOOM.

KAILEY: YES, THERE ARE NEGOTIATIONS HAPPENING ON CAPITOL HILL, BUT THERE ARE NEGOTIATIONS HAPPENING TRYING TO SET NEW RATES OF TARIFFS. THEY ARE GOING TO BE AT LEAST 10% THE BASELINE. THAT BRINGS US TO THE HIGHEST LEVEL WE HAVE SEEN IN DECADES.

DOES THAT NOT HAVE SOME BEARINGS? JOSEPH: YOU WERE DOING -- I ALMOST AGREED WITH YOU ALL THE WAY. CERTAINLY ON THE REVENUE SIDE.

IT HAS YET TO SHOW UP IN THE INFLATION DATA. THE PROBLEM IS WHEN CBO DOES ITS ANALYSIS BECAUSE IT ASSUMES IT HAS TO BE LEGISLATED. LET'S SAY IT IS THE BOTTOM END.

I HAVE TO BELIEVE THAT WHEN THE BUDGET COMES DOWN. $100 BILLION TIMES 10 GIVES YOU 2 TRILLION. JOE: DOES THIS NOT STRENGTHEN THE HAND OF MEMBERS OF THE FREEDOM CAUCUS WHO HAVE EXPRESSED CONCERN ABOUT RISING DEBT AND DEFICIT.

THEY JUST GOT AN INTERESTING BIT OF COMPANY IN THIS ARGUMENT. JOSEPH: CERTAINLY THE FISCAL HAWKS WILL USE THIS AS A REASON TO BE MORE CAREFUL ON THE OUTLOOK. AS IT RELATES, WE NEED TO SLOW THE PACE OF SPENDING.

THESE ARE NOT CUTS. JOE: I'M JUST ANOTHER JOE, JOE. [LAUGHTER] JOSEPH: IF WE GO FROM 6% NOMINAL SPENDING TO 5%, I THINK WE DESPERATELY NEED TO SLOW THE PACE OF SPENDING.

BECAUSE THE DEFICIT LONG-TERM IS ON THE REVENUE SIDE, THEY ARE ASSUMING THAT IF WE HAVE MASSIVE TAX INCREASES NEXT YEAR, THE LARGEST EVER, THAT WILL RAISE REVENUE. IT WON'T WORK THAT WAY BUT ON THE SPENDING SIDE, THERE IS ROOM TO CUT OR SLOW THE SPENDING. KAILEY: IF YOU WOULD EXPECT KNOWING THE PRESIDENT AS YOU DO FOR HIM TO BE PUSHING FOR THE ACTUAL RATES SET BY THE FEDERAL RESERVE TO BE LOWER IN THE NAME OF LONG-TERM PHYSICAL HEALTH, WOULD YOU BE SURPRISED IF HE STEPS IN WITH THAT ARGUMENT?

JOSEPH: MAYBE, BUT HERE IS WHAT I WANT TO SAY. IF YOU LOOK AT THE YIELD CURVE, IT IS STILL VERY FLAT AND RECENTLY, THE TWO YEAR YIELD WAS ABOVE THE FED FUNDS RATE. SO THE INTEREST COSTS ARE SIGNIFICANTLY HIGH.

IF WE HAVE LOWER RATES AND THE CURVE NORMALIZES, THIS WILL LOOK A LOT LOWER. BY JAY POWELL ZONE INFLATION METRIC, THE SERVICES ECONOMY, EXCLUDING ENERGY AND HOUSING. IT HAS NO IMPACT.

THERE IS A VERY POWERFUL ARGUMENTS THAT THE FED SHOULD AND COULD BE CUTTING. INTEREST COSTS ARE GOING TO COME DOWN A LOT. I DOUBT THAT IS IN MOODY'S ESTIMATES EITHER.

JOE: THANKS FOR BEING WITH US HERE MOMENTS AFTER THIS NEWS BROKE. UP NEXT A LOT MORE ON THE BREAKING NEWS COME ALIVE ON CAPITOL HILL FOR REACTION AS WELL. THIS IS BALANCE OF POWER ON BLOOMBERG TV AND RADIO.

KAILEY: MOODY'S HAS DOWNGRADED THE U. S. 'S CREDIT RATING FROM AAA DOWN TO AA ONE.

THEY CITE DECISIONS ON CAPITOL HILL, PUTTING A SPOTLIGHT ON THEM. THE HOUSE BUDGET COMMITTEE AFTER CONSERVATIVE REVOLT SHOT DOWN ITS ADVANCEMENT, THE TAX PACKAGE, THROUGH THE BUDGET COMMITTEE. WE WANT TO GET MORE FROM JACK FITZPATRICK FROM BLOOMBERG GOVERNMENT.

WE KNOW CONVERSATIONS ARE GOING TO CONTINUE WITH THESE CONSERVATIVE MEMBERS THIS WEEKEND. HOW MUCH FUEL DOES THIS DOWNGRADE GIVE TO THEIR ARGUMENTS WHEN WE CONSIDER THOSE FISCAL HAWKS? JACK: IT ADDS A LOT OF FUEL.

YOU HAD FOUR CONSERVATIVE HOLDOUTS IN THE BUDGET COMMITTEE ALONE. ON THE OTHER HAND, I WOULD POINT OUT THE SALT REPUBLICANS WHO WANT A MORE GENERALLY GENEROUS BILL FOR THEIR CONSTITUENTS HAVE THREATENED TO HOLD OUT. THERE IS A RISK THAT IF YOU GIVE MORE IN MEDICAID SPENDING REDUCTIONS AND MORE FISCALLY CONSERVATIVE MEASURES TO THE CONSERVATIVES IT MAY JUST BE REDIRECTED TO A MORE GENEROUS SALT DEDUCTION.

THERE IS NOT NECESSARILY A FAIR TAKEAWAY TODAY THAT THIS WILL BE A FAR MORE CONSERVATIVE BILL EVEN AS A FEW CONSERVATIVES REALLY AT THEIR FOOT DOWN AND DEMAND ADDITIONAL CONCESSIONS. JOE: WE UNDERSTAND THERE IS A 10:00 P. M.

HEARING SET FOR SUNDAY TO TRY TO DO THIS ALL OVER AGAIN. YOU CAN LET US KNOW IF THAT IS THE CASE. WHAT CHANGES BETWEEN NOW AND THEN FOR THESE FREEDOM CAUCUS MEMBERS?

JACK: ROY AND NORMAN ONE AND EARLIER PHASE-IN . THEY WANT AN EARLIER ATTEMPT TO PULL BACK THE CLEAN ENERGY TAX CREDIT. YOU COULD COME UP WITH SOME COMBINATION OF OFFER.

YOU NEED AT LEAST TWO OF THEM TO GET ON BOARD IN THE BUDGET COMMITTEE, BUT YOU ALSO NEED EITHER ROY OR NORMAN SPECIFICALLY TO GET ON BOARD TO GET THEM THROUGH THE RULES COMMITTEE BECAUSE YOU CAN ONLY LOSE TWO VOTES ARE THERE. THEY NEED SOME SIGNIFICANT COMBINATION, POTENTIALLY RE-OUT OF THE FOUR FUNCTIONALLY TO GET THIS TO THE HOUSE FLOOR SOMETIME NEXT WEEK. JOE: IT IS GOING TO HAVE TO BE A PRODUCTIVE WEEKEND FOR THAT TO HAPPEN.

JACK FITZPATRICK FROM CAPITOL HILL, THANKS FOR THE REPORTING AS WE ADD THE VOICE OF CONGRESSMAN ROGER CHRISTER MURPHY. QUITE THE AFTERNOON AND EVENING WE HAVE FOUND OURSELVES HERE. WE HAVE SEEN THE BILL FAIL IN THE BUDGET COMMITTEE AND HOURS LATER, THE CREDIT DOWNGRADE WE JUST RECEIVED FROM MOODY'S.

IS MOODY'S TELLING US SOMETHING THAT OTHER LAWMAKERS OUGHT TO BE LISTENING TO? WHAT ARE WE LEARNING ABOUT THE FISCAL HEALTH OF OUR NATION? >> WELL, IT IS PRECARIOUS IN THIS PARTICULAR BILL, THEY CALL IT THE BIG, BEAUTIFUL BILL, IT IS A LARGE LOUSY LAW PUTTING TRILLIONS OF DOLLARS.

THIS THING PILING UP DEBT FOR FUTURE GENERATIONS AND IT IS SENDING A SIGNAL TO THEM NOT TO PASS THE BILL. KAILEY: AND YET THEY ARE GOING TO CONTINUE TO TRY OVER THE WEEKEND, CONGRESSMAN. THERE ARE MANY QUESTIONS ABOUT THE TIMELINE.

EMBEDDED IN THE BILL IS A LIFT TO THE DEBT CEILING THAT HAS THEM PART CAUSED THE DOWNGRADE FROM THE OTHER CREDIT -- CREDIT AGENCIES, FITCH AND S&P HAVE WARNED ABOUT THIS. DO YOU THINK THERE MAY BE A POSSIBILITY DEMOCRATS IN THE NAME OF THE FULL FAITH AND CREDIT OF THE UNITED STATES ARE GOING TO HAVE TO STEP IN AND WORK REPUBLICANS TO MAKE SURE THE DEBT CEILING GETS RAISED IN A TIMELY MANNER. REP.

KRISHNAMOORTHI: POSSIBLY, BUT ONLY IF THE REPUBLICANS DON'T SHRED THE SOCIAL SAFETY NET IN THE NAME OF FUNDING TAX CUTS FOR THE WEALTHIEST AMONG US. THIS SAME BILL BASICALLY TAKES MEDICAID AWAY FROM UPWARDS OF 10 MILLION AMERICANS. THEIR SOLE SOURCE OF HEALTH CARE.

IT BASICALLY LEAVES THEM MORE DESTITUTE, SICKER, AND UNABLE TO WORK, MAKING THEM MORE RELIANT ON THE SOCIAL SAFETY NET. I MAY PRODUCT MYSELF A PUBLIC HOUSING AND FOOD STAMPS. I WOULD NOT BE HERE BUT FOR THE FACT THAT THE GOVERNMENT STEPPED IN THE BREACH.

AND YET WE ARE HERE TALKING ABOUT DOING THE SAME TO MILLIONS OF OTHER PEOPLE. DEMOCRATS ARE NOT GOING TO STAND FOR THAT. THEY ARE NOT GOING TO SUPPORT THAT TYPE OF APPROACH TO OUR BUDGET THE WAY THE REPUBLICANS ARE RIGHT NOW.

JOE: CONGRESSMAN, CONSIDERING THE FACT DEMOCRATS DO NOT HAVE A SEAT AT THE TABLE FOR THIS DEBATE IN THE RECONCILIATION PROCESS BY DESIGN ARE YOU QUIETLY HOPING THE FREEDOM CAUCUS DERAILS THIS WHOLE THING? REP. KRISHNAMOORTHI: I THINK WHETHER I DO OR NOT, I THINK THAT IS WHAT THEY ARE DOING RIGHT NOW AND WE HAVE SEEN THE INFIGHTING.

I THINK PARTICULARLY BECAUSE CONSTITUENTS ARE KIND OF RAISING THE ALARM. DEMOCRATS ARE SHINING A LIGHT ON THE HARM THAT IS BEING DONE TO THESE PROPOSED CUTS. I'M GETTING CALLS CONSTANTLY, JOE, FROM PEOPLE WHO ARE BASICALLY FEARFUL THAT NOT ONLY IS MEDICAID GOING TO BE CUT, BUT THE SOCIAL SECURITY AND MEDICARE ARE GOING TO BE AFFECTED.

I'VE GOT TO BELIEVE THAT THEY ARE GETTING THE SAME TYPES OF CALLS. DO THEY CHOOSE THEIR CONSTITUENTS OR DONALD TRUMP? IF THEY CHOOSE THE LATTER, THEY WILL BE HELD ACCOUNTABLE.

KAILEY: YOU ARE IN THE MIDDLE 11 ACTIVE RUN FOR A SENATE SEAT BEING VACATED BY DICK DURBIN. I WONDER WHAT YOU EXPECT FROM THE UNITED STATES SENATE AS THERE ARE SENATORS WHO HAVE MADE SIMILAR SUGGESTIONS TO YOU EVEN IN OF THE REPUBLICAN SIDE ABOUT CONCERNS OVER MEDICAID, OVER THE TYPE OF SPENDING CUTS WE ARE LOOKING AT HERE. ARE WE ASSUMING THE HOUSE CAN PASS ONE IN THE FIRST PLACE?

REP. KRISHNAMOORTHI: I THINK THEY WILL. BASED ON WHAT I HAVE HEARD, IT IS VERY POSSIBLE THEY ARE NOT GOING TO GO ALONG WITH THESE TYPES OF CUTS.

AT THE END OF THE DAY, DONALD TRUMP IS TRYING TO FUND THE TAX CUTS ON THE BACK OF WORKING FAMILIES AND THE POOR. THAT IS SOMETHING THAT DOESN'T GO OVER WELL AND NOT ONLY IS MOODY'S, THIS IS THE FIRST TIME ALL THREE RATINGS AGENCIES HAVE DOWNGRADED AMERICA'S DEBT AT THE SAME TIME. NOT ONLY IS THIS BILL HORRIBLE FROM A FISCAL STANDPOINT, BUT IT IS MORALLY WRONG.

I THINK THAT IS SOMETHING WEIGHING ON A LOT OF PEOPLE AS WELL. JOE: WHEN YOU HEAR ABOUT A BUDGET COMMITTEE MEETING 10:00 P. M.

ON A SUNDAY, DOES THAT TELL YOU THE CHAIRMAN THINKS HE HAS THE VOTES OR NOT? REP. KRISHNAMOORTHI: IT SIGNALS TO ME THAT PERHAPS HE IS HOPING THAT SOME MEMBERS DON'T SHOW UP.

I THINK THAT IT IS A DESPERATE ATTEMPT TO TRY TO RESCUE THAT PARTICULAR BILL, BUT REGARDLESS OF WHAT HAPPENS SUNDAY NIGHT, I GUARANTEE YOU THAT CONSTITUENTS ARE GOING TO BE PAYING ATTENTION NOT ONLY SUNDAY NIGHT, BUT THE NEXT WEEK AS WELL. KAILEY: OF COURSE THIS WEEKEND IN WASHINGTON IS GOING TO BE A VERY BUSY ONE FOR THAT REASON. THAT IS WHAT PRESIDENT TRUMP IS RETURNING TO AS HE MAKES HIS JOURNEY BACK TO THE MIDDLE EAST.

I DO WANT TO ASK YOU ABOUT THE DEALS PRESIDENT TRUMP STRUCK WITH THE MOVES THE U. S. IS MAKING WHEN IT COMES TO CHIPS AND TECHNOLOGY THAT SAUDI ARABIA AND THE UAE ARE GOING TO HAVE ACCESS TO.

ARE YOU WORRIED ABOUT THE MARKET BEING CHINA? REP. KRISHNAMOORTHI: YES, I THINK IT IS A HORRIBLE DEAL.

FIRST OF ALL, RECISION OR ENDING OF WHAT IS CALLED THE AI DIFFUSION, BASICALLY THIS RULE PREVENTS US FROM SELLING TO INDIVIDUALS OR ENTITIES IN COUNTRIES THAT MIGHT END UP SHARING WITH THE CHINESE COMMUNIST PARTY AND THAT IS WHAT IS GOING TO HAPPEN HERE. IF WE ALLOW AMERICAN CHIP COMPANIES TO SELL THE HIGHEST AND SEMI CONDUCTORS TO COMPANIES LIKE G 42 IN THE UNITED ARAB EMIRATES, THAT TECHNOLOGY IS GOING TO END UP IN THE HANDS OF THE CHINESE GOVERNMENT AND IT IS GOING TO BE USED AGAINST US. IT IS GOING TO BE USED IN THEIR MILITARY SYSTEMS AND TO PERPETRATE HUMAN RIGHTS ABUSES SUCH AS IN THE UIGHUR GENOCIDE.

JOE: SOMETHING TELLS ME THAT CHINA SELECT COMMITTEE WILL NOT BE HOLDING A HEARING ON THAT. IS THAT IS SOMETHING YOU WILL PUSH FOR? REP.

KRISHNAMOORTHI: I WILL BE PUSHING TO SHINE A LIGHT ON THIS AS MUCH AS I POSSIBLY CAN BECAUSE IT IS ONE OF THOSE ISSUES WHERE I THINK THESE EXPORT CONTROLS REALLY HAVE MADE A CRITICAL DIFFERENCE. WE HAVE TO KEEP THE CCP AWAY FROM THESE HIGHEST AND SEMI CONDUCTOR CHIPS. THEY WILL USE THOSE CHIPS AGAINST US MILITARILY, WHETHER IT IS IN HYPERSONIC SOULS OR OTHER WEAPONS AND THEY WILL USE IT TO PERFECT THEIR SURVEILLANCE STATE, THEIR TECHNO-AUTHORITARIAN SURVEILLANCE STATE AGAINST U IGHURS, TIBETANS, AND OTHERS.

GOOD TO HAVE YOU BACK. THANK YOU AS ALWAYS FOR THE INSIGHTS HERE ON BLOOMBERG TV AND RADIO. IF YOU CAN BELIEVE IT, WE HAVE MORE BREAKING NEWS TO TALK ABOUT THIS EVEN IN THIS TIME IT IS COMING FROM THIS COURT.

-- FROM THE SUPREME COURT. THEY HAVE TEMPORARILY BLOCKED THE USE OF A WARTIME LAW BY THE TRUMP ADMINISTRATION TO DEPORT VENEZUELANS, SAYING THE ADMINISTRATION DID NOT PROVIDE SIGNIFICANT ENOUGH NOTICE. CAN YOU PUT INTO PERSPECTIVE HOW MUCH IMPACT THIS WILL HAVE?

>> THIS RULING IS ALL ABOUT DUE PROCESS. THEY ARE SAYING THE GOVERNMENT CANNOT JUST PORT THESE PEOPLE -- DEPORT THESE PEOPLE WITHOUT GIVING THEM DUE NOTICE, WHICH MEANS MORE THAN 24 HOURS AND THE ABILITY TO NOTIFY THEIR LAWYERS AND FILE AN APPEAL. THEY ARE SAYING THESE PEOPLE NEED TO BE ABLE TO FILE HABEAS PETITIONS TO PROTECT THEIR DEPORTATION TO SEEK THEIR RELEASE.

THIS IS AN EXTENSION OF THE EARLIER ORDER WE SAW APRIL 19 1:00 IN THE MORNING WHEN THEY WERE ACTING UNDER EXTREME URGENCY BECAUSE THEY HAD REPORTS OF THESE MEN BEING PUT ON BUSES AND TAKING AIR -- TAKING TO AIRPORTS. KAILEY: ALL CAPS ON TRUTH SOCIAL, THE SUPREME COURT WON'T ALLOW US TO GET CRIMINALS OUT OF OUR COUNTRY. MY UNDERSTANDING OF WHAT YOU SAID IS NOT THAT THE SUPREME COURT IS SAYING YOU CAN'T GET THEM OUT, YOU JUST HAVE TO GO THROUGH DUE PROCESS.

>> THIS IS EXACTLY RIGHT. THEY HAVE NOT WEIGHED IN AT ALL IN OF THE USE OF THE ALIEN ENEMIES ACT. THEY ARE ALSO POINTING TO ANOTHER CASE, THE ABREGO GARCIA CASE.

THE OTHER ISSUE IS THAT THE GOVERNMENT HAS NOT INVITED ANY EVIDENCE ABOUT ANY OF THESE DETAINEES TO SHOW THAT THEY ARE CRIMINALS. WE JUST HAVE THE GOVERNMENT'S WORD, BUT THERE WAS A LOT OF BACK-AND-FORTH BETWEEN JUDGES AND THE ADMINISTRATION OVER WHETHER OR NOT THESE PEOPLE CAN BE DETAINED AND DEPORTED AND WHY. THE JUDGE TODAY WAS VERY FRUSTRATED BECAUSE THE GOVERNMENT HAS NOT ANSWERED ANY QUESTIONS ABOUT ABREGO GARCIA AND WHY HE WAS DEPORTED AND THE GOVERNMENT HAS ALREADY ADMITTED THAT HE WAS MISTAKENLY DEPORTED.

THE JUDGE SAID IN THAT CASE SHE DOESN'T HAVE ENOUGH INFORMATION TO EVALUATE WHETHER THAT WAS CORRECTLY APPLIED. JOE: WHAT RULING MIGHT -- IMPACT MIGHT THIS RULING HAVE? >> IT WILL CLEARLY BE APPLIED TO OTHER CASES.

THERE ARE TWO FILING A CASE OF THE VENEZUELANS, BUT THERE ARE NEARLY 200 IN DETENTION CENTERS AROUND THE COUNTRY THAT WILL BE AFFECTED BY THIS ORDER AND POTENTIALLY OTHERS. KAILEY: ALL RIGHT, THANK YOU SO MUCH FOR JOINING US AS WE DEAL WITH ONE PIECE OF BREAKING NEWS U. S.

RATINGS DOWNGRADED FROM MOODY'S. ROMAINE BOSTICK HAS AN UPDATE ON THE MARKET REACTION. THIS DROPPED AFTER HOURS ON A FRIDAY SO WE HAVE TO CONSIDER THE TIMING, BUT WHAT ARE YOU TRACKING?

ROMAINE: WE SHOULD POINT OUT, THE FIRST BIG DOWNGRADE WE GOT OF THE TRIPOLI RATING WAS AUGUST OF 2011, IT WAS ALSO ON A FRIDAY AFTER THE MARKET HAD CLOSED SO WE HEADED TO WAIT A FEW DAYS TO SEE HOW INVESTORS WOULD TAKE IT AND THEY DID NOT TAKE IT WELL. THAT MORNING, THE DOW JONES PILLAGED -- PLUNGED 50%. THE RUSSELL 2000 PLUNGED ABOUT 9%.

LOOKING AT TREASURY FUTURES ON THE SCREEN, THIS IS INTERESTING BECAUSE IN 2011, TREASURY YIELDS FELL AFTER THAT AND IT WAS KIND OF COUNTERINTUITIVE BECAUSE EFFECTIVELY WHAT HAPPENED IS PEOPLE TOOK A SIGN WHEN THEY SAW THE DOWNGRADE, THEY SOUGHT AS A SIGN THERE WERE BROADER ECONOMIC ISSUES GLOBALLY. WHERE DO YOU RUN IN TIMES OF TROUBLE BUT TO THEM WORLD'S MOST LIQUID BOND MARKET? IT HAVE THE OPPOSITE EFFECT.

THAT'S WHAT WE HAVE TO CONTEND WITH MONDAY MORNING, HOW INVESTORS WILL PARSE THIS. IN 2023, WHEN FITCH DOWNGRADED THE U. S.

FROM ITS AAA RATING, IT WAS KIND OF A MARKET SHRUG. ALL LOSSES WERE RECOUPED IN SHORT ORDER. JOE: WE ARE IN A DIFFERENT PERIOD OF TIME, THE PAST COUPLE OF WEEKS WE'VE WATCHED A REMARKABLE ROUND-TRIP FROM INAUGURATION AND LIBERATION DAY.

YOU'VE HAD CONCERN WE HAVE RUN UP TO FAR TOO FAST WITHOUT A GREAT CHANGE IN NEWS, INDICATIONS OF TRADE DEALS FOR THE MOST PART. IS THIS A PERIOD IN WHICH THE MARKET IS AT MORE RISK WHEN WE REOPEN MONDAY MORNING? ROMAINE: THAT'S WHAT WE'RE HEARING FROM A LOT OF FOLKS.

WE HAD A GUEST FROM MORGAN STANLEY THIS MORNING SAYING THAT, ADVISING HER CLIENTS TO TAKE PROFITS SPECIFICALLY FROM TEXTURES TO THINGS MORE DEFENSIVE, AND MIGHT BENEFIT FROM DEREGULATION. A LOT OF PEOPLE ARE SAYING THE OTHER LEG OF THE STOOL, THE HOLISTIC APPROACH THE TRUMP ADMINISTRATION HAS BEEN TRYING TO MAKE WITH FISCAL POLICIES, THE OTHER LEG OF THE STOOL LOOKS LIKE IT MIGHT GIVE INVESTORS MORE TROUBLE TO WRAP THEIR HEADS AROUND, PARTICULARLY NOW THAT MOODY'S HAS DECIDED TO WEIGH IN BEFORE WE GOT AN ACTUAL VOTE ON THE BILL. JOE: ANOTHER REMARKABLE MOMENT WITH HELP OF ROMAINE BOSTICK.

NEXT, MORE REACTION TO THE RATINGS DOWNGRADED AS WE ARE LIVE WITH CONGRESSMAN TIM BURCHETT OF TENNESSEE. "BALANCE OF POWER"BALANCE OF POWERMUCH MORE TO COME ON. " JOE: WELCOME BACK TO "BALANCE OF POWER.

" TONIGHT WE ARE COMING TO YOU WITH BREAKING NEWS AFTER MOODY'S DOWNGRADED THE U. S. CREDIT RATING, THE AGENCY DELIVERING A HARD FOR U.

S. LEGISLATORS. "WHILE WE RECOGNIZE SIGNIFICANT ECONOMIC AND FINANCIAL STRINGS, WE BELIEVE IT HAS NO LONGER FULLY COUNTERBALANCE THE DECLINE.

" THE U. S. TO A AA1 RATING FROM A AAA.

FOR BACKGROUND, WE HAVE A REPUBLICAN CONGRESSMAN WITH US. GOOD TO SEE YOU, THANKS FOR JOINING US. MOODY'S SEES IS DIRECTLY CONNECTED, THE DOWNGRADED TODAY WITH THE DEBATE TAKING PLACE ON CAPITOL HILL, THE TAX AND SPEND A BILL THAT IS SUPPOSED TO LEND ITSELF TO A RECONCILIATION PROJECT.

THEY'RE ARE GREAT CONCERNS ABOUT ADDED TO THE DEBT AND DEFICIT. DO YOU SHARE THOSE WORRIES? >> I DO 100%.

I COME FROM TENNESSEE AND WE HAVE ZERO DEBT, WE ARE AAA+, THE AGENCIES ALL GIVE US THAT BECAUSE WE DON'T BORROW AND WE PAY DOWN EVERYTHING. THE FEDERAL GOVERNMENT JUST PRINTS MORE MONEY AND PEOPLE ARE LOOKING TO GET THROUGH THE NEXT ELECTION. KAILEY: IF YOU DO AGREE, DO YOUR COLLEAGUES CHIP ROY, RALPH NORMAN, THOSE THAT SHOT THE PACKAGE DOWN HAVE A POINT THAT THE BILL AS IT STANDS RIGHT NOW SHOULD NOT PASS?

REP. BURCHETT: THAT'S WHAT MOODY'S HAS SAID AND EVERYONE AGREES WITH IT. THE PROBLEM IS FOLKS BACK HOME ARE NOT GRASPING THE SERIOUSNESS OF $36 TRILLION IN DEBT AND RUN AWAY INFLATION.

THE LARGEST SINGLE ITEM WE WILL PAY WILL JUST BE INTEREST ON OUR LOAN. I'M WORRIED ABOUT LOSING OUR MAJORITY BUT I'M WORRIED MORE ABOUT LOSING OUR COUNTRY BECAUSE WHAT WE KNOW TODAY, THE ECONOMIC FREEDOMS WE ENJOY WILL NOT BE ENJOYED MUCH LONGER IF WE CONTINUE DOWN THIS PATH. JOE: PRESIDENT TRUMP WOULD SAY IF WE DON'T PASS THIS BILL IT WILL RESULT IN THE BIGGEST TAX HIKE IN RECENT HISTORY, 65% HIGHER FOR SOME FOLKS.

WHAT IS WORSE FOR THE FISCAL HEALTH OF OUR COUNTRY, A TAX HIKE OR MORE DEFICIT SPENDING? REP. BURCHETT: I THINK WE CAN GET BY POSITIVE ON BOTH, WE CAN REDUCE SPENDING AND KEEP REDUCING TAXES, ALL WE ARE DOING IS CONTINUING THE TAX CREDITS PRESIDENT TRUMP PUT IN IN HIS FIRST TERM.

IT'S NOT GOING TO INCREASE ON ANYONE. IF WE WOULD JUST DO SOME FISCALLY RESPONSIBLE PROGRAMS AND STOP WORRYING ABOUT ELECTIONS I THINK WE COULD ALL GET THERE. BUT WE ARE NOT.

PEOPLE IN WASHINGTON OVER WORRIED ABOUT BEING IN LEADERSHIP OR THE MAJORITY, NOT PUTTING AMERICA FIRST, AND TRUMP ACTUALLY IS. I BELIEVE HE WILL GET ENGAGED AND THERE WILL BE SOME THINGS, CHIP ROY AND MY FRIEND CONGRESSMAN NORMAN, THEY UNDERSTAND THAT. THEY ARE WORRIED ABOUT OUR FISCAL RESPONSIBILITY MORE THAN POLITICAL FUTURES AND I BELIEVE PRESIDENT TRUMP BELIEVES THAT AS WELL.

THIS IS LIKE A BASKETBALL GAME, DON'T WATCH THE WHOLE GAME, JUST WATCH THE LAST TWO MINUTES AND WE WILL GET IT WORKED OUT. KAILEY: AS WE CONSIDER PRESIDENT TRUMP, WHO YOU THINK SHARES SOME OF THESE BELIEFS, IS HE ASKING FOR TOO MUCH THAT WOULD ADD TO THE BURDEN? SHOULD HE NOT BE GETTING EVERY THING HE WANTS WHEN IT COMES TO NO TAX ON TIPS OR OVERTIME FOR EXAMPLE?

REP. BURCHETT: IF YOU THINK PEOPLE ARE HONESTLY PAYING FULL TEXT ON TIPS NOW, NO. HE IS A BUSINESSMAN, HE UNDERSTANDS JUST BECAUSE HE HAS MONEY DOESN'T MEAN HE SHOULD SPEND IT AND IF HE DOESN'T, HE KNOWS HE CAN'T SPEND IT.

OUR SIDE OF THE AISLE, THE CONSERVATIVE SUCH AS MYSELF, BECAUSE I HAVEN'T CHECKED OFF ON THIS LAN EITHER MYSELF AND THEY KNOW IT BUT THEY WILL BE VOTING ON IT IN THE COMMITTEE. I THINK THERE'S ROOM FOR BOTH. I THINK WE CAN REDUCE TAXES -- WHY DON'T WE REDUCE THE SIZE OF GOVERNMENT?

IF WE COULD GO TO UNDER PRE-COVID SPENDING LEVELS WE COULD WORK THIS OUT. YOU CAN'T NAME ME ONE PROGRAM -- AND I'M NOT POINTING YOU OUT, I'M SAYING AMERICA, CAN'T NAME ONE PROGRAM ADDED SINCE COVID YOU CAN'T LIVE WITHOUT, YET IF WE WENT BACK UNDER THAT, WE COULD WORK THIS THING OUT. BUT WE DON'T HAVE THE MATURITY TO DO THAT.

WE ARE ADDICTED TO OUR GRANDCHILDREN'S MONEY AND THAT'S GOT TO CHANGE, BOTH PARTIES. JOE: THAT SAID, WHAT IS YOUR MESSAGE TO REPUBLICANS, MANY OF THEM FROM THE NORTHEAST, LOOKING FOR A HIGHER SALT CAP? CAN YOU AFFORD IT?

REP. BURCHETT: I DON'T THINK IT'S FISCALLY RESPONSIBLE. I THINK WE CAN PROBABLY AFFORD SOMETHING.

STATE AND LOCAL TAXES -- THESE DEMOCRAT-CONTROLLED STATES, ALL THEY ARE ASKING THE REPUBLICAN-CONTROLLED STATES ACTING RESPONSIBLY, IS TO SUPPLANT THEIR LACK OF TAX DOLLARS. THEY WILL PUT ANOTHER RADICAL PROGRAM IN THAT COSTS MONEY AND THEY WILL TAX BUSINESSES AND DRIVE THEM OFF AND THEY WILL ASK THEIR RESPONSIBLE REPUBLICAN-CONTROLLED STATES TO BAIL THEM OUT AND THAT'S ALL THE SALT TAX DOES GOOD THEY SHOULD BE FORCED TO FIX THEIR OWN PROBLEM IN THEIR STATES AND KEEP THEIR HANDS OFF OF TENNESSEE'S MONEY PIT BUT I SUSPECT IT WILL BE A COMPROMISE. WE USED TO SAY IN THE TENNESSEE LEGISLATURE, EVERYBODY WILL BE A LITTLE UNHAPPY BUT IN THE END IT WILL BE OK.

IF YOU GET 95% OF WHAT YOU WANT THAT'S A VICTORY AND I THINK WE ARE ON THAT PATH. I THINK PRESIDENT TRUMP IS ENGAGED WITH THIS AND HE USUALLY WAITS UNTIL THE END TO SEE WHAT EVERYBODY WANTS AND THEN HE TRIES TO FIGURE SOME THING OUT. THAT'S THE ART OF THE DEAL AND WHY HE IS SUCCESSFUL.

KAILEY: IT DOES RAISE THE QUESTION OF TIMING, KNOWING TREASURY HAS WARNED CONGRESS NEEDS TO PASS A DEBT CEILING INCREASE BY MID JULY OR WE RISK RUNNING UP AGAINST THE X DATE THAT COULD CREATE A HOST OF PROBLEMS WITH RATING AGENCIES THE ON WHAT THEY ARE ALREADY WARNING ABOUT. DOES THAT POTENTIALLY, THE DOWNGRADE, ADD FUEL TO THOSE WHO DON'T WANT TO SEE THE DEBT LIMIT INCREASED IN THE NAME OF FISCAL RESPONSIBILITY? WHAT DOES THAT DO TO THIS ARGUMENT?

REP. BURCHETT: WE NEED TO BE MORE FISCALLY RESPONSIBLE. IN THE LONG RUN WE WON'T.

A LOT OF THESE TAX PLANS WE HAD IN PLACE WERE 5, 6, 10 YEARS DOWN THE ROAD BEFORE THEY WERE IMPLEMENTED AND THAT'S HOW THEY BALANCED THE BUDGET. YOU KNOW DONALD TRUMP WILL NOT BE THE PRESIDENT IN FIVE OR 10 YEARS AND UNFORTUNATELY WE MIGHT HAVE A DEMOCRAT AND THEY WILL DO AWAY WITH EVERY THING WE TRIED TO PUT IN. THAT'S WHITE'S OPPONENT TO MAKE THESE THINGS PERMANENT AND QUIT WITH THE DOUBLETALK.

WE CANNOT SPEND MORE MONEY THAN WE TAKE IN, THAT'S THE BOTTOM LINE. IF WE COULD GET BACK TO FISCAL RESPONSIBILITY WE COULD DO THAT. ALL OF THE RATING AGENCIES WOULD LOVE THAT AND AMERICA WOULD LOVE IT BECAUSE THERE DOLLARS WOULD GO FATHER AND THEY COULD SAVE UP.

JOE: BRING US BEHIND THE SCENES, WHAT ARE YOU HEARING FROM CALLINGS ABOUT THE BUDGET COMMITTEE HEARING SET FOR SUNDAY NIGHT? WILL THIS ACTUALLY PASS AND CAN WE GET TO RULES NEXT WEEK? REP.

BURCHETT: I THINK IF WE GET SOME AGREEMENT LIKE I SAID, HOLD YOUR NOSE ON THE SALT THING AND GET THE MEDICAID STUFF WORKED OUT TO COME UP THE WASTE ABUSE AND QUIT LISTENING -- I'M GLAD YOU HAVEN'T JOINED IN, BUT WHEN YOU ARE CUTTING WASTE, ABUSE AND FRAUD IN THINGS LIKE MEDICAID, THAT PROVIDES MORE MONEY FOR THE LEAST AMONGST US AND THEY SHOULD BE FOR THAT BUT THEY ARE NOT BECAUSE IT PAYS FOR BONUS PROGRAMS ON THE LEFT AND THEY KNOW IT AND IT PAYS THOSE PEOPLE TO COME TO THE POLLS THAT WILL NOT WORK AND AMERICA IS SICK OF IT. IF YOU HAVE KIDS OR ARE DISABLED AND YOU CAN'T WORK, THE PROGRAM IS FOR YOU. IF YOU ARE ABLE BODIED AND SITTING ON THE COUCH AND WATCHING THE VIEW ALL DAY, YOU OUGHT TO BE OUT GETTING A JOB AND AT LEAST QUALIFY FOR JOB TRAINING.

THAT'S ALL WE ARE TRYING TO DO, TAKING ILLEGALS OFF OF THIS STUFF. WE CAN DO THAT AND AGREE TO HOLD OUR NOSE ON SALT AND WE WILL SEE WHERE WE CAN GET. JOE: WE WILL SEE WHAT THE VIEW HAS TO DO WITH THAT.

THANK YOU. OUR POLITICAL PANEL IS NEXT ON BALANCE OF POWER. >> COMMITTEE STANDS IN RECESS, SUBJECT TO THE CALL OF THE CHAIR.

I WANT TO THANK EVERYBODY FOR THEIR TIME AND PATIENCE AND GODSPEED AND SAFE TRAVELS. KAILEY: THAT WAS THE CHAIR OF THE HOUSE BUDGET COMMITTEE, SEEMINGLY DEFEATED EARLIER TODAY AFTER HIS COMMITTEE FAILED TO MOVE THE REPUBLICAN TAX BILL FORWARD. THIS EVENING, A DOWNGRADE FROM MOODY'S AND THE BILL MIGHT BE IN MORE TROUBLE THAN IT ALREADY WAS.

JOINING US FOR MORE REACTION IS THIS EVENING'S POLITICAL PANEL. WELCOME TO YOU BOTH. MAURA, YOU SPENT PLENTY OF TIME IN THE HOUSE, I CAN'T IMAGINE MIKE JOHNSON IS FEELING VERY GOOD ABOUT WHAT MOODY'S IS SAYING, TALKING ABOUT FISCAL POLICY PROPOSALS UNDER CONSIDERATION.

DID HE LOSE CHANCE OF BEING ABLE TO NEGOTIATE HIS WAY TO THE SPILL PASSING THIS WEEKEND? MOIRA: IT MADE THINGS A LOT HARDER FOR SPEAKER JOHNSON. I REMEMBER WHEN SPEAKER BOEHNER WASN'T WORKING WITH A FORMER PRESIDENT OBAMA TRYING TO HASH OUT BUDGET CONVERSATIONS, WHICH WILL KEEP COMING UP IN THE NEXT DAYS, WEEKS, MONTHS.

BUDGET THINK ABOUT THE DEBT NOW VERSUS THEN, IT'S MORE THAN DOUBLE. MOODY'S IS NOT HELPING SPEAKER JOHNSON OR THE BUDGET COMMITTEE AS THEY TRY TO MOVE THE BILL FORWARD. I THINK IT ADDS FUEL TO THE FIRE FOR THE STRONGHOLD WHO FELT VERY PASSIONATELY ABOUT NOT ENOUGH CUTS MADE.

THIS WILL BOLSTER THEIR POSITION I THINK AND KEEP THEM FROM FULLY SUPPORTING IT AS IT CURRENTLY IS. JOE: JIM, DID THE EARTH JUST SHIFT UNDER SPEAKER JOHNSON'S FEET? JIM: IT DID.

THE BILL WAS IN TROUBLE AND NOW IT SERIOUS TROUBLE. MOODY'S DOWNGRADED, THE CREDIT DOWNGRADE GIVES IMPETUS TO THE HARDLINERS THAT REALLY WANT A DRAMATICALLY MORE HARSH BILL. IT HURTS THE SALT CAUCUS FOLKS THAT WANT BIGGER DEDUCTIONS FOR SALTS.

WILL THEY GET TO SOMETHING IN THE END? YOU HAVE TO. BUT THIS BILL HAS TO RADICALLY CHANGE.

THE RADICALS ON THE RIGHT JUST GOT A BIG WIN. KAILEY: THE RADICALS ON THE RIGHT, AT LEAST SOME OF THEM, HAVE A HISTORY OF CHANGING VOTES WHEN THE PRESIDENT CALLED. DO YOU THINK THAT WILL BE THE CASE THIS TIME?

JIM: I THINK SENSED -- SINCE LIBERATION DAY AND APRIL 9, WE SEEN A DIMINISHED PRESIDENT WHERE PEOPLE ARE MUCH MORE WILLING ABROAD AND AT HOME IN THE GOP CAUCUS, TO STAND UP TO THE PRESIDENT. I DON'T THINK HE HAS THE POWER HE DID SIX WEEKS AGO. JOE: WHAT OF THE SPEAKERS OPTIONS?

AS A VETERAN OF ANOTHER REPUBLICAN SPEAKER'S OFFICE, WHAT IS THE MENU OF OPTIONS FOR MIKE JOHNSON? THERE ARE STILL 11 SPENDING BILLS OUT THERE AND THEY COULD BE COMBINED IN MANY DIFFERENT FORMS OVER THE NEXT COUPLE OF WEEKS. MOIRA: ABSOLUTELY.

ONE OF THE THINGS THAT HASN'T BEEN EXPLORED IN MY KNOWLEDGE IS WE KNOW THE BILL WILL CHANGE NO MATTER WHAT HAPPENS, IT GOES TO THE SENATE SIDE AND MANY SENATORS HAVE SAID IT WON'T PASS THE SENATE AS IT IS. JOHNSON MIGHT WANT TO REACH OUT. IF YOU'RE GOING TO ASK THE PRESIDENT TO STRONG-ARM THOSE MEMBERS TO PASS HIS AGENDA -- BECAUSE THAT'S WHAT THIS BILL IS, IT IS TRUMP'S AGENDA, IT'S WHAT THE PRESIDENT WANTS.

SPEAKER JOHNSON MIGHT WANT TO TALK TO JOHN THUNE AND ASK HOW WE GET IT ACROSS THE FINISH LINE FOR THE PRESIDENT? I THINK UNTIL THIS POINT, THE CONVERSATIONS HAVEN'T HAPPENED BECAUSE THE HOUSE FELT STRONGLY ABOUT TAKING IT ON THEIR OWN BUT I THINK IT'S TIME THEY MAKE OUTREACH EFFORTS. I ALSO THINK THE PRESIDENT IS TALKING ABOUT THINGS THAT COULD BE SO COSTLY.

ALCATRAZ IS MAYBE NOT THE BEST IDEA, SPENDING MILLIONS. YOU DON'T NEED A FOREIGN GIFT OF A PLANE THAT WILL HAVE TO BE TAKEN APART PIECE BY PIECE. THERE ARE CONVERSATIONS THAT NEED TO BE HAD IN THE REPUBLICAN PLANK ABOUT COST SAVINGS.

KAILEY: I'VE BEEN CHECKING TWITTER SINCE THE DOWNGRADE HIT, WAITING FOR REPUBLICANS WHO SHOT THIS DOWN TO CHIME IN AND MAKE THE POINT THAT MOODY'S IS MAKING THEIR ARGUMENT IN THE FIRST JUST HIT FROM RALPH MORGAN, MOODY'S STRIPPED AMERICA OF ITS LAST TOP CREDIT RATING. THIS IS WHY WE NEED CHANGE IN CONGRESS. STAY TUNED TO SEE IF CHIP ROY AND OTHERS FOLLOW.

TO THE POINT JUST MADE ABOUT HOW IT COULD CHANGE IN THE SENATE, WHERE YOU HAVE EXPERIENCE, JIM, DOES THIS MAKE IT LESS LIKELY THAT THE SENATE IS GOING TO TRY TO ROLL BACK DRAMATIC CUTS TO MEDICAID OR THE ROLLBACK OF SUBSIDIES IN THE INFLATION REDUCTION ACT BECAUSE THE NEED TO MAKE SURE THE PRICE TAG IS NOT TWO HIGH? DOES MOODY'S MAKE THIS HARDER FOR THE SENATE? MAURA: DO YOU WANT -- JIM: DO YOU WANT TO GIVE A TAX BREAK THROUGH SALT DEDUCTION SO YOU CAN HURT RED STATE WORKING-CLASS PEOPLE BY TAKING AWAY THEIR MEDICAID?

IT MAKES THE SITUATION THAT MUCH HARDER. THIS HAPPENED IN 1993 WITH BILL CLINTON, WHEN HE RADICALLY CHANGED THE RECONCILIATION BILL BECAUSE THE BOND TRADERS WERE SAYING WE'VE GOT A PROBLEM AND YOU NEED A VERY DIFFERENT BILL. JOE: WHAT CHANGE CAN YOU MAKE?

IS THERE ANYTHING SPEAKER JOHNSON COULD MAKE THAT WOULD BE PALATABLE FOR THIS CONFERENCE? JIM: I'M GOING TO TAKE ONE OF DONALD TRUMP'S IDEAS AND SAY THEY SHOULD DO IT. PEOPLE WITH INCOMES OVER $400,000, 500,000 DOLLARS SHOULD NOT CONTINUE TO GET THE TAX BREAK.

PROBABLY DOWN TO $400,000. IT IS RIDICULOUS WE ARE DOING THIS. I DISAGREE WITH A LOT OF REPUBLICANS ON HOW TO GET THE BUDGET CLOSER BUT WE HAVE A MASSIVE MISMATCH BETWEEN REVENUE AND SPENDING AND I THINK MORE PROBLEMS ON THE REVENUE SIDE BUT SOME ON THE SPENDING SIDE.

WE'VE GOT TO RAISE MORE REVENUE AND DO SOMETHING ON SPENDING. KAILEY: DOES RAISING MORE REVENUE PERHAPS SHINE A MORE POSITIVE LIGHT ON THE PRESIDENT'S CURRENT TARIFF POLICY HE'S ARGUING IS BRINGING MORE MONEY INTO U. S.

COFFERS? I WONDER HOW YOU VIEW THE OTHER PURSUITS OF THE ADMINISTRATION FACTORING IN. MAURA: IF I WERE IN THE TRUMP WHITE HOUSE, I WOULD POINT OUT HOW THEY ARE TRYING TO BRING IN MORE REVENUE FOR THE UNITED STATES AND AMERICAN COMPANIES AND OUR GDP.

LOOKING AT THE TARIFF POLICIES AND TALKING ABOUT HOW THEY ARE TRYING TO MAKE THINGS MORE FAIR AND THAT AMERICA IS NOT AT A DISADVANTAGE WITH TRADING PARTNERS. I'VE SAID SEVERAL TIMES FROM THE GET-GO, I THINK THERE WAS A DIPLOMACY ELEMENT SEVERELY LACKING. AT THIS CURRENT STAGE IT'S AN OPPORTUNITY TO LEVERAGE THOSE THAT HAVE ALREADY BEEN SECURED.

IT CAN ALSO CALL INTO JEOPARDY SOME OF THE ONES OUTSTANDING. THIS DECISION AND THE BUDGET DEAL FALTERING. THEY MAY BE IN A LESS STRONG POSITION TO NEGOTIATE WITH ALLIES AND TRADING PARTNERS.

I WOULD CERTAINLY BRING THIS UP IF I WERE ON THE TRUMP TEAM BUT HIS ECONOMIC ADVISERS NEED TO BE THINKING THROUGH WHAT OUR PLANS B, C, D. JOE: WE JUST HEARD FROM CHUCK SCHUMER, MOODY'S DOWNGRADE OF THE U. S.

CREDIT RATING SHOULD BE A WAKE-UP CALL HE SAYS, TO TRUMP AND REPUBLICANS TO END THEIR DEFICIT BUSTING TAX GIVEAWAY. ALL OF A SUDDEN CHUCK SCHUMER HAS MOODY'S BEHIND HIM. DOES HE ENGAGE WITH SPEAKER JOHNSON OR POP THE CORN AND WATCH?

JIM: I THINK THEY WILL WATCH. A RECONCILIATION BILL IS THERE FOR A REASON, SO YOU DON'T NEED DEMOCRATS IN THE SITUATION. YOU ARE WATCHING THE PRESIDENT, HE HAS RETREATED ON TARIFFS, HE HAS RETREATED WITH UKRAINE.

YOU CAN SEE SOME RETREATING HERE. THIS IS A PLACE WHERE HE IS SCALING BACK AND I THINK THAT'S A GOOD THING, FRANKLY BUT THIS IS A WAKE-UP CALL AND YOU'RE NOT GOING TO GET IT BY TAXING PEOPLE GOING TO WALMART. THAT'S NOT HOW WE MAKE UP THE DEFICIT.

JOE: GREAT CONVERSATION. THANK YOU BOTH SO MUCH FOR A GREAT PANEL ON A BREAKING NEWS EVENING HERE IN WASHINGTON. KAILEY: IT'S GOING TO BE A WORKING WEEKEND IN WASHINGTON AS WELL AS REPUBLICANS TRY TO GET THEIR HEADS TOGETHER ON THE BUDGET RECONCILIATION PACKAGE, THE MOODY'S DOWNGRADE MAKING IT MORE COMPLICATED.