Speaker 1: This is Wall Street Week.
Speaker 2: I'm David Weston bringing you stories of capitalism. This week,
Speaker 2: the price of regulating competition around the world. We spoke
Speaker 2: with former EU Commissioner Margareta Vesteier on her very last
Speaker 2: day and the job, about what she has meant for
Speaker 2: Europe's tech industry and a growing threat for the data
Speaker 2: at the center of our economy. How US statistical agencies
Speaker 2: are grappling with shrinking budgets even before cuts to the
Speaker 2: overall federal budget. But we begin with a story about
Speaker 2: one hundred and five trillion dollars. That is the size
Speaker 2: of the gross domestic product of the entire world, and
Speaker 2: also the amount of money researchers tell us Americans will
Speaker 2: inherit over the next twenty five five years. If that
Speaker 2: seems large, that's because it is.
Speaker 3: It's definitely the biggest number we've ever seen. We've been
Speaker 3: looking at this research for over a decade now.
Speaker 2: Chase Horton is a senior analyst that Cerooly Associates, and
Speaker 2: he's the lead author of a new report quantifying how
Speaker 2: much wealth in the US will be given out or
Speaker 2: passed on over the next two and a half decades.
Speaker 2: It's a big jump from the numbers to really found
Speaker 2: a few years ago, and he thinks he knows why.
Speaker 3: It's really a confluence of three trends. Over the past
Speaker 3: dozen or so years, we've seen a substantial amount of
Speaker 3: wealth creation, So privately held wealth by households in the
Speaker 3: United States has increased essentially one hundred percent since we
Speaker 3: were looked at this in twenty eleven, and that's on
Speaker 3: an inflation adjusted basis. In addition, we also have seen
Speaker 3: wealth become increasingly concentrated among fewer wealthier households, and those
Speaker 3: wealthier households are more likely to be survived by their assets,
Speaker 3: so they're not going to be spending those assets down
Speaker 3: like the rest of us. And we've also seen wealth
Speaker 3: concentration among older households, so more wealth is held today
Speaker 3: by households that are over the age of sixty than
Speaker 3: we've seen in a long time. And it's also the
Speaker 3: highest portion. If you look at the ratio of expected
Speaker 3: to wealth transfer in the next twenty five years as
Speaker 3: a ratio of overall wealth held today, we see about
Speaker 3: eighty percent of the wealth held today going to be
Speaker 3: in motion over the course of the next twenty five years.
Speaker 3: And when we first looked at this about a decade ago,
Speaker 3: that ratio is closer to fifty percent of assets in motion.
Speaker 3: So the ratio of wealth expected to be changing hands
Speaker 3: in the next twenty five years is significant and much
Speaker 3: greater than what we even saw a decade ago.
Speaker 2: More money getting passed down over a relatively short time,
Speaker 2: and for the one in five who receive any inheritance
Speaker 2: at all, the share of their net worth coming from
Speaker 2: that inheritance rather than their earned income is on the rise.
Speaker 2: A new Bloomberg analysis shows today your financial status has
Speaker 2: more to do with who your parents are than at
Speaker 2: any time in recent history. That inherited money now accounts
Speaker 2: for at least a quarter of the wealth for the
Speaker 2: average inheritor, but many economists think that figure is much higher,
Speaker 2: including former Treasury Secretary than Wall Street Week contributor Larry Summers.
Speaker 4: If you account what happens when somebody gets an inheritance
Speaker 4: and then they invest it, and that builds up more wealth,
Speaker 4: that probably the vast majority is certainly a majority of
Speaker 4: the wealth in our economy is related to inheritance, and
Speaker 4: that's of course a complicated thing. On the one hand,
Speaker 4: family values are good, on the other hand, it's not
Speaker 4: like it's equally distributed. It's not like it's even as
Speaker 4: unequally distributed as income. It's not even like it's as
Speaker 4: unequally distributed as the rest of wealth. It's really very
Speaker 4: much a phenomenon about a very small action of the population.
Speaker 2: Given how much wealth is being transferred, one might think
Speaker 2: we may see a wider distribution of that wealth as well,
Speaker 2: but don't count on it.
Speaker 3: We constantly get asked, will this be redistributive in terms
Speaker 3: of wealth in the United States, And from what we've
Speaker 3: seen in the numbers is we don't really think that
Speaker 3: that's an expectation that people should have. You know, we
Speaker 3: see a significant amount of the wealth, over fifty percent
Speaker 3: is held by high net worth households, so those that
Speaker 3: are ten million or more in net worth, and that
Speaker 3: makes up around two percent of the population, and we
Speaker 3: expect a lot of that wealth to go to the
Speaker 3: top two percent of inheritors. So we don't really see
Speaker 3: any sort of reason or thing to make us believe
Speaker 3: that this is going to be, you know, widely distributed
Speaker 3: beneficially for all Americans.
Speaker 2: All that concentrated wealth being passed down echoes what the
Speaker 2: United States saw back in the Gilded Age of the
Speaker 2: late nineteenth century, which led President Teddy Roosevelt to call
Speaker 2: for a graduated inheritance tax on big fortunes properly safeguarded
Speaker 2: against evasion. And Andrew Carnegie, who became the richest man
Speaker 2: in the world in nineteen oh one when he sold
Speaker 2: his steel company to John D. Rockefeller, agreed saying, of
Speaker 2: all forms of taxation, this seems the wisest. In nineteen sixteen,
Speaker 2: Congress enacted the federal estate tax that's been with us
Speaker 2: in some form or another ever since. But today that
Speaker 2: tax doesn't apply to the vast majority of the one
Speaker 2: hundred and five trillion dollars passing hands.
Speaker 4: I think there's a lot of good that's come in
Speaker 4: this country out of family businesses, family farms, of family assets.
Speaker 4: I do think the extent to which this avoids taxation,
Speaker 4: even among the very wealthiest people is something that is
Speaker 4: very bizarre. Your study estimated that there'll be about two
Speaker 4: and a half trillion dollars of wealth passing this year.
Speaker 4: The collections on the inheritance tax are only going to
Speaker 4: be about one percent of that two and a half
Speaker 4: trillion dollars. Of course, relatively limited inheritances shouldn't get taxed.
Speaker 4: Of course, you have to treat family farms in appropriate ways.
Speaker 4: But two and a half trillion dollars passing and the
Speaker 4: vast majority of that being among five percent or one
Speaker 4: percent of the people who die, and only collecting one
Speaker 4: percent of it in taxes. I do think we can
Speaker 4: do better.
Speaker 2: There is little reason to expect that the inheritors will
Speaker 2: pay any more in taxes under the next Trump administration.
Speaker 2: In his first term, mister Trump worked with Congress to
Speaker 2: cut the number of people subject to the tax to
Speaker 2: near historic lows, and in campaigning for a second term,
Speaker 2: advocated eliminating it altogether. But there is one way the
Speaker 2: great wealth Transfer will reduce inequality. Women are set to
Speaker 2: inherit more money than ever before.
Speaker 5: Enormous amounts of this are going to women, because first,
Speaker 5: you have to think that men and women have different
Speaker 5: life expectancies, So first the money goes to the wife.
Speaker 2: Emily Green is head of wealth management at Elevest, a
Speaker 2: financial firm that focuses on working with women. Wealth advisors, brokers,
Speaker 2: real estate agents and others could be well positioned for
Speaker 2: a windfall as the wealth transfer accelerates in the next
Speaker 2: few years, and Green says she and her team have
Speaker 2: seen firsthand the shift from men to women and this.
Speaker 5: Next generation millennials and such, there's a lot more single
Speaker 5: women there have been in prior generation, So there's a
Speaker 5: lot more women controlling the wealth as this inheritance comes
Speaker 5: down than there was previously. It's really going to change
Speaker 5: the way that we invest, spend, give all these different
Speaker 5: types of things because women are going to get this
Speaker 5: huge amount of money.
Speaker 2: How far along are we in the process of this
Speaker 2: wealth transfer.
Speaker 5: We're still really early. We're still really early.
Speaker 2: Until now, women have gotten a smaller share of inherited
Speaker 2: wealth than men, but Soorooly estimates that over the next
Speaker 2: quarter century, gen Z women will become the first to
Speaker 2: receive at least half of the country's inheritance, and that
Speaker 2: Green says, has major implications for the way that money
Speaker 2: will be spent and invested in the future.
Speaker 5: And you have seen women tend to hire, women tend
Speaker 5: to give philanthropically, women tend to invest more in other women.
Speaker 5: They can give more politically, they can look to make
Speaker 5: sure that the people in office are reflecting them. You
Speaker 5: think about businesses and so the more women can start
Speaker 5: their own businesses and do these things, that changes society
Speaker 5: as well. If you look at women business owner numbers,
Speaker 5: they're great entrepreneurs. Women have the money to create businesses.
Speaker 5: They can create businesses that serve them. So even think
Speaker 5: about healthcare healthcare. For a long time, drugs were only
Speaker 5: tested on men, and so when we think about healthcare,
Speaker 5: if women can create healthcare companies that are focusing on
Speaker 5: fifty percent of the population as well, you are changing things.
Speaker 5: There's a lot of opportunity within these spaces because there's
Speaker 5: a lot of companies that just aren't focusing on women
Speaker 5: and how they're actually thinking about this.
Speaker 2: An economy that's better suited to fulfill the needs of
Speaker 2: the whole population rather than just fifty percent of it
Speaker 2: is certainly an improvement. But what about the eighty percent
Speaker 2: of Americans who don't stand to inherit anything? Will rising
Speaker 2: inequality way on economic dynamism?
Speaker 1: How much does it matter?
Speaker 2: Big questions and easy enough to ask, But when it
Speaker 2: comes to answering them, what's best for the US economy
Speaker 2: might not be what's best for your family, and one
Speaker 2: of those will always come first. Just to push it
Speaker 2: and get a little personal here. You wrote a paper
Speaker 2: in nineteen eighty one. I think you were still a
Speaker 2: PhD candidate at the time. Now you've had a very
Speaker 2: successful career, I hope done reasonably well, have a fan,
Speaker 2: have a granddaughter.
Speaker 6: Have your views.
Speaker 2: Changed on the intergenerational transfer wealth sort of that late
Speaker 2: in your career as opposed at the very beginning.
Speaker 4: I think at the very beginning, I didn't really think
Speaker 4: of it as a personal issue at all. I thought
Speaker 4: about it as just part of understanding the savings process
Speaker 4: in the economy. Now I think about wanting to help
Speaker 4: my children now that I have a grandchild, help my grandchild,
Speaker 4: but certainly not to the point where they're not living
Speaker 4: their own lives professionally and doing their own work. Is
Speaker 4: the philosophy that I have. I take advantage of the
Speaker 4: law as it is written, and I find it troubling
Speaker 4: that the law affords me as many opportunities to avoid
Speaker 4: paying taxes in completely legal ways.
Speaker 7: As it does.
Speaker 4: And I think there are all kinds of changes in
Speaker 4: the estate tax law that would make that law function
Speaker 4: in a fairer and more equitable way.
Speaker 2: Those changes are unlikely to come soon, if at all,
Speaker 2: and until they do, the economy may grow more dynastic,
Speaker 2: forcing us to come to grips with how much of
Speaker 2: our wealth is truly ours and how much we owe
Speaker 2: to future generations coming up. As Europe struggles to get
Speaker 2: its tech sector on the map, we examine the role
Speaker 2: that competition policy may play and the trade offs between
Speaker 2: taking the lead in regulation and spurring innovation. That's next
Speaker 2: on Wall Street Week.
Speaker 6: You're listening to Bloomberg Wall Street Week with David Weston
Speaker 6: from Bloomberg Radio. This is Bloomberg Wall Street Week with
Speaker 6: David Weston from Bloomberg Radio.
Speaker 2: This is a story about trade offs, in particular the
Speaker 2: tradeoff between making sure firms don't dominate an industry and
Speaker 2: making sure that those same firms have the incentives to
Speaker 2: innovate and grow so that they can drive the economy.
Speaker 2: It's a tradeoff being made differently in the US and
Speaker 2: Europe when it comes to the tech sector. Bloomberg's Max
Speaker 2: Ramsey tells us about the EU's self assigned role as
Speaker 2: the world's regulator in chief.
Speaker 8: The European economy is facing a slow agony as it
Speaker 8: struggles to compete with the US and China. So said
Speaker 8: none other than former ECB President Mario Draghi in September,
Speaker 8: pointing to sluggish growth and productivity.
Speaker 9: Growth has been slowly down for a long time in Europe,
Speaker 9: but we've ignored it. We until I would say, until
Speaker 9: two years ago, we would never have such a conversation
Speaker 9: as the one we're having today because things were sort
Speaker 9: of going well. And now we cannot ignore it any longer.
Speaker 9: Now conditions have changed. Europe is nowadays stuck in a
Speaker 9: static industrial structure populated by meat technology companies which are
Speaker 9: already mature. The problem is not that we lack smart people,
Speaker 9: and we don't lack certainly good ideas, but there are
Speaker 9: too many barriers to commercialize in innovations and scaling the
Speaker 9: map in the European Union.
Speaker 8: The numbers helped show the scale of the gap between
Speaker 8: Europe and the US despite having a larger population. The
Speaker 8: European Union's GDP sits around nineteen trillion dollars. That's compared
Speaker 8: to twenty nine trillion dollars for the US. The stock
Speaker 8: six hundred's market cap is about fourteen trillion dollars versus
Speaker 8: over fifty trillion for the S and P five hundred.
Speaker 8: One criticism has been that Brussel's aggressive approach to regulation,
Speaker 8: especially with big technology companies, has held corporate Europe back
Speaker 8: versus its global rivals. The person at the center of
Speaker 8: this policy for the past decade is Margreta Vestaya, the
Speaker 8: EU's Format Competition Commissioner. We spoke to her on her
Speaker 8: final day as the bloc's top antitrust enforcer.
Speaker 10: What that has been sort of mid live in Danish politics,
Speaker 10: in European politics, was to make sure that everybody has
Speaker 10: a fair chance of making it and making sure that
Speaker 10: the market provides for thats that the market serves customers.
Speaker 10: That has been you know, the thrend of these ten
Speaker 10: years from me.
Speaker 8: It's a mancha that has resulted in some of the
Speaker 8: toughest rules in the world for big tech. Another way
Speaker 8: to put it, if you can't beat Silicon Valley at
Speaker 8: its own game, regulate it. Vestia has overseen some of
Speaker 8: the EU's most high profile cases, taking on the world's
Speaker 8: biggest companies and issuing over twenty five billion euros in
Speaker 8: fines for abuses of dominance and cartel violations.
Speaker 7: Today is a big win.
Speaker 8: She won a record thirteen billion euro tax judgment against
Speaker 8: Apple and oversaw one of the Eve's landmark pieces of regulation,
Speaker 8: the Digital Markets Act. We asked about her rise from
Speaker 8: Danish politician to perhaps the most feared name in Silicon Valley.
Speaker 10: I don't really know how to prepare for being on
Speaker 10: the front page of one of the US main papers.
Speaker 10: It's important to figure out how to go with it.
Speaker 10: I came, of course from executive positions in Denmark. I
Speaker 10: was the Deputy Prime Minister. That several experiences as a minister.
Speaker 10: But I think the most important point is that you've
Speaker 10: believe in what you do. That's the cases that we
Speaker 10: have thoughts, that they have been fought with great work
Speaker 10: by the teams, with very strong evidence. I think that's
Speaker 10: the kind of preparedness that you need, that you believe
Speaker 10: that this is a strong case and you have something
Speaker 10: valuable to say.
Speaker 8: And from her point of view, things have gotten better.
Speaker 10: I definitely think that we have made progress. The world
Speaker 10: was different ten years ago. How we looked at technology
Speaker 10: was very different. Ten years ago, nobody was really asking
Speaker 10: questions to say is this really fair? Is this a
Speaker 10: good way to behave in the marketplace? That has changed completely.
Speaker 10: You know, now people have much more nuanced views. I
Speaker 10: think seeing all the good things that comes with technology,
Speaker 10: but also realizing that we really need to take care
Speaker 10: both to make sure that the market remains open, but
Speaker 10: also that technology is not addictive, is not providing rapid
Speaker 10: holes or dark patterns or anything else that may manipulate
Speaker 10: us as humans in ways that undermine how society works.
Speaker 8: But today, Vestia's legacy faces a challenge from those who
Speaker 8: say regulation has her Europe, stopping it from creating massive
Speaker 8: technology companies to rival the US or China. We put
Speaker 8: this to Roxanne Vasa, a woman at the very heart
Speaker 8: of Europe's tech scene.
Speaker 7: What I sum up.
Speaker 11: Versus europe regulation, Well, I mean I think Europe definitely
Speaker 11: has the image and the reputation of always wanting to regulate,
Speaker 11: and they're good at it.
Speaker 8: Vasa is the director of Station F, a startup campus
Speaker 8: in Paris. She's also a scout for Sequoia Capital and
Speaker 8: an angel investor herself.
Speaker 11: And I definitely think regulation does in some cases slow
Speaker 11: things down. It creates complexity. In some cases, it's not
Speaker 11: even clear when the regulations are first coming out exactly
Speaker 11: what they apply to and what we need to do
Speaker 11: to comply with them, so it can be quite quite
Speaker 11: difficult to navigate, especially for young innovative companies that don't
Speaker 11: have a lot of resources and a lot of time
Speaker 11: to spend on that kind of thing.
Speaker 8: All that she says can bring some disadvantages for companies
Speaker 8: in Europe compared to their rivals in North America.
Speaker 11: I think in the US there's a lot more flexibility.
Speaker 11: The consumer is potentially less protected because of those discrepancies,
Speaker 11: but as we mentioned, there's less room for innovators to
Speaker 11: play with. So I think there are two very different approaches,
Speaker 11: and I think the European approach will naturally dissuade some
Speaker 11: types of innovation from happening here.
Speaker 8: Margaret Tavastaya takes a different view.
Speaker 10: We're talking a lot these days about competitiveness. The paradox
Speaker 10: is that you can have competition without having competitiveness, but
Speaker 10: you cannot have competitiveness without competition. So really important to
Speaker 10: maintain that strive that everybody should challenged. If you achieve
Speaker 10: a very strong market position, it comes with responsibility. So
Speaker 10: to some degree, I think a lot of people can
Speaker 10: mirror themselves in what we are asking your market participants
Speaker 10: in their own lives. If someone is rich and powerful,
Speaker 10: they have responsibility. If someone is small with very few
Speaker 10: means well they should have a better chance of making it.
Speaker 8: This view has informed the flagship technology regulation for the
Speaker 8: EU and by extension, much of the world over the
Speaker 8: past ten years.
Speaker 10: I think it's important here to see while some regulation
Speaker 10: like the dinal Markets Act is opening the marketplace.
Speaker 7: Regulation like the AI.
Speaker 10: ADS makes AI safe to use, which means again that
Speaker 10: it opens the market for many more use cases where
Speaker 10: people may otherwise scare off. So I think it's important
Speaker 10: to look at regulation and say, okay, that is market creating,
Speaker 10: that is market opening, that is enabling innovation. And then
Speaker 10: look at regulation where you have reporting obligations that you
Speaker 10: may not need or that implementation have been done in
Speaker 10: a way that was overly strict, where with new technology
Speaker 10: or going through things, I would say, why did we
Speaker 10: do that in such a complicated manner?
Speaker 7: There are much easier ways to.
Speaker 10: Do this, So I think it's really important to do that,
Speaker 10: And the new Commission has obliged itself to go through
Speaker 10: the entire.
Speaker 7: Body of regulation to.
Speaker 10: Weed out the overlaps what is unnecessary in order to
Speaker 10: make life easier for businesses speak and.
Speaker 1: Small station FSA.
Speaker 8: Vasa also says that while regulation can sometimes slow tech innovation,
Speaker 8: it can also create opportunities, and she's optimistic about the
Speaker 8: future of Europe's startup culture.
Speaker 7: I think it's.
Speaker 11: Interesting we don't also talk about the opportunities that some
Speaker 11: regulations can create. And when I say that something specifically
Speaker 11: of climate tech, the climate tech industry, I do think
Speaker 11: that the regulation obviously is causing a lot of headache
Speaker 11: for some companies that have to comply, but it is
Speaker 11: also creating a lot more opportunity and a lot more
Speaker 11: interest for this category in Europe. I would say actually
Speaker 11: that Europe has made a huge cultural shift, maybe over
Speaker 11: the last five years. If I'm looking specifically at France,
Speaker 11: ten years ago, it was definitely not a thing to
Speaker 11: be an entrepreneur. It was almost considered crazy, why don't
Speaker 11: you go get a real job essentially, but that has
Speaker 11: one hundred percent change today and I think just about
Speaker 11: everybody wants to be a founder. So I think this
Speaker 11: cultural shift that we're seeing in France and the rest
Speaker 11: of Europe is also catching up with It has changed
Speaker 11: a lot of things. And when I actually look at
Speaker 11: how people build companies in the US and in Europe,
Speaker 11: I mean obviously structurally in Europe, things are very different.
Speaker 11: It means something very different to build a company buttural,
Speaker 11: the kind of mindset of entrepreneurs is almost identical. I
Speaker 11: would say it's actually maybe become even a little bit
Speaker 11: more balanced recently. I think with AI, we've seen the
Speaker 11: US having to step in a bit more, deciding to
Speaker 11: regulate a bit more now, or have to see if
Speaker 11: that continues with the new presidency.
Speaker 8: The u's tough approach to regulation hasn't always pleased its partners.
Speaker 8: President Trump notably attacked the Stayre, saying she hates the
Speaker 8: United States, perhaps worse than any person I've ever met.
Speaker 8: Now she hands over to her successor today, Saidribeta of Spain.
Speaker 8: With massive antitrust decisions to take against American companies Apple, Alphabets, Google, Meta,
Speaker 8: and X, owned by Trump confidant Elon Musk, could face
Speaker 8: billions in fines or even mandatory divestment orders. We ask
Speaker 8: Drewbera how she hopes to deal with the new administration.
Speaker 12: I will try to anticipate how to say cooperative relations
Speaker 12: in this fields. I think that all American consumers and
Speaker 12: European consumers worldwide consumers to benefit when we pay attention
Speaker 12: on how the market does work, and I was said,
Speaker 12: and this is quite clear that before in the previous
Speaker 12: Trump bandit there was also some involvement, relevant involvement and
Speaker 12: coordination between the competitition competition policies and decisions between the
Speaker 12: two authorities. So I hope that we can work together.
Speaker 8: As for Vestias, she may be backing away from the
Speaker 8: front lines of antitrust enforcement, but she's hardly fading away.
Speaker 10: Well, what the future brings, I don't know. What I
Speaker 10: know is that I bought myself a domain, which is
Speaker 10: dot eu because it may be that the European Commission
Speaker 10: is done with me.
Speaker 7: But I'm so not done with Europe.
Speaker 2: Coming up, numbers make the world of Wall Street go around,
Speaker 2: but the reliability of those numbers may be at risk
Speaker 2: as we continue to cut government costs. Next on Wall
Speaker 2: Street Week.
Speaker 6: This is Bloomberg Wall Street Week with David Weston from
Speaker 6: Bloomberg Radio.
Speaker 2: This is a story about numbers here at Bloomberg. Numbers
Speaker 2: are our business. They move markets and help us understand
Speaker 2: the economy, and so we need them to be timely
Speaker 2: and accurate. Our colleague Molly Smith tells us about the
Speaker 2: risk of not getting the numbers that we need.
Speaker 13: One of President elect Donald Trump's earliest priorities. When he
Speaker 13: steps back into the Oval office in January, We'll be
Speaker 13: shrinking the government by cutting regulations, spending, and headcount.
Speaker 14: For God, this is an important day. It's the beginning
Speaker 14: of a journey. You've heard what DOGE is all about,
Speaker 14: the Department of Government and efficiency. It's a new thing,
Speaker 14: and this is a new day in Washington and a
Speaker 14: new day in America.
Speaker 13: A slim down federal government could present a threat to
Speaker 13: a handful of statistical agencies that have been sounding the
Speaker 13: alarm on their cash crunch for years. The Census Bureau,
Speaker 13: the Bureau of Economic Analysis, and the Bureau of Labor
Speaker 13: Statistics are all under financial strain. The BLS collects and
Speaker 13: analyzes US employment data, and it lays claim to what
Speaker 13: could be the single most important piece of information in
Speaker 13: the world of finance, the monthly Jobs Report.
Speaker 15: Every year, BLS lost purchasing power right salaries for the workers.
Speaker 15: We're going up, but the budget was not.
Speaker 13: Erica Groschen is intimately familiar with the BLS's fight for funding.
Speaker 13: She served as its commissioner under President Obama from twenty
Speaker 13: thirteen to twenty seventeen.
Speaker 15: You start almost two years beforehand, so one you've got
Speaker 15: one budget kind of in process, and you're pulling together
Speaker 15: the next year's budget. The department sends that budget to
Speaker 15: OMB and from all of the departments, so the Department
Speaker 15: of Commerce, Labor, et cetera. The OMB helps the White
Speaker 15: House pull together what's called the President's budget. Then it
Speaker 15: goes to the House and to the Senate, and each
Speaker 15: of those appropriations committees winnows it down further. So it's
Speaker 15: a long drawn out, complicated process where you're continually giving
Speaker 15: up on ideas and necessities that you really wanted to
Speaker 15: be funded.
Speaker 13: The BLS, Census Bureau and the BEEA how to combine
Speaker 13: two point two billion dollar budget last year just zero
Speaker 13: points zero three percent of federal spending after adjusting for inflation.
Speaker 13: BLS funding has slumped almost twenty percent since twenty ten.
Speaker 16: Congress, unlike its predecessors in the nineteenth century, has lost sight,
Speaker 16: in my opinion, of the value of the statistical system.
Speaker 13: Andrew Reemer at George Washington University has been researching the
Speaker 13: role of policy and agency funding for twenty years.
Speaker 16: Back in the day two hundred plus years ago, the
Speaker 16: primary customer for the data was Congress. There was no internet.
Speaker 16: Data were if it was published, it was published way late.
Speaker 16: No one could really use it. Our world has changed,
Speaker 16: and so we're on Wall Street week. The first Friday
Speaker 16: of every month, the stock market does something on the
Speaker 16: basis of the numbers that come out on Friday morning
Speaker 16: regarding unemployment and jobs.
Speaker 1: The FED needs that data.
Speaker 16: The second thing that happens when that data come out
Speaker 16: first Friday of the month is that Chairman Powell goes
Speaker 16: in front of the cameras and says what it means
Speaker 16: for the FED cutting or not cutting interest rates up
Speaker 16: the street from me as a target. Target relied on
Speaker 16: census data to determine it's going to be in my neighborhood.
Speaker 16: Every business, every retail business, every factory uses federal data
Speaker 16: to figure out where it's going to invest and how
Speaker 16: much it's going to invest. If those data are bad,
Speaker 16: companies lose money.
Speaker 13: The data isn't just important on paper. It has real
Speaker 13: market consequences, which we saw play out when a weaker
Speaker 13: than expected print helped trigger a six point four trillion
Speaker 13: dollar global wipeout in August.
Speaker 1: Well, here is a downside surprise. It's going to catch
Speaker 1: the market's attention.
Speaker 16: One hundred and fourteen thousand jobs created last month, according
Speaker 16: to the BLS.
Speaker 13: Michael Collins at PGIM Fixed Income sees the difference in
Speaker 13: the quality of the data and the effect it has
Speaker 13: on how he makes his investment decisions.
Speaker 17: The data is probably less reliable today than it's been,
Speaker 17: But that being said, we have so much more data
Speaker 17: right than we've ever had. I mean, you think back,
Speaker 17: you know, the nineteen to forties, fifties and sixties, and
Speaker 17: you look at the old newspaper clippings, I mean the
Speaker 17: limited amount and the and the poor timeliness of the data.
Speaker 17: People are still managing money and making you know, big
Speaker 17: investments on those releases. Today we're actually, you know, have
Speaker 17: the benefit of having so much macro data, micro data,
Speaker 17: uh you know, contemporaneous data, leading data, lagging data, and
Speaker 17: so we have the flexibility to put it all together
Speaker 17: and try to, you know, paint a bigger picture. And
Speaker 17: we're really looking, you know, at each piece of data
Speaker 17: as a as a component to the bigger picture.
Speaker 1: Does it support our thesis or.
Speaker 17: Does it you know, make us think twice about our
Speaker 17: thesis and maybe pause before we put on a trade
Speaker 17: or an investment that that will benefit from from from
Speaker 17: our view, and by the time you get the revisions
Speaker 17: right that it is so backward looking that it doesn't
Speaker 17: reflect market behavior going forward.
Speaker 3: Right.
Speaker 17: The markets are very forward looking beasts, as you know, Uh,
Speaker 17: they will take each data point and try to extrapolate
Speaker 17: the trend up or down on any of these different
Speaker 17: indicators or series. So when you do a revision, all
Speaker 17: it does is kind of reset maybe the level, but
Speaker 17: it doesn't really.
Speaker 1: Change the forward looking trend.
Speaker 17: So either way, the data to investors like us, long
Speaker 17: term investors.
Speaker 1: Are not that important.
Speaker 17: What's important is how the markets are going to respond
Speaker 17: to activity in the future. So we're always trying to
Speaker 17: stay obviously one step ahead of the data, right, to
Speaker 17: try to take the data and again try to paint
Speaker 17: a picture of the direction of these different indicators, and
Speaker 17: we will certainly make investments and put on trades and
Speaker 17: put on positions that we think are consistent with our
Speaker 17: view on which way the data is pointing. If you
Speaker 17: get a revision, by then it's real, it's really moot.
Speaker 13: In August of this year, the BLS found itself unprepared
Speaker 13: to handle a delay in releasing a scheduled revision to
Speaker 13: its jobs data. The figures were finally released about thirty
Speaker 13: minutes after they were supposed to come out, but not
Speaker 13: before a handful of firms, including B and P, Prryba,
Speaker 13: and Mazuo got the numbers because they called the BLS
Speaker 13: and asked. The follout from the glitch was made worse
Speaker 13: by the massive revision, highlighting another issue plaguing the BLS
Speaker 13: and other statistical agencies, declining response rates to surveys.
Speaker 15: Because response rates are falling, then you're not actually getting
Speaker 15: sixty thousand households every month, you're getting substantially less than that,
Speaker 15: and so you're really missing out on smaller groups, racial groups,
Speaker 15: industry groups, veterans, etc. If you want to know what's
Speaker 15: going on with the various groups, the information just won't
Speaker 15: be as good. Response rates are falling for all surveys
Speaker 15: all across the world, all kinds of surveys. There's what it's.
Speaker 7: Called in the field.
Speaker 15: It's called survey fatigue. So people get a lot of
Speaker 15: requests and when it first started, there were very few surveys.
Speaker 15: And another factor in all of this has been the
Speaker 15: demonization of government.
Speaker 13: Grosshan says the lack of trust in the government and
Speaker 13: its data creates a feedback loop of low response rates
Speaker 13: and inaccurate data.
Speaker 15: So a conversion of the top ranks of the staff
Speaker 15: in the statistical agencies to political appointees threatens to undermine
Speaker 15: trust in the agencies. And when you undermine trust, you
Speaker 15: interfere with their ability to fulfill their mission.
Speaker 16: If you had come here a few years ago, these
Speaker 16: streets didn't exist it.
Speaker 13: Zach Brandon and Aaron Olver saw firsthand how data from
Speaker 13: statistical agencies turned into cash for their hometown of Madison, Wisconsin, but.
Speaker 18: Really start earlier in two thousand and five, two thousand
Speaker 18: and four. But the report that I think set the
Speaker 18: groundwork for what came out of the Chips Act was
Speaker 18: this the study that came from Brookies in twenty nineteen.
Speaker 18: They looked at population, they looked at types of jobs,
Speaker 18: they looked at share of bachelor's degrees, They looked at
Speaker 18: stem R and D investments, they looked at.
Speaker 1: PhDs per capita.
Speaker 18: So all that is federal data that's collected, and so
Speaker 18: those data sets become important to put together the composite.
Speaker 13: Fifteen Wisconsin companies specializing in healthcare technology as well as
Speaker 13: higher education institutions came together last year to seek the
Speaker 13: designation as a so called tech hub under the Chips
Speaker 13: and Science Act. The state earned forty nine million dollars
Speaker 13: in federal funding, which is expected to create nine billion
Speaker 13: dollars worth of economic development and more than thirty thousand jobs.
Speaker 18: There's sexy headlines and then there's discernible data, right, and
Speaker 18: so you have to look past the headlines, and also
Speaker 18: to look past scale, because if you just looked at size,
Speaker 18: if you just said, you know, well, who has the
Speaker 18: most of these employees, you would just stay in those
Speaker 18: five cities, you know, you'd go to New York wherever
Speaker 18: there was scale. But what you're really looking for is
Speaker 18: a bit of a needle in the haystack. You're looking
Speaker 18: for density. What you're looking for is where is this
Speaker 18: bubbling up now? And that if you could add an
Speaker 18: accelerant to it, So where has the spark occurred? And
Speaker 18: if we could add an accelerant, where will it catch fire?
Speaker 18: What are the solutions to global challenges that the US
Speaker 18: can develop? So health being one of those, So personalized medicine,
Speaker 18: thinking about BioHealth is going to be a big part
Speaker 18: of the future economy in this country.
Speaker 1: So where are those companies? Where does that research exist?
Speaker 18: And I think that's what you saw in this technology
Speaker 18: hub that's developed within Wisconsin, is that if you start
Speaker 18: in Milwaukee and you make your way to Madison, you've
Speaker 18: got more than one hundred companies that touch health in
Speaker 18: some way. And some of the largest companies in the
Speaker 18: world that are doing health care, health delivery, health research,
Speaker 18: health R and D happen to be based in this corridor.
Speaker 1: But if you weren't looking at data, you wouldn't have
Speaker 1: noticed that.
Speaker 13: Brandon says that despite his city's rapid tech growth, it
Speaker 13: could stumble without federal support, and other cities could miss
Speaker 13: out on future investment if statistical agencies continue to lose resources.
Speaker 1: It's really hard to be the dominant innovation economy in
Speaker 1: the world. It's not that hard to undo.
Speaker 18: It, right, and slowly ticking away, knocking off pieces of
Speaker 18: what got us here will set us on us certainly
Speaker 18: on a downward trajectory. And so if you're worried about
Speaker 18: global competitiveness, if you're worried about understanding China's rise and
Speaker 18: innovation and matching that against the US rise and innovation,
Speaker 18: you need data to be able to understand what the
Speaker 18: future looks like.
Speaker 13: Understanding that future as best we can will always be valuable,
Speaker 13: no matter whose data we use to do it. So,
Speaker 13: if the government can't survey and put out its own figures,
Speaker 13: can the private sector pick up the slack? Erica Groschen says,
Speaker 13: It's not so simple.
Speaker 15: It's a huge opportunity, but it's not a substitute. Why
Speaker 15: a private sector company would never have the incentive to
Speaker 15: create the long history of data that the statistical agencies
Speaker 15: do that really help you to put current conditions in perspective.
Speaker 15: They don't have the incentive to be as transparent.
Speaker 13: For now, government data and private surveys continue to go
Speaker 13: hand in hand, but no matter who generates them, good
Speaker 13: numbers will always cost money. The question is do we
Speaker 13: value them enough to keep paying the bill.
Speaker 2: That does it for us? Here at Wall Street Week,
Speaker 2: I'm David Weston. This is Bloomberg. See you next week
Speaker 2: for more stories of capitalism.