Latest / Bloomberg Intelligence / Trump Government Muddies Economics With Politics: Alan Blinder

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Trump Government Muddies Economics With Politics: Alan Blinder · Bloomberg Intelligence

• 0:05
  Speaker 1: Welcome to the Bloomberg P and L Podcast. I'm Pim Fox.
• 0:08
  Speaker 1: Along with my co host Lisa Abramowitz. Each day we
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  Speaker 1: bring you the most important, noteworthy, and useful interviews for
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  Speaker 1: you and your money, whether you're at the grocery store
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  Speaker 1: or the trading floor. Find the Bloomberg P and L
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  Speaker 1: Podcast on Apple Podcasts, SoundCloud, and Bloomberg dot com. He
• 0:32
  Speaker 1: has been at Princeton since the early nineteen seventies. Alan
• 0:36
  Speaker 1: Blinder is an economist. He's a former vice chair of
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  Speaker 1: the Federal Reserve. He is currently the Gordon Renschler Memorial
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  Speaker 1: Professor of Economics at Princeton University, and he is the
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  Speaker 1: author of a new book is that It is entitled
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  Speaker 1: Advice and Dissent Why America's Suffers When Economics and Politics Collide.
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  Speaker 1: Alan Blinder, thank you very much for being with us.
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  Speaker 1: I want to jump right into which you describe. You
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  Speaker 1: have an interesting phrase in the book. I believe it's
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  Speaker 1: it's a new world have you And I'm wondering if
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  Speaker 1: you could sort of describe where you came up with that,
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  Speaker 1: and maybe just also tell us how do you define
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  Speaker 1: political logic? All right, let me try to do those uh,
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  Speaker 1: The phrase was at the end of an anecdote that
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  Speaker 1: I was relating from when I, way back in the
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  Speaker 1: nineties migrated temporarily from the academic world to the political
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  Speaker 1: world and experienced at the table with Bill Clinton, who
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  Speaker 1: was then President elect, my first photo op. If you're
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  Speaker 1: an academic, you don't do a lot of photo ops.
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  Speaker 1: In fact, you don't do any But if you're a politician,
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  Speaker 1: you do. And Bill Clinton, as the photographers rushed in,
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  Speaker 1: said to me, um Alan, You're now supposed to say
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  Speaker 1: nothing and look profound. And I retorted, as funny, because
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  Speaker 1: of my previous jobs, I was supposed to say profound
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  Speaker 1: things that look like nothing. Uh So it was indeed
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  Speaker 1: a new world for me. Um Your question about political
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  Speaker 1: logic goes to a number of things that informal logic,
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  Speaker 1: or what I call in the book Aristotelian logic, kind
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  Speaker 1: of things we teach in universities are very different. I'll
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  Speaker 1: give you an example that's really arithmetic, which is a
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  Speaker 1: form of logic. If you take a policy, and by
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  Speaker 1: the way, many details of trade policies and tax policies
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  Speaker 1: are like this. That gives a very large um gift
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  Speaker 1: to a relatively small number of people and uh and
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  Speaker 1: also disadvantages, but by small amounts, many, many millions of people.
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  Speaker 1: Economic logic would likely say that's a bad idea. You
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  Speaker 1: added up over the millions of people, and that's a
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  Speaker 1: bad idea. Political logic says, this is a great idea
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  Speaker 1: because the millions of people that lose, you know, I
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  Speaker 1: make up a number two dollars a year are not
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  Speaker 1: going to notice it that I won't understand that even
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  Speaker 1: if they do, two dollars does not move them to
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  Speaker 1: political action. But if other people are gaining millions, that will.
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  Speaker 1: Professor Blinder, I'm struck by an implicit assumption in this
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  Speaker 1: idea that you shouldn't mix economics and politics. Um, are
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  Speaker 1: we really worse than we ever have been before? Because
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  Speaker 1: this has always been the issue, from the foundation of
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  Speaker 1: the Federal Reserve, in the U. S. Treasury Department, it
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  Speaker 1: has always been the issue. I think we're worse than
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  Speaker 1: ever before, and presumably this is a temporary condition because
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  Speaker 1: of Donald Trump's general rejection of expertise in every domain.
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  Speaker 1: This is not just the economics that he does this
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  Speaker 1: and I can't remember another I don't think we ever
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  Speaker 1: had another president that had that kind of atitude towards expertise,
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  Speaker 1: which is not to say, and this is your point, really,
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  Speaker 1: that they've always followed the advice of expert technicians. No,
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  Speaker 1: they haven't. In fact, more often than not they rejected it.
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  Speaker 1: And that's okay, because, um, we live in a democracy
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  Speaker 1: and we elect politicians, not technocrats to make decisions. Yeah,
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  Speaker 1: Professor Blinder. One area of the government that typically has
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  Speaker 1: tried to remain at least the veneer of being somewhat
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  Speaker 1: independent from the sort of political regime is the Federal Reserve.
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  Speaker 1: There are a lot of vacancies on the Federal Reserve.
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  Speaker 1: One that has got garnered some attention is the rumor
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  Speaker 1: that John Williams will be the next New York Fed
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  Speaker 1: president selection. I'm wondering what is your feeling about that,
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  Speaker 1: and just generally about sort of the composition of the
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  Speaker 1: Fed right now. Yeah. So, uh, you know, there there
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  Speaker 1: has been a clamor for some time for diversity, and
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  Speaker 1: I'm very sympathetic to that. I think other things that well,
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  Speaker 1: it's better to have diversity. Um, we had a woman
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  Speaker 1: chairman of the Faith, which was great, and she was
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  Speaker 1: a great chair of the Fed, Janet Ellen. I think
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  Speaker 1: John Williams is an excellent selection for the presidency of
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  Speaker 1: the New York Fed. That's not, by the way, a
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  Speaker 1: political appointment, unlike the governor. Know you mentioned the vacancies.
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  Speaker 1: There lots of vacancies exists on the Board of Governors,
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  Speaker 1: and for that we need nominees from President Trump that
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  Speaker 1: get confirmed by the Senate. John Williams at the New
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  Speaker 1: York Fed or any of the bank presidents of the
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  Speaker 1: twelve federal reserve banks are not political appointees. Why do
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  Speaker 1: you what do you want people to take away from
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  Speaker 1: the book Advice and dissent. Yeah, it's a good question.
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  Speaker 1: I'd like people to take away the stark contrast between
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  Speaker 1: the advice that's given by a lot of economists, and
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  Speaker 1: of course it's not all the same, although I do
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  Speaker 1: emphasize in the book there's a lot more agreement among
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  Speaker 1: economists and people commonly think, and the way that it
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  Speaker 1: is ignored or distorted or so on by politicians. I
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  Speaker 1: don't want people thinking that I believe that technocrats should
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  Speaker 1: be making all these decisions. I don't. But what I
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  Speaker 1: think we could do a better job of is, like
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  Speaker 1: I used the phrase in the book, moving the needle
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  Speaker 1: a little bit away from where it is now, where
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  Speaker 1: decisions are just so so political with very little technocratic
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  Speaker 1: input that actually matters, and just move it a bit
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  Speaker 1: away from that. I think we could get better economic
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  Speaker 1: policies if we did that. Do you get the sense
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  Speaker 1: that sort of career government workers are still head down
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  Speaker 1: doing their job making the country run, or do you
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  Speaker 1: think that the current administration has changed that aspect of government.
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  Speaker 1: I think they are there with their heads found. Who
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  Speaker 1: have there john some of them hiding under their dead
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  Speaker 1: waiting for the storm to pass. But here's the thing. Uh,
• 7:11
  Speaker 1: let's druk sharp contrast between our system and say, the
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  Speaker 1: British system. In the British system, a new government comes in,
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  Speaker 1: the minister gets replaced, everybody else stays on the job.
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  Speaker 1: In our system, the political appointees come in and they
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  Speaker 1: take about the five top levels of the bureaucracy over
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  Speaker 1: and then the technocrats start below that. The these uh
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  Speaker 1: people that Steve Mannon called the deep state. Uh, except
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  Speaker 1: that the State Department, which has been almost denuded, it
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  Speaker 1: seems a lot of the deep state people are still
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  Speaker 1: there and they're trying to ride out this storm. The
• 7:50
  Speaker 1: e p A is another place where they're having a
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  Speaker 1: very very hard uh, very very hard time. But so
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  Speaker 1: it's not just the cabinet member that changes. It's quite
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  Speaker 1: a few people, uh, in any in any cabinet department.
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  Speaker 1: Alan Blinder, thank you so much for being with us.
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  Speaker 1: He is the Gordon Renchler Memorial Professor of Economics at
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  Speaker 1: Princeton University, also former FED Vice chair uh and he
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  Speaker 1: has a new book, Advice and Dissent, Why America Suffers
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  Speaker 1: when Economics and Politics collide. Sinclair Broadcast Group is the
• 8:39
  Speaker 1: biggest US broadcaster. It is trying to tie up loose
• 8:44
  Speaker 1: ends as the FEC decides whether it can buy Tribune Media,
• 8:49
  Speaker 1: and now it's generating a new controversy. Here to tell
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  Speaker 1: us more about that, I'm so happy to bring in
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  Speaker 1: Jordan's Holman, who covers all things related to wages, salaries, compensation,
• 9:01
  Speaker 1: personnel issues. Jordan's just, first of all, can you set
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  Speaker 1: the stage. What is the controversy here with Sinclair? So
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  Speaker 1: over the weekend, uh, the Sinclair anchors across the country
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  Speaker 1: they were giving, you know, a blanket speech. I was saying,
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  Speaker 1: we decry false news and dead spend put together a
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  Speaker 1: video of all these anchors saying the same words, and
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  Speaker 1: some people in the media and people watching felt like
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  Speaker 1: it was a shot at the integrity of the news media. Okay,
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  Speaker 1: so why is this now causing some angst among the
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  Speaker 1: nearly two hundred stations that Sinclair runs. So a lot
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  Speaker 1: of the journalists I spoke to who work at Sinclair,
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  Speaker 1: they didn't like that their company was in the spotlight
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  Speaker 1: in that negative way, that it looked like they were
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  Speaker 1: talking negatively about other media companies. And so the question
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  Speaker 1: started to come up, well, why don't you just quit?
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  Speaker 1: Why don't you leave and go somewhere else? And people
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  Speaker 1: said that in their contract they would have to pay
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  Speaker 1: up to their annual compensate shin if they wanted to
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  Speaker 1: leave before their contract was over, which is a steep
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  Speaker 1: price if they broke their contracts. Yeah, so that's that's
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  Speaker 1: my question. I mean, is this normal to have, say,
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  Speaker 1: a two year contract, especially in broadcast, uh, that has
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  Speaker 1: a penalty should you choose to quit. So on broadcast,
• 10:16
  Speaker 1: is normal to have a contract that you ask someone
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  Speaker 1: to stay two or three years. But what's not normal
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  Speaker 1: that some lawyers said who I spoke to, is that
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  Speaker 1: you have the steep penalty that you have to give
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  Speaker 1: your compensation if you leave beforehand, and that if it
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  Speaker 1: usually applies to orang air talent, but at Sinclair, some
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  Speaker 1: people who never appeared on TV had to sign that
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  Speaker 1: clause and maybe just also offer up what the response
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  Speaker 1: was from Sinclair and the various UH maybe TV stations
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  Speaker 1: or broadcast networks that you were able to contact in
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  Speaker 1: regards to the story. So Sinclair's vice president of news
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  Speaker 1: he sent out a memo to all the employees UH
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  Speaker 1: yesterday on Monday, saying that critics were ubsite at their
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  Speaker 1: just is and to have the anchors read this false
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  Speaker 1: news statement but that context was missing and perspective was
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  Speaker 1: missing missing, and that employees would be proud of where
• 11:07
  Speaker 1: they work. Sinclair hasn't directly um spoken to Bloomberg about it,
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  Speaker 1: but some employees still didn't feel like that was enough. Okay,
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  Speaker 1: to be very clear, the lines that we're talking about
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  Speaker 1: here are the sharing of biased and false news has
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  Speaker 1: become all too common on social media. Some members of
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  Speaker 1: the media use their platforms to push their own personal bias.
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  Speaker 1: I have to say, you know, there are a lot
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  Speaker 1: of people who probably believe this, and you know, you
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  Speaker 1: might even have some journalists who do feel like this
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  Speaker 1: is the case who work for Sinclair. Why is this different, right,
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  Speaker 1: Why is this different from just a number of people
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  Speaker 1: saying something sort of decrying and ambiguous, uh sort of concept. Well,
• 11:49
  Speaker 1: when you go back to the idea of what's the
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  Speaker 1: context around Sinclair, they are the largest broadcaster in the US.
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  Speaker 1: They reached about thirty eight percent of households in the US.
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  Speaker 1: So when they're you know, broadcasting this to all markets
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  Speaker 1: across the country, some people don't agree with that, you know,
• 12:05
  Speaker 1: they it seems like you're taking shots within the industry. Well,
• 12:08
  Speaker 1: but this is this is the key question. Is it
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  Speaker 1: the content of what that said? Or is it the
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  Speaker 1: fact that journalists who are supposed to be coming at
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  Speaker 1: something from a sort of impartial perspective or given a
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  Speaker 1: script to read. I mean, how unusual is that aspect
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  Speaker 1: of this, Right, It's definitely something you don't see every day.
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  Speaker 1: That's why I think that video really resonated when it
• 12:27
  Speaker 1: was like all these journalists from all these differ cities
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  Speaker 1: are saying the exact same thing. So it kind of
• 12:32
  Speaker 1: seems like, well, we're Sinclair saying we're being impartial and
• 12:35
  Speaker 1: we're the real journalists. But they're still providing a script
• 12:38
  Speaker 1: which doesn't always add up. And so you know, the
• 12:41
  Speaker 1: journalist I spoke to at Sinclair said that that rubbed
• 12:44
  Speaker 1: them wrong. They did not like that, and that they
• 12:47
  Speaker 1: even if they wanted away out, it just seemed too expensive. Um,
• 12:51
  Speaker 1: there's a case right now, former employee who works in
• 12:54
  Speaker 1: Florida who suit the or who got sued by the
• 12:57
  Speaker 1: company for leaving early, for breaking his contract act. And
• 13:01
  Speaker 1: now he's facing that in court and he has a
• 13:03
  Speaker 1: lawyer and assistant. Expensive process to want to leave if
• 13:05
  Speaker 1: you want to. And and also just to add to this, uh,
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  Speaker 1: Sinclair is described as the country's largest broadcaster right it
• 13:14
  Speaker 1: has about it has a hundred and ninety three television stations,
• 13:18
  Speaker 1: and it is seeking to purchase Tribune Media for three
• 13:22
  Speaker 1: point nine billion dollars and regulators are looking over that
• 13:27
  Speaker 1: potential acquisition because of any trust concerns. Right, Yeah, it
• 13:30
  Speaker 1: would make it even huger broadcaster, reaching even more Americans.
• 13:35
  Speaker 1: But President Trump supports that. Yes, So yesterday, um, he
• 13:39
  Speaker 1: tweeted that Sinclair was a far superior network compared to
• 13:44
  Speaker 1: NBC or CNN, and so he did definitely you know,
• 13:47
  Speaker 1: throw his hat behind like them as a broadcast institution. Well,
• 13:52
  Speaker 1: I guess this is a story that's going to keep
• 13:54
  Speaker 1: on developing, and we thank you very much for sharing
• 13:58
  Speaker 1: it with us and giving us this detail. Jordan's Holman
• 14:01
  Speaker 1: of Bloomberg News about Sinclair employees uh AS, saying that
• 14:05
  Speaker 1: contracts make it too expensive for them to quit the company.
• 14:24
  Speaker 1: One area that we really need to address is in Britain.
• 14:28
  Speaker 1: We are dealing with less than a year now before
• 14:31
  Speaker 1: Brexit day countdown has begun. There are some crucial issues
• 14:36
  Speaker 1: to be decided. It's unclear whether there is much progress
• 14:39
  Speaker 1: being made on them. Here to join us is Baroness
• 14:42
  Speaker 1: Helena Kennedy, a Labor Party member of the House of Lords,
• 14:46
  Speaker 1: coming to us here in our eleven three studios in
• 14:49
  Speaker 1: New York, even though she's normally based in London. Thank
• 14:52
  Speaker 1: you so much for being here. I want to want
• 14:55
  Speaker 1: I want to ask about momentum, because I think in
• 14:58
  Speaker 1: the US, for example, a lot of times when you
• 15:01
  Speaker 1: mentioned Brexit, people's eyes glaze over. Oh, that's still going
• 15:03
  Speaker 1: on again. Aren't they just going to come to some
• 15:05
  Speaker 1: kind of resolution and everything's going to move on the
• 15:07
  Speaker 1: way it was. Do you think that people are not
• 15:10
  Speaker 1: paying enough attention to the potential ramifications of what's going
• 15:13
  Speaker 1: to have to happen in the next year. It's taken
• 15:15
  Speaker 1: a long time to get to this point. I mean,
• 15:17
  Speaker 1: we've wasted such a lot of time, um really dealing
• 15:21
  Speaker 1: with the complexity which people hadn't fully understood. And so
• 15:25
  Speaker 1: I think that slowly there is a realization actually economically
• 15:30
  Speaker 1: in terms of peace and Ireland, in terms of the
• 15:33
  Speaker 1: immigration issues, that actually this is not going to be
• 15:36
  Speaker 1: the solution to many of the problems that people felt
• 15:39
  Speaker 1: very strongly about. And so I think that that's slowly
• 15:42
  Speaker 1: filtering through, but it's getting late in the day further
• 15:45
  Speaker 1: to be any kind of real comeback on that. I mean,
• 15:48
  Speaker 1: we've the deadline now is October. We've been told by
• 15:52
  Speaker 1: our the negotiators in Europe. Um I met with Barnier,
• 15:56
  Speaker 1: who is leading the European Union negotiations. Um I met
• 16:00
  Speaker 1: with him a month ago and he said October is
• 16:03
  Speaker 1: the deadline because it has to go in front of
• 16:05
  Speaker 1: all the European and the European Parliament has to go
• 16:08
  Speaker 1: in front of our parliament. To October is a deadline
• 16:11
  Speaker 1: for exactly what this Brexit deal would look like. What
• 16:14
  Speaker 1: the deal would look like and so and so we've
• 16:16
  Speaker 1: really got a very small window of time in which
• 16:19
  Speaker 1: to nail this down. And that's the real anxiety, because
• 16:22
  Speaker 1: already there's been an agreement which is causing a lot
• 16:24
  Speaker 1: of unhappiness, which is the transition deal, a recognition that
• 16:29
  Speaker 1: by March of next year, a year from now exactly,
• 16:32
  Speaker 1: we will not be in a place to actually say
• 16:34
  Speaker 1: it's done and dusted. There has to be we will not.
• 16:37
  Speaker 1: There's going to be a period of transition which will
• 16:40
  Speaker 1: not end until December two thousand and twenty. And during
• 16:43
  Speaker 1: that period things will carry on much the same as
• 16:46
  Speaker 1: they are as a lot of people who are saying,
• 16:48
  Speaker 1: but we voted to leave, we thought it was going
• 16:50
  Speaker 1: to be a pretty swift deal and we'd get out
• 16:53
  Speaker 1: and start treading with the rest of the world on
• 16:56
  Speaker 1: our own, not with the rest of Europe and uh,
• 16:59
  Speaker 1: and that's not going to be happening. And it's become
• 17:01
  Speaker 1: clear because for example, business does not want to drop
• 17:04
  Speaker 1: off a cliff cliff age, and so they want to transition.
• 17:07
  Speaker 1: And there was a lot of pressure being put on government,
• 17:10
  Speaker 1: by by business and by the city to say, look,
• 17:13
  Speaker 1: we need to have serious transition, slow, slowly, safely surely,
• 17:18
  Speaker 1: rather than somehow dropping off the edge and not knowing
• 17:22
  Speaker 1: where we're going. Uncertainty, of course is bad for business,
• 17:24
  Speaker 1: but it's bad for everybody and bad for individuals inside
• 17:27
  Speaker 1: our society too. Baroness Kennedy, if if Brexit and the
• 17:34
  Speaker 1: referendum process, uh, we're to have appeared before blind justice.
• 17:40
  Speaker 1: And you know why I'm mentioning this because maybe you
• 17:42
  Speaker 1: can offer people a little bit of your personal background.
• 17:46
  Speaker 1: What do you think would be revealed about the actual
• 17:49
  Speaker 1: referendum process and what people knew at the time of
• 17:54
  Speaker 1: the referendum and what we are learning now about potential
• 17:58
  Speaker 1: foreign interference uh in the referendum to leave or stay
• 18:04
  Speaker 1: inside the European Union. Well, it is interesting. I mean,
• 18:08
  Speaker 1: the problem with with a referendum is always that the
• 18:11
  Speaker 1: question is simple, do you want to stay in Europe?
• 18:13
  Speaker 1: What do you want to get out? And for many
• 18:15
  Speaker 1: people the answer to that is actually more complicated. I'd
• 18:18
  Speaker 1: like to leave these aspects of it and I don't
• 18:20
  Speaker 1: want to leave those aspects of it or um. And
• 18:23
  Speaker 1: so for many people it was the answer was much
• 18:25
  Speaker 1: more nuanced than just saying out or in um. And
• 18:29
  Speaker 1: so that's the problem always with our referendum um the
• 18:32
  Speaker 1: fact that we now know that there's a real likelihood,
• 18:35
  Speaker 1: a real possibility that there was interference, and that Cambridge
• 18:39
  Speaker 1: Analytica that possibly the Russian Russian money, that there was
• 18:42
  Speaker 1: interference in different ways in the outcomes and the ways
• 18:46
  Speaker 1: in which people were influenced to making that decision. I'm
• 18:49
  Speaker 1: not sure that if you said to many of the
• 18:51
  Speaker 1: people now, would you have changed your vote, that they
• 18:53
  Speaker 1: would say that they would have done. The people like
• 18:55
  Speaker 1: to imagine that they made it on their own beliefs
• 18:59
  Speaker 1: and they were not deeply influenced by the opinions of
• 19:01
  Speaker 1: others or the ways in which they were receiving information.
• 19:05
  Speaker 1: So I don't know whether that would make the difference.
• 19:07
  Speaker 1: But what people are realizing is that economically it's not
• 19:10
  Speaker 1: going to be it's not going to be the day
• 19:12
  Speaker 1: in the country that they were given to understand the story,
• 19:15
  Speaker 1: the lie in fact, and it was a lie was
• 19:18
  Speaker 1: told where where buses traveled through our cities with the
• 19:21
  Speaker 1: message on the side saying in every week, fifty million
• 19:25
  Speaker 1: pounds more will be spent on the national health service
• 19:28
  Speaker 1: if we're out of Europe, because instead of paying money
• 19:31
  Speaker 1: into the contributory schemes of Europe. We will have this
• 19:34
  Speaker 1: money available to spend on the national health service. In fact,
• 19:37
  Speaker 1: when it was hammered down, it wasn't true that that
• 19:40
  Speaker 1: that piece of information was a completely phony and if
• 19:42
  Speaker 1: we're talking about fake news, where that was seriously fake news.
• 19:45
  Speaker 1: So and people are realizing that the economic story is
• 19:49
  Speaker 1: not going to be so good. And already people are
• 19:51
  Speaker 1: feeling the pinch. They're feeling that the pound in their
• 19:53
  Speaker 1: pocket is not worth as much. There's been a devaluation.
• 19:56
  Speaker 1: There's a sense in which they're they're realizing that food
• 19:59
  Speaker 1: is going to become much more expensive. Um. There's also
• 20:02
  Speaker 1: there's a worry that a certainly food coming from Europe
• 20:05
  Speaker 1: because of we won't have the benefits of the of
• 20:08
  Speaker 1: the Single market or of the Customs Union where we
• 20:11
  Speaker 1: don't pay customs duties. There's also the an issue I
• 20:14
  Speaker 1: have to see it about the United States is that
• 20:16
  Speaker 1: we had imagined that there would be great deals to
• 20:18
  Speaker 1: be done with the United States for us alone, because
• 20:21
  Speaker 1: we are special, we have a special relationship with you guys,
• 20:23
  Speaker 1: you're our cousins and so and people are now suddenly
• 20:26
  Speaker 1: getting a bit worried because they're hearing your president talking
• 20:29
  Speaker 1: about in much more protectionist terms and about the possibility
• 20:32
  Speaker 1: of tarrifsms on. So they're much more worried about what
• 20:35
  Speaker 1: will that look like and will we get the deals
• 20:37
  Speaker 1: with you or China or India that we imagined, and
• 20:40
  Speaker 1: will they follow fast on our leaving Europe or will
• 20:43
  Speaker 1: it take a hell of a long time before it
• 20:44
  Speaker 1: happens with Within Parliament, when you have private conversations with, say,
• 20:49
  Speaker 1: Brexit hardliners, do you get the sense that any of
• 20:52
  Speaker 1: them are softening their position at all? Not at all.
• 20:55
  Speaker 1: The hardliners are not shifting one jot, but a lot
• 20:58
  Speaker 1: of the people that the room mainers are very on
• 21:02
  Speaker 1: the Conservative ventures. The remainders have the problem that they
• 21:06
  Speaker 1: there's a loyalty they feel settling in the House of Lords.
• 21:08
  Speaker 1: Many of the people who were appointed huge numbers are
• 21:10
  Speaker 1: appointed by David Cameron, many of them remainers like David
• 21:14
  Speaker 1: Cameron himself. UM, But they do feel a loyalty to
• 21:17
  Speaker 1: party and I think that the it would only be
• 21:20
  Speaker 1: if they really feel that the deal, the ultimate deal
• 21:23
  Speaker 1: is is catastrophic UM, that they will they will vote
• 21:27
  Speaker 1: against because there will be a debate in Parliament in
• 21:29
  Speaker 1: October when the crunge comes, and then there's the issue
• 21:33
  Speaker 1: of Labor and what will Labor's position be, which has
• 21:36
  Speaker 1: also been constructive. Ambiguity was how it was being described,
• 21:40
  Speaker 1: you know, saying that they're not happy with the way
• 21:42
  Speaker 1: that the negotiations are going, that they would want to
• 21:44
  Speaker 1: have much greater and closer connection to Europe in the
• 21:47
  Speaker 1: in the you know, as we go forward. Um but
• 21:50
  Speaker 1: but Corbin has been very clear in saying that he's
• 21:53
  Speaker 1: not in favor of staying in the Single Market. So
• 21:56
  Speaker 1: may and of course that the vast majority of politicians
• 21:59
  Speaker 1: in Labor do to stay. So it's all rather macy
• 22:02
  Speaker 1: at the moment. So where we're going, I still don't know.
• 22:05
  Speaker 1: All right, Well, we look to you to help us
• 22:07
  Speaker 1: understand what's come back and give you the inside skinny.
• 22:11
  Speaker 1: We appreciate it and we look forward to it. Baroness
• 22:14
  Speaker 1: Helena Kennedy, Labor Party member of the House of Lords,
• 22:18
  Speaker 1: are joining us here in our eleven three oh studios.
• 22:21
  Speaker 1: You're listening to Bloomberg Markets. I'm pim Fox my co
• 22:23
  Speaker 1: host Lisa abram Witz. This is Bloomberg. In other news,
• 22:30
  Speaker 1: Astronomers using the Hubble space telescope found the farthest star
• 22:35
  Speaker 1: ever observed, a bright dot nine billion light years away.
• 22:39
  Speaker 1: I can't wait to go home and talk about this
• 22:41
  Speaker 1: with Anyone who owns a home in Manhattan should be
• 22:59
  Speaker 1: watching this figure. The number of sales plunged the most
• 23:04
  Speaker 1: since the recession. What does this mean for the road forward?
• 23:07
  Speaker 1: Joining us now? Jonathan Miller, President and chief executive officer
• 23:11
  Speaker 1: of Miller Samuel in New York. Jonathan explained, how concern
• 23:15
  Speaker 1: should people be about this? Well, I think it's less
• 23:18
  Speaker 1: about concern and more just about awareness. The reason why
• 23:21
  Speaker 1: we saw the sales volume drop, there's really twofold one
• 23:27
  Speaker 1: is we've seen a real drop in UM the closings
• 23:31
  Speaker 1: of what I call legacy contracts UH New Development. That's
• 23:35
  Speaker 1: all those super luxury buildings that contracts are signed several
• 23:39
  Speaker 1: years ago that UH had could close until the buildings
• 23:43
  Speaker 1: are completed, and those have largely UM. The buildings have
• 23:47
  Speaker 1: largely been completed, so we've seen a real fall off
• 23:51
  Speaker 1: in their closing volume. And that's skewed top level prices
• 23:55
  Speaker 1: down for the market. And also UH contributed to part
• 23:59
  Speaker 1: of this decline in sales. The other big part UH,
• 24:02
  Speaker 1: and I think probably two thirds of that UH is
• 24:06
  Speaker 1: really related to the uncertainty. And you know the word
• 24:10
  Speaker 1: location three times is the trite real estate uh phrase
• 24:14
  Speaker 1: of our lives. Uh. Really, now, it's uncertainty and and
• 24:19
  Speaker 1: and it's really has to do with the federal tax
• 24:21
  Speaker 1: law and its impact on high cost housing markets. It's
• 24:25
  Speaker 1: not that the actual items in the tax law are
• 24:29
  Speaker 1: impacting the market, to call the slow slowdown, it's essentially
• 24:32
  Speaker 1: the uncertainty of it is causing participants to take a
• 24:36
  Speaker 1: little bit longer to make decisions. So you know, overall
• 24:41
  Speaker 1: prices actually trended up, uh if you remove UM the
• 24:45
  Speaker 1: new development component to it. So it's really a market
• 24:50
  Speaker 1: where uh, you know, I think we're looking at over
• 24:53
  Speaker 1: the next year, buyers and sellers are going to dance
• 24:56
  Speaker 1: around what the new equilibrium is between them and UM,
• 25:01
  Speaker 1: and we're probably going to see some software prices going forward. Jonathan,
• 25:04
  Speaker 1: Then what do you say whenever you hear people respond
• 25:07
  Speaker 1: to the question about state and local tax deductions for
• 25:11
  Speaker 1: property tax in that cap of ten thousand and basically
• 25:15
  Speaker 1: it gets waved off as not relevant to the actual
• 25:19
  Speaker 1: transaction in a high cost area such as New York
• 25:22
  Speaker 1: or even in places like California. Do you believe it.
• 25:26
  Speaker 1: Oh no, not at all. I think it absolutely has
• 25:28
  Speaker 1: an impact. I think the reason why it was waved
• 25:30
  Speaker 1: off is there was this idea that that those additional
• 25:35
  Speaker 1: costs would be offset by a tax cut. Um. But
• 25:39
  Speaker 1: I don't think people, when they have a collection of assets,
• 25:42
  Speaker 1: are going to be willing to overpay for one asset
• 25:45
  Speaker 1: while saving on another. Um. They really look at each
• 25:48
  Speaker 1: asset individually, and I think, um, you know, there's also
• 25:53
  Speaker 1: a lot of hyperbole about this, but I think the
• 25:55
  Speaker 1: general rule of thumb is the higher the property rice generally,
• 26:01
  Speaker 1: the higher the impact of the new tax all will
• 26:04
  Speaker 1: be on the property. But it really comes down to
• 26:07
  Speaker 1: the individual tax situations of the of you know, of
• 26:10
  Speaker 1: the homeowner more than ever before. Well, this you raise
• 26:15
  Speaker 1: a really good point. I think a lot of people
• 26:16
  Speaker 1: dismissed the effects of the tax law on sort of
• 26:19
  Speaker 1: the mortgage deduction being kepped at rather than a million
• 26:23
  Speaker 1: dollars as not having that big of an effect. What
• 26:26
  Speaker 1: about that piece of it? Does that have an effect?
• 26:28
  Speaker 1: Or is this mostly just the overlap between state and
• 26:31
  Speaker 1: federal taxes? I think sault Satan local taxes is the
• 26:36
  Speaker 1: deduction is much more important to focus on than the
• 26:40
  Speaker 1: mortgage interest deduction. Uh that I think is has less
• 26:44
  Speaker 1: of much less of an impact, if any, It's much
• 26:47
  Speaker 1: more about all the deductions. The way to look at
• 26:51
  Speaker 1: this is the way I look at it, is that
• 26:55
  Speaker 1: this is really the process of the federal government extracting
• 26:59
  Speaker 1: itself them the home ownership promotion business. And they're hoping
• 27:03
  Speaker 1: that by doubling standard deductions for single and married will
• 27:07
  Speaker 1: provide um, you know, some offset to this and and
• 27:11
  Speaker 1: and that is certainly true. It just becomes more problematic
• 27:15
  Speaker 1: as you shift into higher cross housing markets, which are
• 27:18
  Speaker 1: generally on the East and West coast. Jonathan, give you
• 27:21
  Speaker 1: about thirty seconds. Maintenance fees and the percentage of taxes
• 27:25
  Speaker 1: that are included in maintenance fees. Is that going to
• 27:27
  Speaker 1: go up? I think. I think the reduction of of
• 27:32
  Speaker 1: the lack of ability to deduct those um is going
• 27:36
  Speaker 1: to make maintenance feel a lot more expensive than it
• 27:39
  Speaker 1: currently is. I want to thank you very much, Jonathan Millery,
• 27:43
  Speaker 1: President and the chief executive officer of Miller Samuel, offering
• 27:48
  Speaker 1: some insight into the Manhattan home market. Thanks for listening
• 27:56
  Speaker 1: to the Bloomberg P and L podcast. You can subscribe
• 27:59
  Speaker 1: and listen to interviews at Apple Podcasts, SoundCloud, or whatever
• 28:03
  Speaker 1: podcast platform you prefer. I'm pim Fox. I'm on Twitter
• 28:06
  Speaker 1: at pim Fox. I'm on Twitter at Lisa Abramo wits one.
• 28:10
  Speaker 1: Before the podcast, you can always catch us worldwide on
• 28:13
  Speaker 1: Bloomberg Radio