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‘Failure is just not an option for Democrats’: PIMCO Head of Public Policy

Libby Cantrill, PIMCO Head of Public Policy, joins Yahoo Finance’s Rick Newman at the 2021 Milken Institute Global Conference to discuss the infrastructure and spending bill, as well as President Biden’s approval rating.

Video transcript

BRIAN SOZZI: Let's head over to Yahoo Finance's senior columnist Rick Newman over at the Milken Conference. He's joined by PIMCO's head of public policy, Libby Cantrill. Rick, sounds like you're having a good time out there.

RICK NEWMAN: Of course, Brian. I mean, I'd rather be golfing with you, but here we are in Los Angeles having a good time. I'm talking with Libby Cantrill. She's head of public policy for PIMCO. Libby, thanks for joining us. Obviously, a lot of ongoing drama in Washington DC-- the Democratic plans seem to be diminishing before our eyes.

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So are the Democrats going to be able to pass these two bills-- the infrastructure bill that has some bipartisan support, and then the Biden bill that is the-- more the social welfare and green energy? Or is there some chance that this could all go poof?

LIBBY CANTRILL: Well, it's a great question-- very relevant, especially given all the drama, as you mentioned. Our view is that failure's just not an option for Democrats here, that they have to pass something. And as you said, these are linked bills-- this bipartisan infrastructure bill, which has already passed the Senate, just waiting for a vote in the House; and then the Biden agenda, the Build Back Better bill.

However, failure's not an option, but it's going to be a lot smaller than what a lot of Democrats had originally wanted. And honestly, this has been pretty evident from the very beginning, because if you have very small majorities in Congress-- the smallest since Grover Cleveland, actually-- of any first-term Democratic administration-- it was always inevitable that it was going to be much harder to pass something as big and bold as a $6 trillion deal.

So we do think something gets done probably by the end of the year, but again, it will be more watered down. And I don't think that should be news to anyone, just given the very narrow majorities in Congress the Democrats have.

RICK NEWMAN: You put a note out recently talking about two trends. One is the declining approval ratings for President Biden. I think most people know about that. Another important one people may know less about is that the public support for these big government programs seems to have dropped by a lot just during the last six months or so. What is going on there, and why?

LIBBY CANTRILL: Yeah. It's a great question. So on the first one, this fading honeymoon effect, this is very consistent with other first-term administrations. There's this-- usually a very heightened approval ratings in the first few months of the administration, and then reality sets in. Governing is hard, and especially with these very narrow majorities in Congress-- so in some ways, not surprising, as you mentioned, in terms of a declining Biden approval rating that probably puts more urgency on passing his agenda.

On the other poll that you're referring to, which is a Gallup poll that was just released, it does show that Americans have declining support for more government intervention. And also, as you noted, this is actually a reversal from last year, where a majority of Americans were actually supportive of more government. Now a minority of Americans are supportive of more government, and that is a headwind certainly to this Biden agenda.

RICK NEWMAN: This directly undercuts support for things like extending the child tax credit, more social welfare spending. And it actually makes it much harder to get it done, when it turns out, oh, maybe the public isn't so excited about these ideas anyway. Isn't that right?

LIBBY CANTRILL: Well, actually, if you look at the polling on those particular provisions that you just mentioned, the polling's actually quite good. And so this is sort of a messaging problem for Democrats. They're letting this narrative of big intrusive government, I think, take over, when they really should be emphasizing things like the child tax credit, things like child care and universal pre-K, because on their own, those actually poll very well, have a vast majority of Americans' support.

So in some ways, this is just messaging, which is very key in Washington. But you're right. I think this is an obstacle. For those moderate Democrats who are already on the fence for a big package, certainly they can point to this recent Gallup poll as evidence that they should be going smaller.

RICK NEWMAN: So for the things that your clients and our audience care most about-- not so much in the infrastructure plan, which seems to be more in the bag--

LIBBY CANTRILL: Yep.

RICK NEWMAN: --but as part of the Biden agenda, do you think that certain large programs are just going to fall out completely in order for Democrats to pass something, or do you think it's going to be this other idea, where the whole grab bag stays in, but instead of 10 years, maybe it's four years, and so on?

LIBBY CANTRILL: Yeah, I think that's a big question mark, honestly. Speaker Pelosi has indicated that she would rather go big and bolder in a couple of areas, and let some of these other things fall out. It's not clear that the president believes that. And so I do think this is going to be subject to more negotiations.

RICK NEWMAN: Do you see certain things-- parts of the plant that are most endangered?

LIBBY CANTRILL: I think some of the health care provisions-- the Medicare provisions, for instance, the dental and vision, which are very important to many members of Congress, who enjoy that-- would enjoy that benefit because of their older age-- is maybe more vulnerable. But I think, from a markets perspective, what we-- our clients really care about are the tax provisions. And if the price tag is coming down, that likely means that there are going to probably be fewer tax increases, and I think that's good news from--

RICK NEWMAN: Market positive--

LIBBY CANTRILL: Yeah. From a market perspective, yeah.

RICK NEWMAN: So another topic here is the Biden administration's approach and policy toward China. They have not revealed a lot of this yet, but they have said, basically sticking with the Trump tariffs for now, and we're going to start to engage with China. This is complicated. We don't have a lot of time here, but can you see this-- any tangible China policies developing?

LIBBY CANTRILL: So it's been interesting. I think something that's really important for folks to remember is that the Democrats were sort of the original China hawks. When China was allowed into the WTO, there were many Democrats on Capitol Hill who are pretty skeptical about that. So this idea that there was going to be some big reversal and a softening towards China under the Biden administration, I think, really didn't take that history into account, didn't appreciate that this had been a longstanding view among Democrats, particularly around alleged human rights abuses, in terms of China.

So I'm not sure that we should be surprised by the fact that this has been an extension of the Trump administration's approach. The tactics are different, though. So I think that the strategic objective is pretty similar to President Trump-- try to isolate China economically and politically. But the tactics are going to be different. It's a lot more predictable, and it's going to be a lot more multilateral. So we've seen previews of that USTR representative Katherine Tai recently gave a speech indicating that, that this harder approach will continue, but it will be more multilateral, less bilateral.

RICK NEWMAN: Everybody's a China hawk now, I guess.

LIBBY CANTRILL: It's politically popular. And if you look at all of the polling, the vast majority of Americans disapprove of the Chinese Communist Party in particular.

RICK NEWMAN: Libby Cantrill, with PIMCO, thank you for joining us. We'd love to have you back.

LIBBY CANTRILL: Thanks.

RICK NEWMAN: Brian, back to you--

BRIAN SOZZI: All right, Rick Newman, thanks so much. See you on the golf links very soon, my friend.