How DC Sausage is Made: Ted Cruz & Musk Author Walter Isaacson 6/5/25
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Hi, I'm CNBC producer Katie Kramer. Today on Squawk Pod. Kill the bill? Elon Musk taking a public stand against massive spending legislation the president supports. Today's Thursday. That was Friday of last week when that glowing send-off

occurred in the Oval Office. It was such a love fest. Biographer Walter Isaacson on the bad blood now between the world's richest man and Washington. If you look at what happened with Biden not being invited to the EV summit, but also the whole crackdowns and the regulatory thing of the Biden administration. So I think you're seeing the same thing with the Trump administration.

But Senator Ted Cruz says while the details are messy, this legislation is happening. We're going to get it done. It is going to be ugly. It's going to be bumpy. It always is. Plus, the rest of today's news that got us squawking. And with what you said yesterday, I'm ready to just let it all hang out. Oh, as opposed to your usual button-down self. It's Thursday, June 5th, 2025. SquawkPod begins right now.

Stand, Becky, by in 3, 2, 1. Cue, please. Good morning, everybody, and welcome to Squawk Box right here on CNBC. We're live from the Nasdaq market site in Times Square. I'm Becky Quick, along with Joe Kernan. Andrew is off today. Elon Musk escalating his campaign against President Trump's tax and spending bill. In a post on X, Musk told his followers to call their local members of Congress to, in his words, kill the bill.

There's been speculation that Musk has come out against the bill because it cuts EV tax credits. He was also a little irritated that his pick for NASA was not given into going through. They waited till he was gone. He was gone to say, no, we're not going to do that. And he actually supposedly told associates...

I gave hundreds of millions of dollars to help get Trump elected and now this. This is what I get in return. And then this was over the weekend he was saying this apparently. Also saying, by the way, posting on Doge, or posting on X, that these people at Doge really put a lot of effort into this, took a lot of pain and arrows that were kind of slung their way as a result, and it feels like maybe nothing was accomplished by that. $9 billion. $9 billion.

That they won't vote on. And you can't even barely get that Dakota vote. It was supposed to be $2 trillion. Then it was supposed to be $1 trillion. And now we're talking about $9 billion. I mean, I'm not blaming Doge. It's impossible. That's what DeSantis said. You know, Doge took on the swamp and it scores. Swamp won, Doge nothing. I mean, I would...

Wouldn't be surprised if some of it was frustration for Elon Musk. I'm sure. To do that, to take on all of those efforts, and I think it's the hundreds of millions of dollars, but it's also the months of his time. And to watch his businesses being attacked in the meantime and then have to go back. Terrible. What he went through, what's amazing to me is today's Thursday.

That was Friday of last week when that glowing send-off occurred in the Oval Office, when the president said the greatest things in the world. And it was such a love fest. They also played the tape of CNBC, which was also funny.

People say, you know, Trump is very forgiving at times because, you know, you've seen him say things that we've got Ted Cruz. You've seen things happen, lying Ted. And so he does forget. People do come back in the fall. But then they say, but when it's this much that this is going to be a tough one. We'll have Walter Isaacson on, too. It's it's weird. I think that that now you're hearing Elon Musk talk.

in more favorable light with some liberals and Democrats. But what he's really asking for is even more cuts. - It's an aspect to them. - Right, it's even more cuts, but because it would scuttle the bill, now they're kind of on his side. - Yeah, but again, if he is successful, the Democrats are not gonna be happy with what he pulls off. - You know what's frustrating?

I would do the 2017, okay. Right, just extend the tax. I don't know if I'd do all those other ones, but the tax on tips, did you see what the Senate vote was?

It was 99 to 1. It was 100 to 0. So it's like both sides are part of the problem. It's really hard to stand up in Washington when the other party, when whatever party is trying to give money away. And look, usually it's the Democrats that are doing this. But whenever somebody is giving money away, other people's money away, it's really hard to stand up and say no to that. But none of this has made a whole lot of sense. John Thune was the one that didn't want to do one huge bill. He ran it all together. John Thune wanted to say... Yesterday he was...

I felt bad for him. I mean, first we had Ron Johnson, who was so strident about what he was saying. Yesterday on Squawk Box. Right, on Squawk Box. And Mike Johnson was kind of trying to say, oh, we'll still get it done. Then Thune was talking in front of a gaggle, and it was like erupted. And Barrasso, Senator Barrasso was behind him. They both were like this. What the hell?

Why do you think Elon Musk is trying to kill this bill? Well, I can't speak to, you know, his reasons other than what he stated. And I think that what he stated was that he thought it was something that would add to the deficit. And we believe the opposite. The questions being fired about whether this

You know, it was almost like piranha because the bill looks like in the current form could be in trouble. I don't know how they rein it in. I was you've mentioned Josh Hawley a couple of times. He doesn't want to cut anything out of Medicaid. You can put him in the camp with Susan Collins. All politics really are local. Yeah. Look, I don't know when Holly's up for election. Because of the state, because they're on the Medicaid campaign.

You know, they're going to be some personality. They're on the they are. They're suckling at the. Yeah, they're on. Can you say so you can say that word T.A., but you can't really say. Yeah. T is is OK. OK. All right. Well, and I did say T.A. Yeah, you did. And with what you said yesterday, I'm ready to just let it all hang out.

Oh, as opposed to your usual button down song. My usual, my usual, right. President Trump, people might know I've been watching this, but we don't need to go into it. I won't repeat it. No. Unless you want me to. No, no. If you do, I'll talk about Jardians' side effects. Never mind, let's move on. President Trump says he's going to deny visas.

for foreign students trying to come to the U.S. to attend Harvard. It's the White House's latest attack on the institution, which the administration claims has not done enough to combat anti-Semitism on campus. In a statement, a Harvard spokesperson said, this is yet another illegal retaliatory step taken by the administration in violation of Harvard's First Amendment rights. Harvard will continue to protect its international students

This is actually playing into some of the China negotiations. They're not happy about that. I don't know why they want to send students over here so badly.

Because it's an excellent education. I know, but then they bring them back to undermine the United States. Meanwhile, the White House says it notified the accreditor for Columbia University that it thinks that the school violated federal anti-discrimination laws. In a statement, a Columbia spokesperson said it was deeply committed to combating anti-Semitism on our campus, said it had addressed the Department of Education's concerns there,

With its accreditor. We have Lankford on today, too, getting back to... Senator Lankford. I think he's with Thune and the others that are still... Trying to hold it together. You know what the moral of the story is? We should both be glad we never ran for office or are in politics. It's impossible. It's like everybody... I don't see how you put all these differing constituencies. I don't see how you get it done. There's going to be a lot of whipping.

But right. But when you have such thin majorities, it's going to be like the more you try and bite off when you have a thin majority, the tougher it is. You see, supposedly there's not a single senator that cares about salt. Yeah. Not a single one. That's the first thing. I don't remember if we said this on air yesterday, but we were at least talking off camera. Salt is going to be the first thing to go, I bet.

No one's going to defend that. It was hard enough to extend the existing tax. That's where it made it difficult. To pile on so many things on top of it. When you're not willing to. Now, I'm not willing to write this bill off or to say that they're not going to get something passed, because I think it would be a political suicide to push those sort of tax increases through. Four and a half trillion next year. Right. Right.

Something will get done. I don't know what the final result is going to look like. Something will get done. General points out $4.5 trillion. Add in the tariff effects, and you're almost guaranteed. $4.5 trillion in tax increases. Tariff effects, you're guaranteeing a recession. Tariffs are taxes. Right. You're almost guaranteed a recession if it doesn't pass. Right.

The new report in the Wall Street Journal says that the Bureau of Labor Statistics told outside economists this week that a hiring freeze at the agency was forcing it to cut back on the number of businesses it's able to survey for price checks.

To examine April inflation data, the Bureau had to use a less precise method for estimating price changes. It has also cut back on the cities in which it actually collects consumer inflation data, eliminating collection from Lincoln, Nebraska, Provo, Utah, and Buffalo, New York. The agency said it makes reductions when resources can no longer support the collection effort.

Economists worry that the staffing shortage will impact the quality of recent incoming inflation reports. - The story, I read through it. It did go out of its way to say they're not suggesting that there's any manipulation of the numbers that are taking place, but these are really important numbers. If you get inflation wrong, it affects things like social security benefit increases,

It affects tips and obviously questions about the Federal Reserve's decisions, too. And, you know, I didn't even realize exactly how they conducted this number. They literally send hundreds of people out there to go price check. And it's like channel checks, going into stores and checking to see prices on some of these things. They'll make substitutions if they can't find the exact thing. If you're supposed to be talking about slacks, they may do the cargo pants. Is the the

Margin for the same on either overstating or understating it. The delta just gets bigger and you could be wrong either way or does it favor underestimating or overestimating? Well, I would say in a situation where you're worried about prices going up, it may favor underinflation at this point just because you're looking at a change in the delta. But it's an inaccuracy no matter which way you cut it. The standard deviation just widens on both sides. Right, right.

All right, Reddit filing a lawsuit against Anthropic, claiming that the AI company is illegally scrapping its data to train its clawed chatbot. Reddit says that Anthropic is accessing its content despite being asked not to do so and has trained on users' personal data without ever getting permission from them.

Reddit has more than 100 million daily users who update the site with the kind of material frequently sought by AI companies for training their models. It's seen as really valuable stuff. The site has a licensing agreement in place with Google, also with OpenAI. For its part, Anthropic said that it disagreed with Reddit's claims and that it will defend itself. That's just... Half my line. No, but...

The cesspools on those chat rooms and read it. I mean, if that's that's where they get a lot of their info. What else are you going to do? You need more information from these constant places. It does give you a leg up with it. Who are we talking to yesterday? If you've got if you if your view of the world is based on what's going on on Reddit in this chat room, you're on X. You've got serious problems.

Teas will be next. Coming up, a flurry of late-night developments from the White House, a travel ban on citizens from 12 countries, the latest from our reporter Eamon Javers in Washington.

And Elon Musk biographer Walter Isaacson unpacks the Tesla CEO's frustration with the big, beautiful, expensive spending and tax cut bill and the end of Musk's time in the public sector. Elon Musk has never shown himself able to be a collegial player with many other people. He's always kind of owned the joint and he was probably not the person who was going to make this happen, but I actually thought he could have done a lot more. We'll be right back.

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President Trump says he's going to deny visas for foreign students trying to come to the U.S. to attend Harvard University. He also announced a travel ban on 12 countries. Eamon Javers joins us now with more. Hey, Eamon.

Hey, good morning, Joe. Yeah, the president with a flurry of activity yesterday at the White House, a number of proclamations and executive orders. The first one is this travel ban. And take a look at the countries that are impacted. He's talking about 12 countries here that will have suspended travel to the U.S. for citizens. That's Afghanistan, Burma, Chad, Republic of the Congo, Equatorial Guinea, Eritrea, Haiti, Iran,

Libya, Somalia, Sudan, and Yemen. There's also partial restrictions here for seven other countries. And the president says all of this is going to take place Monday at 12:01 a.m. So there will be a flurry of activity at the border here as well. And then on Harvard, a similar issue in the back and forth with

Harvard University and this administration. The president saying that he's going to deny visas to Harvard's international students in this proclamation that the president signed yesterday. Trump said Harvard failed to present sufficient information about its foreign students to the federal government. In fact,

The administration said that Harvard only presented data about three students who'd been disciplined. They said that that number indicated that Harvard was not being serious about discipline and security. Harvard University responding with their statement saying, this is yet another illegal retaliatory step taken by the administration in violation of Harvard's First Amendment rights. Harvard will continue to protect its international students. So guys, I think on the Harvard front here,

You can expect that university to continue to fight the administration in court. I would imagine that at some point you'll see lawsuits around this and we'll see where it goes in the courts. You remember on the travel ban issue, you remember back in Trump's first term, he had what he called a Muslim ban of travel from certain nations that were majority Islamic.

That one was initially struck down. There was resistance in the courts. They reformulated it in the end. They were able to preserve that travel ban in the first in the first term. And President Biden struck it down, calling it a stain on the nation during Biden's term. Now that travel restriction is back. The president says this is necessary for safety because these countries don't sufficiently vet people because they're hotbeds of terrorism in some cases.

and they're not cooperating with U.S. immigration forces, guys. Back over to you. There's a lot of, obviously, as you said, a lot of litigation that we can expect from Harvard. But you know, Eamon, the executive branch has a lot of power, and it's almost like fighting City Hall. You might win some court cases, but he can do some of this stuff. And Alan Garber, I don't know whether it's good or bad, but now he's kind of been set up as the

lead of the resistance. I don't know of the resistance to what I guess the resistance to curbing anti-Semitism. I don't know why you'd want to be the face of not knuckling under to curbing anti-Semitism, but that's the position he finds himself in. I don't know how it plays out. But Harvard, you know, Harvard, the argument is. Yeah, go ahead. Yep.

I mean, the argument is that there is anti-Semitism and then there's free expression, right? And criticizing the government of Israel, military actions taken by Israel, that sort of thing is simply free expression and not anti-Semitic on its face. And so the question is, where in that continuum does it shift over the line? And what Harvard has said is we're going to defend free expression.

and free academic inquiry by our professors. - If Jewish students still aren't safe, Jewish students still aren't safe. Everybody likes peaceful demonstrations. No one's trying to stop peaceful demonstrations. I don't know if I want them screaming death to the Jews and genocide to the Jews and from the river to the sea. I'm not sure. That just seems to spawn the violence against the Jewish students so you can't feel safe.

It hasn't been fixed. It has not been fixed. And they should get together, figure out a way to fix it. And that's what I mean. I think he's emboldened now because the left is holding him up as some type of, you know, the leader of the resistance. The resistance to what? The resistance to curbing anti-Semitism. Who wants to be the leader of that resistance, Eamon? But this is just me. And look, politically, Joe, this works for Trump, right? Because it's both immigration, but it's also anti...

It's also anti-elites, right? I mean, going after Harvard and Columbia, the very top Ivy League schools on the coast. This fits Trump's message, right? Politically, this is a win for Trump because it fits the message of we're taking on the elites on part of you, the MAGA voters, right? And this is part of Trump reframing the Republican Party as a populist, working class, anti-elite party. And that, you know, for corporate folks,

that has some rebound effects because this is also a party now that doesn't see itself as totally aligned with corporate elites as well, sees them as sort of in the bag with some of those academic elites. And so this is a reframing of American politics in a way that we really haven't seen. And so this is a morphing of a political party into something that's new. And we'll see, you know, sort of in the courts where the fight comes out and then also politically whether this ends up being popular again.

nationwide and this ends up being something that people run on in 28. And there is a question how long it lasts and does it outlast Donald Trump? And I saw George Clooney, who was actually from my hometown, but I saw him say, oh, you know, Trump's very charismatic and he is, you know, a celebrity and once he's gone, it's the entire movement will be dead, which I think totally misses sort of what

sentiment in the country kind of spawned something like MAGA. So I don't know if it ends when Donald Trump...

I mean, if you ask my opinion, not that it's worth anything, but can you have Trumpism without Trump is a really fascinating question. I think ultimately all those factors are in the country. They were in the country before Trump, but Trump harnessed them in a way that's sort of sui generis, right? His personality, his ability to proceed amongst enormous criticism, his disregard for the traditional rules of politics and sort of remaking politics in his own image.

That's something that very few people can do. And so, you know, could a J.D. Vance do that? Could a Josh Hawley do that? You know, Marco Rubio, maybe. Are there are there people out there who could carry the Trump torch forward in 28? You know, I don't know that they have the same personal swagger that Donald Trump has. Well, if they're up against AOC. If they're up against AOC.

They're up against the party's leader, AOC. It might not be that tough of a battle, Eamon. Democrats got their own problems with trying to find someone that anyone would vote for. I mean, the top spokesperson, the top spokesperson for Joe Biden just resigned from the Democratic Party yesterday. Exactly. Bizarre. I mean, that party has some significant challenges. But there's a couple of years left and probably not a good time. We'll see what happens. They're wrapping us up, Eamon. We're having this heart to heart. Things are not trending right.

Having this heart to heart and they're wrapping us up. I don't get it. We've got to do a chart of a stock, I think, to make everyone happy. All right. Amen. Amen. Come visit us in studio. Harder to shut us up.

Elon Musk ramping up his campaign against President Trump's tax and spending bill. Musk calling on lawmakers, in his words, to kill the bill. By the way, he also called that bill an abomination. Joining us right now with his Elon Musk wisdom is CNBC contributor Walter Isaacson, who is a Perella Weinberg advisory partner, Tulane University professor, and of course, the author of Elon Musk. And boy, Elon Musk.

Well, you know, one of the things about Elon is when he goes all in, he goes all in. You know. Or when he goes all out, he goes all in. And all out, et cetera. He is somebody who's not exactly calibrated in his things, and he is seriously upset. Yeah, what's he mad about? Because we've heard a lot of different speculations about whether... Well, you know, he's always been on this...

strong kick for a long time about the deficit. He just thinks the deficit is horrible and now it's kicked in on him. One of the smaller things, but that's really nettling him, is the way they treated Jared Isaacman, who was the person who was going to run NASA. Right. Somebody who was close to Elon and flew on two SpaceX trucks. A great choice for NASA administration. On Friday, when Elon Musk is in the Oval Office,

Getting that rinky-dink little box wooden box with a key in it Which is I think a little bit insulting from Trump Trump told him he was gonna get rid of Isaac man and then told Isaac man then too and that to musk was just infuriating because they were Doing they were going after Jared Isaac man to get at Trump to get at musk. Who's they?

The office of personnel, the people who run that, there are few people in the White House that at least Musk thinks did it. Well, it was interesting because the reason they gave behind it or that's been reported as the reason behind it is because he had given to Democrats in the party. It's like Howard Lutnick, just like Donald Trump. And he had told Trump right at the beginning, he said, hey, I've donated to Democrats. It's all public. That was not the reason. It was just a

a way to get at Musk. And he, you know, Musk, if you look at how he got angry at Biden... So this is this infighting within the administration? This is this infighting within the administration? Yeah, I mean, part of it, but also it's the main thing is that Musk has always been fixated on the deficit. And if you look at what happened with Biden, it was a lot of things, some big, some small, not being invited to the EV summit.

but also the whole crackdowns and the regulatory thing of the Biden administration. So I think you're seeing the same thing with the Trump administration. I mean, to me, it felt a little like just this frustration boiling over. We'd heard reports that, hey, I've given hundreds of millions of dollars to this, not to mention he took months of his time...

away from his companies ported into these efforts in the government probably feels like all of that was for not he took some serious made a very good point which is that he went up against an entrenched washington way of doing things and found it wasn't like companies that you actually own yourself or you can say yeah hey let's get rid of this heat shield let's get once he realized that walter

And I don't like this bill. I don't like it either. But, you know, the journal and the journal has been has not been MAGA or they make editorial editorial. They make Trump mad all the time. And they've even talked about how this bill doesn't do nearly enough with Medicaid and with a with a lot of different things. But yesterday they did say to have Elon almost make it impossible to pass it at this point, or at least pass.

To weigh in that vociferously when there's four and a half trillion dollars in tax increases that will happen. If it you know, remember the good versus the perfect. If Ronald Reagan said if I get 80 percent, this might only be 51 percent worth doing. But not doing anything is even worse than.

than doing this bill. That's not exactly a resounding endorsement. It's not at all. I would cut so much more. I don't know if I'd put these new tax cuts in. I wouldn't do SALT. But how bad will $2 trillion to $3 trillion in deficit be? Musk probably disagrees with you. It's just crushing to the country. But let me get to Susan Collins.

Rand Paul, Thomas Massey. Ron Johnson. Ron, but I'm even going either side. You can find people in the House that are over here and over here because they're in blue districts. People in the Senate that are over here and over here.

it has to be what's within the realm of of what you're actually doing in in you on found that i was my point he found that i don't find it's going to disappointments i had on the mosque going into government that he kinda shot fish in the barrel the easy things like let's get out of the u_s_ aidi play and by pakistan or whatever and that doesn't add up to real money here's somebody who could have taken on the procurement processes in government

could have taken on F-35. That's probably impossible to do, too. Well, I think maybe that's what hit him, is that this is so entrenched in Washington that the big stuff, do we really need F-35s and an F-47 and an era of drones? And do they have to cost a thousand times more than they would have cost if SpaceX...

had built them. I wish he had gone after infrastructure. The problem with shooting fish in a barrel is it may make you feel good, but those are small fish. But can anybody actually do this if Elon Musk can't? And by the way, there was a limited amount of time that he was going to be able to be there. Herbert Hoover did it under the Truman administration. I think you probably need to be elected. You need to be there for at least four years. You need to be able to sit down and really make decisions. Yeah, I mean, Elon Musk has never shown himself able to be a collegial player with many other people. He's always...

kind of own the joint and he was probably not the person who was going to make this happen but I actually thought he could have done a lot more when it came to the cuts on the big thing. Is this schism between he and President Trump something that is

ever gonna be patched up or do you think it? - Well, I think they both have shifting loyalties. I'm not a expert in how Trump thinks. I don't know if Trump's gonna get really furious at him, but I think that when Musk gets on a particular jag, like we don't need more than $2 trillion added to the deficit, Musk, you know, one of the Republican congressmen said, you know, I just hope Musk keeps being Musk.

I'm going, well, you got no worry there. He's going to keep on that. Was it Massey maybe? I mean, I saw some things that he tweeted out too. I guess, does he use the platform, the X platform, to really push this? I think I'm surprised in the past four hours we haven't had 20 more postings. But these things usually last five or six months. And

He feels strongly about this and I think he's so frustrated with the little things, like I said, the Jared Isaacman, and the big things, like you can't go up against abortion in an establishment. And, you know, in my mind, if that was going to happen, he should have really gone hard on the big stuff. He's still got his people in government. He still has Luke Farretta, he still has a guy known as Big Balls. They're going to be trying to do these things.

But they're not going to be able to take on the real wasting government. And you know, the other thing that to get to this point, Joe, mate, I'm not sure on your 51 percent that whether Oren Kass, who is the guy who came tonight at the 92nd Street, why the new conservatism or an Elon Musk, they feel that every single one of those tax cuts has to be extended because

if they're going to increase the deficit. You can fiddle in there. Well, it's not just the extension of tax cuts. It's new ones that have been piled on. I mean, this spends a lot more than the original 2017. Right. There is not necessarily a reason for the economy to get a deficit this high when the extensions and the new tax cuts and the extensions of the old tax cuts, we're not going to look at any of them and say, well, maybe those should be delayed. But, Walter, for a while, even the work requirements for Medicaid weren't starting until 2029. It was a big deal to get them back to 2026. It did toughen it up to 2027.

And you've got Josh Hawley, who I thought was a raging conservative, who wants to pull back some of the Medicaid cuts. Well, you know what? Maybe he cares that people in Missouri get Medicaid when they need it. I know. All politics is... Yeah, but a lot of the people that get it, they're getting ten times as much as the people who actually need it. And a lot of people who get it need it.

Yeah, but you can't see that Medicaid has been totally gamed and abused from what it was intended to be in the first place. There's a much cheaper way to cover the people that you want to cover than just expanding Medicaid. That was done, you know. If you look even on the Affordable Care Act, which is people trying to buy insurance. Which is why it happened.

uh... medicaid is bill cuts back on people being able to get covered under affordable care you can say that yeah we should give tax cuts so we don't have to pay for these things or you could say maybe there's gonna be some waste in medicaid and maybe the affordable care act is helping some people it shouldn't help but maybe this is a balance we have to have in our society

Medicaid needs to be reformed well beyond what this bill is doing. And so does a lot of government, from the Pentagon to Medicaid. Well, there's plenty of cuts that need to happen, but I just don't think, I don't know if new taxes is the way to go either, especially with tariffs. I mean, or if the taxes aren't, if tax cuts aren't extended, you've got $4.5 trillion in tax hikes.

On tariffs, you mean? No. If the tax cuts aren't extended. Tax hike of four and a half trillion. It is if you don't extend the 2017. There's going to be a similar. OK, I'll tell you what. There's some changes that have to happen. You know, I'm old enough to remember back in the days when government could work and finally a Ronald Reagan and a Tip O'Neill would sit down. If you wanted to solve this, it's not that hard. You just need something that doesn't happen today. Why did we go after the pandemic?

to spending three times as much? Why is the deficit $2 trillion instead of $800 billion? Why can't we go back to pre-pandemic spending? Because we don't have a political system or a bureaucracy. But the things you're saying is that you're telling me grandma's going to be pushed off a cliff. Why can't we go back to pre-pandemic spending? We could try to have in this country again what we had from...

many decades, which is the chance for people to come together and say, OK, we're going to have a bargain. What if that meant going back to pre-pandemic spending levels? You're not giving me even the possibility of that happening. He's not saying it shouldn't. He's just saying it's not likely because of the political system. By the way, they're begging me to throw my body in front of you and throw us to commercial. Walter, thank you for coming in. Hey, it's good to see you, Becky. And you too, Joe.

Coming up next on Squawk Pod, brainstorming in the Senate how the reconciliation bill sausage is made and where lawmakers land when it comes to government spending on AI. Senator Ted Cruz. I think there's a real possibility right now that the Senate is more fiscally conservative than the House, and that has not traditionally been the case. We'll be right back.

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Customized license plates. And you're watching Squawk Box on CNBC. It was a birthday present, January 6th. I'm Joe Kernan along with Becky Quick. Andrew is off today. President Trump's big spending bill projected by the CBO to add $2.4 trillion to deficits over the next decade. That's according to the nonpartisan Congressional Budget Office. Concerns about the debt have some congressional conservatives questioning the bill, how it's being constructed. Joining us now, Senator Ted Cruz of Texas.

He chairs the Commerce Committee and Senator, always good to have you on. We had Ron John, which I don't think we can call him that. That's a surf shop. That's a, you know, it's a series of surfs. So Senator Ron John said, I don't know, he...

Depending on who's on, I get talked into a lot of things. And he kind of made sense to me in certain ways, Senator, in terms of maybe do two bills, do one where you make sure you get the tax cuts extended, and then try and really do the work to get back to pre-pandemic spending levels. Has the die already been cast, though? Is that that that that ship has sailed? We're definitely not going to do it that way, are we?

Well, listen, I am certainly supportive of doing multiple reconciliation bills because reconciliation is the main tool to get around the Senate filibuster and we can use it to accomplish important policy objectives. But we have this one in front of us, as it's called, the one big beautiful bill, and we're going to get it done. It is going to be ugly. It's going to be bumpy. It always is. In 2017, the last time we passed major tax cuts under President Trump,

It was a long, drawn-out process. I spent literally hundreds of hours in 2017 negotiating different provisions. We're doing that again here. And so we will get it done. And listen, I think...

You mentioned Ron John. Ron is a good friend. He's doing a great job fighting to rein in spending. We absolutely need to do that. He is absolutely correct. We saw spending explode during COVID. And then, unfortunately, Washington politicians left government spending way, way too high. And so I think we need to do everything humanly possible to rein it in because the debt that politicians are racking up is bankrupting our kids and grandkids.

So you would concede that in its current form that you have deficit concerns with what we're going to do and there's going to be need to be additional reconciliation bills that address, that improve on what this current bill is doing? Look,

Sure, we should do them in the future, but we have this one right in front of us. And I'm glad the House of Representatives passed this. I think the Speaker, Mike Johnson, he's a good man. He did a remarkable job with a really tough and fragile majority in the House. That's the thing. They sent over a bill that started this process. I'm glad they got together and got this done. I can tell you, Joe, in 2017, it was interesting. You look at how the process played out. The House sent over a good bill.

It came to the Senate and it got much, much better. And then we went to conference committee and it got much, much better once again. My hope and belief is we can do the same thing. So what I'm urging my Senate colleagues is, okay, let's take what the House sent as a starting point, but let's be more aggressive. Let's rein in spending. Let's be more aggressive on tax cuts. Let's pass a really good bill. We're not there yet, but I've got some real hope and optimism that that's what we're going to do.

So if you bring Senator Johnson in, do you lose Senator Collins? It's like whack-a-mole. Yeah, it seems like in the House too. Yeah, look, there's no doubt it's complicated. I think there's a real possibility right now that the Senate is more fiscally conservative than the House, and that has not traditionally been the case. But here's why I think that. We have 53 Republicans in the Senate.

I think it is quite arguable that the 50th most fiscally conservative Republican in the Senate

is significantly to the right of the 218th most fiscally conservative House Republican. What does that mean? It means we can be bolder on things like how do we cut spending? Well, for one thing on Medicaid, ensuring that illegal aliens are not on Medicaid or not getting government benefits. That's something that the American people strongly support. That's something that can save hundreds of billions of dollars. On top of that, work requirements. I think work requirements are good public policy.

They work incredibly well. Bill Clinton signed welfare reform into law. It proved tremendously successful getting millions of people back to work. Putting work requirements in Medicaid and other federal benefit programs again saves hundreds of billions of dollars. I'll tell you something else you know a lot about, Joe.

The Federal Reserve pays banks interest on reserves. For most of the history of the Fed, they never did that. But for a little over a decade, they have. Just eliminating that saves a trillion dollars. So there's a lot of things we can do to rein in spending. And I'm urging my Senate colleagues, let's show responsibility for the next generations. Let's do what's right.

You think that's going to go through, the idea of telling the Federal Reserve they can't pay the banks that interest anymore? I don't know. I can tell you we had a robust discussion about it yesterday.

And we're having a lot of robust discussions. Look, something else I'm pressing for is zeroing out the CFPB. That would save about $7 billion. But actually, the biggest saving there is not even from the direct dollars. It's from ending the regulatory assault that is really hurting job creation. And so there are a lot of things.

Yeah, go ahead. I'm just pressing on the bank ones in particular because that's of interest to our audience. That would be a big differential in what the banks can be expecting to take in as revenue and as profit for next year. Is that likely, you think, to get done?

I don't know if it's likely. It is certainly possible. What I'll say is for the history of the Fed, for nearly 100 years, it paid no interest on reserves. And then following the great financial crisis, they put in the policy of paying interest on reserves. It right now costs the Fed. The Fed used to generate money for the American taxpayer.

It's now costing about $100 billion a year. And the way it used to work is if banks wanted to make money, they had to go invest that money and make loans and take care of it on themselves. I don't see a reason why the taxpayers ought to be paying for it. That's one example that generates a trillion dollars.

look at it was put in place to ensure the stability of the financial system they didn't want these runs on things they were trying to do it if it's unwound quickly i just uh... i don't know if it would raise any stability issues but it would certainly raise profitability issues for the banks of it's done instantaneously at you know becky what i thought i can say is is is the bank somehow managed to survive for a century and then if you look at

If you look at Dodd-Frank, it was put in place ostensibly to stop too big to fail. Now, let me ask you something. How did that work? I don't want to be in the position.

be the position of defending the banks on this. You make a lot of sense. I don't know that taxpayer dollars should be going to fund this. It makes a lot of sense. It's just a big change that could come up quickly. Senator, can I ask you about one other provision in this? It's a small one, but it's important because of the aspects of AI and what's happening. The House bill includes

a provision that's called moratorium. And for those who aren't familiar with this, that would effectively prohibit state and local governments from being able to write any enforcement of laws or regulations on AI for the next decade. There is a bipartisan group of 40...

40 state attorney generals, attorneys general who are opposed to this. They say that it's federal overreach, which sounds like something you would traditionally be pretty sympathetic to. They say it undermines the state's effects trying to address AI related harms. And then there's the whole issue of the Byrd rule, which basically says that the Senate cannot put a policy writer on a reconciliation bill if it doesn't have anything to do with the actual budget. And that certainly sounds like this. This is going through your committee. What's going to happen to that House provision?

So listen, as a substantive matter, this moratorium is very good policy. Just a couple of weeks ago, I chaired a big hearing on AI.

Every single witness at the hearing I asked, what do you think about the state-level regulation of AI? Every one of them said it has the potential to be disastrous and that said we needed a moratorium. You know, I'll draw an analogy to the 1990s. Earlier, I was talking about Bill Clinton signing work requirements and welfare reform and how successful that was. I'll give another analogy, which is in the 1990s,

That was the dawn of the Internet. And Bill Clinton signed an executive order mandating a light-touch regulatory approach to the Internet. That proved unbelievably successful. At the same time, Europe took a very different approach. Europe took a heavy-handed, prior-approval regulatory approach. Let me tell you what the consequences were of that one decision. In 1993, the American economy and the EU's economy were virtually identical.

Today, the American economy is more than 50% larger than Europe's, and the two drivers of that are tech and the shale revolution.

AI is going to be every bit as transformational. You see state legislatures right now proposing ridiculous legislation. If we have a 50-state patchwork, you know what that'll do? That'll drive AI development out of America to other countries, and it will cause America to lose the AI race to China. That would be catastrophic.

We shouldn't let that happen. Now, you raised the question, can we do it on reconciliation? That's an open question. Senator, I just want to... CBC's confirming that the president did speak with President Xi. So I just wanted to get that in because the future is...

uh we're basically unchanged now we're seeing that some upward movement on that so cnbc's confirming uh that that uh that the president has spoken uh to the president of china uh xi jinping can i ask you hey you you i don't know what i before he does i just want you to answer so you you've said from a substantive perspective senator that you understand these concerns about the ai

moratorium that you're sympathetic to it because we saw what happened with the internet and i do remember that but that those rules with the internet also gave a big advantage to all of the big players the immediate big players that got out there it's been some of the anti-competitive concerns that have been risen lately but from a practical perspective it does violate the bird rule so will it be stripped out

So I will say in terms of big tech, there has been no stronger critic of big tech in the Senate than I have been. And I think they have abused their power in many respects. But it's worth noting in 1990,

Big tech, by and large, didn't exist. And so I'm very glad we have these incredible economic engines in America. You look at Europe, there are virtually no major tech companies like we have in the United States. And that has produced enormous prosperity, enormous wealth for millions of Americans whose 401 s are invested in it, drives the stock market, it drives jobs.

And so my view, yes, we have to worry about big companies, but I'd much rather innovation, particularly transformational innovation, be coming from America than coming from elsewhere. Now, on the bird rule, and for your viewers at home. Yeah, go ahead, sir.

Is it in the bill? For your viewers at home, the Byrd rule sounds a little bit arcane, but the process of budget reconciliation is the major exception to the Senate filibuster rule. Ordinarily, to move legislation in the Senate, you need 60 votes. Budget reconciliation is the biggest exception to that, but budget reconciliation comes from the Budget Act of 1974, and it specifies a six-part rule that is called the Byrd rule, named for Robert Byrd, who was the Democrat Senate Majority Leader who wrote the law.

of what can be allowed. The basic principle of the Byrd Rule is you can do things that are budgetary in nature, but not things that are policy in nature. You are right, there will be a very serious Byrd Rule challenge to the AI moratorium as the House has written it. I can tell you

in the Senate Commerce Committee. We're trying to rewrite it in a way that is consistent with the Byrd rule. But I fully expect next week to be in front of the parliamentarian litigating this issue. It's not clear if we can do it on reconciliation or not. I hope we can because it is enormously consequential for jobs and economic growth. And that's right at the heart of what we're trying to accomplish in this bill. I only got a minute and it's palace intrigue. And you and the president have a complicated...

Maybe you don't anymore, but you remember President Trump. So what about Elon Musk? Are they friends anymore? Are they going to work together? When you got 200 million followers and you tweet, call your representatives and kill this bill, does that kill the relationship, you think?

Look, I don't know. I am good friends with President Trump. I am his strongest ally in the United States Senate. I'm also good friends with Elon Musk. Elon is a Texan. I spent a lot of time with Elon. He is brilliant. The work he did for President Trump at Doge was incredibly consequential.

And here's my view. I'm really glad that Elon is speaking out and speaking out on debt, saying we need to show fiscal responsibility in this bill. I hope the result of Elon's comments as we see the Senate step in and make this bill much, much better, put in strong work requirements, eliminate illegal aliens from government benefit programs that we show restraint. And if that happens, that's a great outcome for President Trump. It's a great outcome for Elon. It's a great outcome for the whole country.

I bought some more time, Senator. Do you think that after thinking about $2 trillion in doge cuts and then getting to $1 trillion, and now we're having trouble with $9 billion codified, do you think there's some frustration with Elon Musk at this point? If you take on the swamp, the swamp wins. You probably know that, too.

Oh, look, I'm sure Elon is frustrated. I haven't talked to him in the last few days, but I'll tell you what, I am grateful. I mean, he came and devoted five months of his life for free. He's the richest man on planet Earth. And he put his enormous

ENORMOUS ENERGY. THIS IS SOMEONE WHO BARELY SLEEPS, HALF THE TIME HE SLEEPS AT THE OFFICE, AND HE PUT HIS ENORMOUS ENERGY TO UNCOVERING WASTE, FRAUD, AND ABUSE, AND WHAT HE UNCOVERED WAS ENORMOUSLY CONSEQUENTIAL. NOW, CHANGING WASHINGTON IS LIKE TURNING A BATTLESHIP, AND IT'S NOW CONGRESS' JOB. WE NEED TO CODIFY THE DOGE CUTS. I'M GLAD THAT THE WHITE HOUSE HAS SENT OVER THE FIRST PACKAGE

of rescissions, particularly defunding NPR, I think is very worthwhile. There's no reason the taxpayers should pay for a left-wing media network. But I am encouraging the White House send over more rescissions, and we need to see Congress put it in the federal law because that's how those cuts become permanent. Senator, appreciate all your time this morning. It is

I hope everybody at home likes sausage because we really are seeing a lot of sausage. I do. And I don't like that fake chicken sausage either. You? You like pork. It's got to be the real stuff. I like pork like all the politicians. Right, Senator? All right. Very good. Not all of them. All right. Thanks. Good to have you on.

And that is SquawkPod for today. Thanks to you, as always, for listening. SquawkBox is hosted by Joe Kernan, Becky Quick, and Andrew Ross Sorkin. Tune in weekday mornings on CNBC at 6 Eastern, or get the smartest takes and analysis from our TV show right into your ears when you follow SquawkPod wherever you listen to podcasts. That's it. Have a great Thursday, and we'll meet you right back here tomorrow. All right, clear. Thanks, guys. Thank you.

Courage. I learned it from my adoptive mom. Hold my hand. You hold my hand. Learn about adopting a teen from foster care at AdoptUSKids.org. You can't imagine the reward. Brought to you by AdoptUSKids, the U.S. Department of Health and Human Services, and the Ad Council.