Squawk Pod: Ro Khanna on the Megabill & OpenAI warns ‘token’ investors - 07/03/25 | Audio Only

Squawk Pod Summary - July 3rd, 2025

Key Concepts:

• Jobs Report (June 2025): Payroll increases, unemployment rate, labor force participation rate.
• Federal Reserve (The Fed): Interest rates, independence, Chair Jay Powell, potential replacement.
• Trump's Mega Bill: Tax cuts, deficit, economic impact, political implications.
• Tokenized Shares: Robinhood, SpaceX, OpenAI, SEC, regulatory concerns, democratization of investing.
• AI and Job Displacement: Microsoft layoffs, efficiency, middle management, AI agents, HR implications.

1. June Jobs Report and the Fed's Monetary Policy

• Data: US payrolls increased by 147,000 jobs in June, exceeding expectations. The unemployment rate ticked down to 4.1%. However, the labor force participation rate fell to its lowest since late 2022.
• Analysis: Job growth was primarily in state and local government hiring. The report leaves uncertainty about the Fed's next move on interest rates.
• Fed Chair Pressure: President Trump called for Fed Chair Jay Powell to resign via Truth Social, linking to an article detailing a call for Congress to investigate Powell's "deceptive testimony" regarding renovations to the Federal Reserve headquarters.
• Market Reaction: Despite Trump's comments, the market doesn't seem to be reacting negatively, raising questions about the true impact of political pressure on the Fed's independence.
• Powell's Future: There's speculation about whether Powell will relinquish his role as Fed governor if replaced as chair, potentially to limit Trump's influence on the committee.

2. Tokenized Shares and Regulatory Concerns

• Robinhood's Move: Robinhood is offering tokenized shares of SpaceX (a private company) to users in Europe, giving retail investors indirect exposure to private markets.
• OpenAI's Disavowal: OpenAI distanced itself from this, stating, "These OpenAI tokens are not OpenAI equity. We did not partner with Robinhood. We're not involved in this. we do not endorse this."
• Mechanism: Robinhood owns the underlying asset (SpaceX shares) through a special purpose vehicle (SPV) and is creating derivative pieces (tokens) that track the value of the SPV.
• Regulatory Issues: US users cannot access these tokens due to regulatory restrictions.
• Paul Atkins' Perspective: The new chair of the SEC, Paul Atkins, suggests that companies like Robinhood are trying to create derivatives of private company shares to circumvent regulations. He seems reluctant to regulate this market in a meaningful way.
• Concerns:
  • Private companies shouldn't be in the public market through these mechanisms.
  • Companies like OpenAI and SpaceX may not want these shares to be liquid.
  • Retail investors may not understand that they don't actually own the underlying shares.
• Democratization of Investing: The argument is raised that restricting access to these tokens protects "the man" rather than democratizing investing and allowing investors access to opportunities previously limited to venture capitalists.

3. Trump's Mega Bill and Democratic Opposition

• House Vote: The House of Representatives is poised to pass President Trump's mega bill.
• Democratic Delay: Minority Leader Hakeem Jeffries spoke for hours to delay the vote.
• Ro Khanna's Critique: Congressman Ro Khanna (D-CA) outlined two major problems with the bill:
  • Increased National Debt: The bill is projected to add $4 trillion to the national debt, pushing deficits to 8% of GDP, which is unprecedented in peacetime.
  • Unequal Distribution: The bill disproportionately benefits the wealthy, with about 60% of the benefits going to people over $220,000, while potentially making poor and working-class Americans poorer through cuts to Medicaid and food assistance.
• Republican Assurances: Some Republicans who initially opposed the bill reportedly received assurances from President Trump that certain parts of the bill would be "slow-walked" or modified.
• Bond Market Reaction: The bond market's lack of negative reaction is surprising, potentially due to anticipation of a future Fed chair lowering interest rates.
• Potential Benefits: The bill includes aspects that could improve the economy, such as permanent expensing, which could spur business investment.
• Khanna's Qualified Support: Khanna supports certain aspects of the bill in isolation, such as no tax on tips, making the child tax credit permanent, and no tax on overtime.

4. Microsoft Layoffs and the Role of AI

• Layoffs: Microsoft is laying off nearly 4% of its workforce while refocusing on AI.
• AI as an Excuse: Steve Kovac argues that AI is more of an excuse than the primary reason for the layoffs, suggesting it's mainly about getting rid of middle managers.
• Reorganization: McLev Rom suggests the layoffs are a result of the company reorganizing itself around AI, similar to previous technological transformations.
• Limited AI Job Displacement: Despite the focus on AI, there's little evidence of widespread job losses directly attributable to AI. Software engineers, for example, spend only a small portion of their time actually writing code.
• AI Agents as Bosses: There's discussion about a future where AI agents serve as bosses, raising questions about HR management and the structure of organizations.
• AI Assistants vs. AI Bosses: While AI assistants are becoming more common, the idea of AI bosses is still met with resistance.
• AI Productivity: Some companies are testing AI tools like Copilot, but many find them too expensive and not productive enough to justify widespread adoption.

5. Conclusion

The Squawk Pod episode covers a range of significant economic and technological developments. The June jobs report presents a mixed picture, influencing speculation about the Fed's future actions. The debate surrounding Trump's mega bill highlights concerns about its impact on the national debt and income inequality. Robinhood's tokenized shares raise complex regulatory questions about access to private markets and investor protection. Finally, Microsoft's layoffs spark a discussion about the real impact of AI on job displacement and the future of work, with differing views on whether AI will primarily serve as an assistant or a replacement for human workers and managers.