WEBVTT - Alibaba's Shakeup and Rethinking College 0:00:01.280 --> 0:00:05.119 You're listening to the Bloomberg Opinion podcast count US Saturdays 0:00:05.120 --> 0:00:08.280 at one in seven pm Eastern on Bloomberg dot Com, 0:00:08.320 --> 0:00:11.479 the iHeartRadio app, and the Bloomberg Business App, or listen 0:00:11.520 --> 0:00:13.760 on demand wherever you get your podcasts. 0:00:15.160 --> 0:00:18.840 Welcome to Bloomberg Opinion. I'm Amie Morris. This week we 0:00:18.880 --> 0:00:22.280 look at some of the bigger problems facing the US economy, 0:00:22.360 --> 0:00:26.720 things that reach beyond inflation and interest rates. Plus a 0:00:26.840 --> 0:00:30.960 robust job market has more young Americans skipping college and 0:00:31.040 --> 0:00:35.120 going straight to work, and how politicians can take advantage 0:00:35.720 --> 0:00:40.800 and the power of sleep. Scientists say we can be smarter, stronger, 0:00:41.120 --> 0:00:44.920 more creative if we just get enough zs. We begin 0:00:44.960 --> 0:00:48.040 with the latest shakeup at Ali Baba. It is highlighting 0:00:48.080 --> 0:00:52.480 a problem for investors. Profit or growth. CEO Daniel Zang 0:00:52.520 --> 0:00:54.520 was supposed to be in charge of the holding company 0:00:54.760 --> 0:00:57.960 while also running the struggling cloud division. The board, though, 0:00:58.000 --> 0:01:00.120 decided to bring in a couple of company veterans and 0:01:00.120 --> 0:01:03.560 says chair and CEO. This with the backdrop of talks 0:01:03.600 --> 0:01:06.800 between the US and China. Secretary of State Anthony Blincoln 0:01:06.800 --> 0:01:09.240 says talks have been good, but there's still more work 0:01:09.280 --> 0:01:09.800 to be done. 0:01:09.880 --> 0:01:12.479 I came to Vision to strengthen high level challenge of communication, 0:01:13.040 --> 0:01:16.480 to make clear our positions and intentions in areas of disagreement, 0:01:16.880 --> 0:01:19.720 and to explore areas where we might work together when 0:01:19.760 --> 0:01:22.560 our interests aligne on share transnational challenges. 0:01:23.000 --> 0:01:23.800 And we did all of that. 0:01:23.840 --> 0:01:27.479 Secretary Blincoln says, the trip has achieved its goal because 0:01:27.600 --> 0:01:31.640 the two sides were stored some senior level communications. Let's 0:01:31.640 --> 0:01:34.200 talk about it with Bloomberg opinion columnist Tim Culpen. He 0:01:34.280 --> 0:01:37.000 covers technology in Asia, and we want to start with 0:01:37.040 --> 0:01:40.240 the Ali Baba shakeup. Why is this significant? Bring us 0:01:40.319 --> 0:01:40.840 up to speed. 0:01:41.240 --> 0:01:43.480 Well, basically, what has happened is Ali Baba has had 0:01:43.480 --> 0:01:46.920 a tough few years. They have six divisions. Five of 0:01:46.959 --> 0:01:49.040 them don't make any money. One of them makes all 0:01:49.080 --> 0:01:52.240 the money. But that big division, which is it's called Tawbo, 0:01:52.400 --> 0:01:57.120 it's the e commerce division. It's flowing down. And so 0:01:57.320 --> 0:01:59.760 what they're doing is they're splitting the company into six. 0:02:00.360 --> 0:02:03.720 Essentially five of those will be able to IPO and 0:02:03.840 --> 0:02:07.960 up until you know, this past week, the same gentleman 0:02:08.040 --> 0:02:11.240 who was running the whole company, the kind of the mothership, 0:02:12.160 --> 0:02:16.560 Daniel Jung, was also running one of the smaller divisions, 0:02:16.560 --> 0:02:19.959 the cloud division, which is it's quite large, but it's unprofitable, 0:02:19.960 --> 0:02:23.040 and it's certainly smaller than the e commerce division. But 0:02:23.200 --> 0:02:26.920 in its wisdom, the board decided that's not a good idea. 0:02:27.760 --> 0:02:30.080 They let him go and focus on the cloud division, 0:02:30.080 --> 0:02:32.560 which may turn profitable in the next year or two, 0:02:33.320 --> 0:02:35.400 and brought back a gentleman called Joe. 0:02:35.560 --> 0:02:35.760 Say. 0:02:35.960 --> 0:02:38.480 Now, if anyone follows Ali Barber will know that Joe 0:02:38.560 --> 0:02:42.040 is kind of an old hand. He's an old confidante 0:02:42.040 --> 0:02:44.919 of Jack mar who founded the company, and so he's 0:02:44.960 --> 0:02:47.639 coming back into the role of chairman of the group 0:02:47.680 --> 0:02:50.760 company so that the mothership, and I think you'll be 0:02:50.800 --> 0:02:53.760 a steady hand for the company. The mothership after the 0:02:53.919 --> 0:02:56.640 split will not do as much as it did a 0:02:56.639 --> 0:02:58.600 few years ago. It's more of a kind of, as 0:02:58.639 --> 0:03:01.880 I say, a holding company within with cash but not 0:03:02.200 --> 0:03:05.160 really much direct operations. So I think his role there 0:03:05.200 --> 0:03:09.359 will be to be that kind of oldest statesman of 0:03:09.440 --> 0:03:13.640 the company, I guess, in many ways, and allow various 0:03:13.639 --> 0:03:15.600 division chiefs to do what they need to do to 0:03:15.639 --> 0:03:18.720 make each of their divisions grow and be profitable, which 0:03:18.760 --> 0:03:21.560 is not an easy thing right now in China's economy. 0:03:21.919 --> 0:03:24.320 How are things going to be shaking out over the 0:03:24.360 --> 0:03:27.360 next twelve months. It feels like every few months we 0:03:27.480 --> 0:03:29.799 have a new twist to how they're going to try 0:03:29.840 --> 0:03:30.600 to remap this. 0:03:31.480 --> 0:03:34.560 Yeah, that's very good observation. Amy. There has been a 0:03:34.560 --> 0:03:36.839 lot of changes happening in the last few months. In fact, 0:03:36.880 --> 0:03:38.880 it was only three months ago that they announced the 0:03:38.920 --> 0:03:42.600 big breakup, and that was not something that we really 0:03:42.640 --> 0:03:45.600 saw coming. Some media had reported it, but generally speaking 0:03:45.640 --> 0:03:47.600 it was not a rumor that was going around too much. 0:03:48.240 --> 0:03:51.160 And it's really part of this idea that Ali Baba 0:03:51.680 --> 0:03:55.000 has kind of grown too big it's hard to manage. 0:03:55.840 --> 0:03:58.360 There is six major divisions, one of them brings in 0:03:58.480 --> 0:04:01.080 sixty seven percent of its brew and all of its 0:04:01.080 --> 0:04:03.960 profit more than one hundred percent of its profit. And 0:04:04.000 --> 0:04:06.840 the other five divisions, which are the startups of the company, 0:04:06.880 --> 0:04:11.200 things like cloud and logistics. They're growing, but maybe not 0:04:11.280 --> 0:04:14.960 growing enough and certainly not becoming profitable quickly enough. So 0:04:15.040 --> 0:04:17.920 it's all part of this idea of making every individual 0:04:18.000 --> 0:04:21.520 unit responsible for its own p and L and forcing 0:04:21.560 --> 0:04:24.200 the management of those teams to find ways to either 0:04:24.240 --> 0:04:27.480 find growth, cut costs, whatever it takes to get to profit, 0:04:27.520 --> 0:04:30.320 because over the next eighteen months, many of them are 0:04:30.320 --> 0:04:33.400 going to list, probably in Hong Kong, and they will 0:04:33.400 --> 0:04:36.200 definitely want to show investors a very nice P and 0:04:36.320 --> 0:04:38.720 L before they hit the prospectives. 0:04:39.040 --> 0:04:41.560 In your column on the Bloomberg terminal, you say that 0:04:41.720 --> 0:04:45.320 this could become a problem for investors, the choice of 0:04:45.400 --> 0:04:49.040 profit or growth. What is the response so far or 0:04:49.080 --> 0:04:50.880 have we had a chance to hear that response. 0:04:51.320 --> 0:04:54.960 Well, the response really was generally quite positive to the breakup. 0:04:55.000 --> 0:04:57.159 The idea of the breakup was announced back in March 0:04:57.240 --> 0:05:00.960 and since then things I would say that people, you know, 0:05:01.040 --> 0:05:03.359 analysts and investors think, oh, it's not a bad idea, 0:05:03.400 --> 0:05:05.080 it's a good thing. But in terms of the way 0:05:05.080 --> 0:05:07.479 the stock goes up and down, there's bigger macro economic 0:05:07.560 --> 0:05:10.880 issues at play in China right now. But really what 0:05:10.920 --> 0:05:13.279 they have if you're going to invest in any of 0:05:13.320 --> 0:05:16.159 the Aled Barber Group companies, and let's say by the 0:05:16.240 --> 0:05:19.039 end of next year they'll all be listed, then you're 0:05:19.040 --> 0:05:22.479 really going to have to choose between a profitable company 0:05:22.880 --> 0:05:25.719 or a fast growing company, because right now there is 0:05:25.760 --> 0:05:29.440 no company that is growing and is profitable, and that's 0:05:29.480 --> 0:05:31.400 really what it comes down to. And if you're an investor, 0:05:31.400 --> 0:05:33.640 you might say, well, okay, of course I want profit, 0:05:33.680 --> 0:05:36.520 but if there's no growth, what's the point. And the 0:05:36.560 --> 0:05:38.800 reverse side is you might like to go for the 0:05:38.880 --> 0:05:41.599 high growth company, betting that will turn profitable in the future. 0:05:41.839 --> 0:05:43.600 We do want to shift gears now. Tim to the 0:05:43.680 --> 0:05:47.000 Secretary Blincoln's trip to China, it seemed to start off 0:05:47.040 --> 0:05:50.400 kind of clunky, then it ended with some momentum, and 0:05:50.400 --> 0:05:52.560 then it seemed a little clunky again. Bring us up 0:05:52.600 --> 0:05:55.040 to speed on the response to that trip. 0:05:55.920 --> 0:05:58.239 Well, I think the thing that you need to remember 0:05:58.320 --> 0:06:01.720 is that Anthony Blincoln went to Beijing setting a very 0:06:01.800 --> 0:06:05.359 very low bar, really low expectations. And you know how 0:06:05.880 --> 0:06:09.840 you know when you're an investor and the investor relations 0:06:09.880 --> 0:06:12.520 teams tells analyst earnings are not going to be that good. 0:06:12.600 --> 0:06:14.719 Maybe your estimate's a bit too high, and the analyst 0:06:14.800 --> 0:06:16.760 knocks it down a little bit, and guess what the 0:06:16.800 --> 0:06:19.360 earnings come out and it's a lot better than they said. Well, 0:06:19.680 --> 0:06:21.720 that's kind of what they had here. Like I think 0:06:21.800 --> 0:06:26.960 I think Lincoln's kind of sandbag expectations here because a 0:06:27.240 --> 0:06:29.000 he really wasn't sure what he was going to get 0:06:29.040 --> 0:06:30.800 out of the trip. And b he wanted to be 0:06:30.839 --> 0:06:32.800 able to walk away saying, oh, it was really good, 0:06:32.880 --> 0:06:37.479 much better than expectations. As one point to note, when 0:06:37.520 --> 0:06:41.680 he landed in Beijing on Sunday, a meeting with Chinese 0:06:41.760 --> 0:06:45.239 leader Shi Jimping wasn't even on the agenda. Now, everyone 0:06:45.560 --> 0:06:48.599 kind of speculated will he, won't he? And he got 0:06:48.600 --> 0:06:51.760 that meeting at an hour's notice, right, So they called 0:06:51.760 --> 0:06:54.160 that meeting at but one hour's notice, and of course 0:06:54.200 --> 0:06:56.359 he met Shi Jimping, which is you know, I guess 0:06:56.600 --> 0:06:59.360 comes off as looking like a coup, right, And that's 0:06:59.400 --> 0:07:01.600 the kind of way that this whole thing was managed. 0:07:02.200 --> 0:07:04.920 The key point that I guess came out is that 0:07:05.600 --> 0:07:08.720 they have agreed to further talks. There is one area 0:07:08.839 --> 0:07:11.440 that they didn't get a breakthrough on, and that is 0:07:11.560 --> 0:07:16.440 this kind of emergency hotline, military to military emergency hotline, 0:07:16.440 --> 0:07:19.640 which the US has wanted to kick start again. That 0:07:19.760 --> 0:07:23.920 was kind of cut off after Nancy Pelosi visited Taiwan 0:07:23.960 --> 0:07:26.040 of the summer of last year, and the Chinese were 0:07:26.080 --> 0:07:30.280 very incensed by that and kind of ceased all communications. Unfortunately, 0:07:30.320 --> 0:07:33.560 out of the blink and visit, that communication hasn't been 0:07:33.560 --> 0:07:35.880 switched on again, and the US would very much like 0:07:35.960 --> 0:07:38.440 to make sure that's switched on because there's been some 0:07:38.600 --> 0:07:42.600 pretty provocative actions by the Chinese military in the Taiwan 0:07:42.680 --> 0:07:44.000 Strait over the last few months. 0:07:44.080 --> 0:07:46.120 I want to get into that with the Taiwan, the 0:07:46.200 --> 0:07:50.240 concerns about Taiwan, in addition to the relations between the 0:07:50.400 --> 0:07:52.920 US and China, just a big picture, if you could. 0:07:53.480 --> 0:07:56.000 The tensions have gotten worse over the past year, especially 0:07:56.000 --> 0:07:58.760 because of that surveillance balloon shot down over the East Coast. 0:07:58.800 --> 0:08:01.680 We all remember that back in February. But can you 0:08:01.760 --> 0:08:05.440 compare now how relations are today to what they were 0:08:05.480 --> 0:08:08.080 earlier this year, or even to what they were during 0:08:08.080 --> 0:08:11.800 the Trump administration. Are we seeing a trend towards better 0:08:12.360 --> 0:08:15.360 or is it just a stalemate? Where are we right now? 0:08:16.040 --> 0:08:18.720 My opinion is that it's a stalemate now. In the 0:08:18.800 --> 0:08:22.520 Trump years, it was very much focused around there's obviously 0:08:22.520 --> 0:08:27.000 some national security issues the CFO Huawei was being detained 0:08:27.040 --> 0:08:30.560 in Canada, not in the US, but that was definitely 0:08:30.640 --> 0:08:33.960 causing tensions with the US. Trump came in down pretty 0:08:33.960 --> 0:08:38.320 hard on various trade areas, including technology trade and so forth. 0:08:38.800 --> 0:08:41.240 But we've seen it move into a much more military 0:08:41.240 --> 0:08:45.080 dimension that we didn't see during the Trump years. Now 0:08:45.120 --> 0:08:48.640 the trip by then, how speaker Nancy Pelosi the first 0:08:48.640 --> 0:08:52.960 time in a quarter century, was an excuse for China 0:08:53.040 --> 0:08:56.400 to kind of rattle at Seber. China has had designs 0:08:56.440 --> 0:08:59.439 on Taiwan for well for fifty years, but it's been 0:08:59.520 --> 0:09:03.040 ratcheting up those designs since Shi Jimping got into power, 0:09:03.679 --> 0:09:06.199 and it's just not willing to relent on that. So 0:09:06.280 --> 0:09:09.960 you'll hear pretty much anytime there's a conversation between Beijing 0:09:10.040 --> 0:09:13.880 and Washington at any level, that'll be told that the 0:09:13.920 --> 0:09:16.160 Americans will be told to, you know, lay off Taiwan. 0:09:16.200 --> 0:09:19.160 That is a red line, don't you dare? And that's 0:09:19.200 --> 0:09:21.680 what we're seeing more and more. So we may see 0:09:22.320 --> 0:09:25.839 trade tensions ease over the coming years. I think it 0:09:25.920 --> 0:09:28.080 could only get easier. I don't think it could get 0:09:28.160 --> 0:09:32.320 much worse. I don't think that US will ease up 0:09:32.320 --> 0:09:36.040 too much on some of its technology curves and so forth. 0:09:36.480 --> 0:09:40.120 But on the military side, the best thing we can 0:09:40.200 --> 0:09:44.480 have is dialogue, because it's very very hard for me 0:09:44.679 --> 0:09:48.800 sitting in Taiwan to see that the military dimension is 0:09:48.840 --> 0:09:51.280 going to get any friendlier over the next few years. 0:09:51.480 --> 0:09:55.679 We are anticipating another visit from Chinese officials to the 0:09:55.800 --> 0:09:59.400 US in the next few months. Is there anything particular 0:09:59.679 --> 0:10:00.720 you'll be you watching for. 0:10:01.040 --> 0:10:02.600 I mean, the number one thing that I and I 0:10:02.600 --> 0:10:04.720 think everybody is watching for is an opening of the 0:10:04.760 --> 0:10:07.760 military communication the hotline, so to speak. I mean, that 0:10:07.800 --> 0:10:10.760 would be the key breakthrough the US. Really, really, what's that? 0:10:11.240 --> 0:10:13.400 Chinese don't seem as eger and I think it's kind 0:10:13.440 --> 0:10:16.520 of a punishment from the Chinese. But it'll be interesting 0:10:16.559 --> 0:10:18.920 to see what comes out of a Janet Yellen trip. 0:10:18.960 --> 0:10:21.440 And we shouldn't forget climate. You know, the climate change 0:10:21.600 --> 0:10:24.320 and climate issues are very important to the US and 0:10:24.440 --> 0:10:29.000 the Biden administration. But China, they don't dismiss it. But China, 0:10:29.240 --> 0:10:32.520 like many developing countries, is in this position of saying, well, hey, 0:10:32.559 --> 0:10:35.080 you know, you had your chance to pollute the world. 0:10:35.160 --> 0:10:37.640 Don't tell us what to do. And so I think 0:10:37.800 --> 0:10:41.280 any breakthrough that John Carey could have in Beijing, I 0:10:41.320 --> 0:10:43.520 think would be welcome. It wouldn't be so much a 0:10:43.559 --> 0:10:46.160 political or trade thing. But you know, we can't dismiss 0:10:46.200 --> 0:10:49.200 that the climate issue is very very important to the 0:10:49.280 --> 0:10:50.120 US administration. 0:10:50.520 --> 0:10:53.680 Thank you, Tim. Tim Culpn is a Bloomberg opiion columnist 0:10:53.800 --> 0:10:57.080 covering technology in Asia. Coming up, we'll look at what 0:10:57.240 --> 0:11:00.760 other problems may be facing the US economy. It's not 0:11:01.000 --> 0:11:04.240 all about inflation. You're listening to Bloomberg Opinion. 0:11:14.280 --> 0:11:18.280 You're listening to the Bloomberg Opinion podcast Contest Saturdays at 0:11:18.280 --> 0:11:21.400 one and seven pm Eastern on Bloomberg dot com, the 0:11:21.480 --> 0:11:24.600 iHeartRadio app and the Bloomberg Business App, or listen on 0:11:24.679 --> 0:11:26.760 demand wherever you get your podcasts. 0:11:28.800 --> 0:11:32.280 You're listening to Bloomberg Opinion. I maybe Morris. When you 0:11:32.320 --> 0:11:34.880 think of the US economy, you probably think of the 0:11:34.880 --> 0:11:39.360 battle with inflation. Treasury Secretary Janet Yellen appeared before the 0:11:39.400 --> 0:11:43.680 Senate Finance Committee and discussed President Biden's budget proposal. Part 0:11:43.720 --> 0:11:47.040 of that, she talked about wage growth and pay gaps. 0:11:47.200 --> 0:11:51.320 Well, the highest journers of seen their income grow, Families 0:11:51.360 --> 0:11:54.640 at the bottom end of the distribution have seen their 0:11:54.720 --> 0:11:59.320 pay stagnate. Gender and racial pay gaps also. 0:11:58.880 --> 0:12:03.240 Persistation might not be the most pressing problem facing our economy. 0:12:03.280 --> 0:12:06.439 Let's get some insight now. Bloomberg Opinion columnist Catherine Edwards, 0:12:06.600 --> 0:12:10.360 a labor economist and independent policy consultant, joins US now 0:12:10.679 --> 0:12:14.240 If it isn't inflation that is the biggest problem facing 0:12:14.280 --> 0:12:15.600 our economy, then what is it? 0:12:16.640 --> 0:12:21.640 Inequality? Inequality is the term that economists use to describe 0:12:21.920 --> 0:12:26.280 the different pace of growth and progress of different parts 0:12:26.360 --> 0:12:29.280 of the income distribution. So the rich get richer, the 0:12:29.320 --> 0:12:33.440 poor get poor. That's not just, you know, a market 0:12:33.480 --> 0:12:36.160 outcome that's not fixable. It's one that tends to be 0:12:36.200 --> 0:12:40.439 reinforced by American policy choices. My hope in pointing out 0:12:40.480 --> 0:12:43.560 this article wasn't just to paint a portrait of the 0:12:43.600 --> 0:12:46.719 future we're heading towards, but to help people understand the 0:12:46.760 --> 0:12:49.440 era that we're living in. The richer getting richer and 0:12:49.480 --> 0:12:52.920 the poor getting poor. That's right now. If it continues this, 0:12:53.400 --> 0:12:55.800 you know it'll be worse. And of course income is 0:12:56.000 --> 0:12:58.200 nothing compared to the inequality and wealth. 0:12:59.160 --> 0:13:02.240 We are talking with Blomberg opinion columnists Catherine Edwards about 0:13:02.240 --> 0:13:06.599 the big problem facing the US economy, and that is inequality. Catherine, 0:13:07.080 --> 0:13:10.160 where do you see this going? How bad could this get? 0:13:10.760 --> 0:13:15.040 The concentration of income and wealth right now is not 0:13:15.679 --> 0:13:19.960 precedented in US history, so we can't say, oh, but 0:13:20.040 --> 0:13:22.760 this happened before and then and then it corrected this 0:13:22.800 --> 0:13:25.360 way or this policy was helpful to justin it. We've 0:13:25.440 --> 0:13:27.880 never seen the type of income and wealth inequality that 0:13:27.920 --> 0:13:31.160 we're seeing today, you know, so it's harder to say 0:13:31.200 --> 0:13:32.760 and this this is what we'll fix it. We do 0:13:32.920 --> 0:13:35.920 know that the prior apex of inequality was the period 0:13:36.000 --> 0:13:38.640 right for the Great Depression, and what fixed it was 0:13:38.720 --> 0:13:40.400 not something that I would recommend, is that you just 0:13:40.400 --> 0:13:42.880 need to wipe out a lot of wealth and put 0:13:42.880 --> 0:13:47.200 the economy through you know, it's worse economic period, and 0:13:47.240 --> 0:13:50.439 that in the in the rubble that's left we built 0:13:50.679 --> 0:13:53.880 We rebuilt the economy more equally, you know, out of 0:13:53.920 --> 0:13:55.880 the Great Depression in World War Two and kind of 0:13:55.880 --> 0:13:58.320 the apex of unionization in the United States. But I 0:13:58.320 --> 0:14:00.720 mean that that's not something that I would recommend. If 0:14:00.760 --> 0:14:02.640 you know, let's just burn it all down and start again. 0:14:02.720 --> 0:14:05.120 You know, we could have much better policy options than 0:14:05.160 --> 0:14:05.720 the ones we have. 0:14:05.800 --> 0:14:09.400 Now, Okay, what are some of those policy options. Let's 0:14:09.400 --> 0:14:10.280 just go right into it. 0:14:10.760 --> 0:14:13.280 Well, let me make sure that I'm speaking to the 0:14:13.360 --> 0:14:17.760 naysayers out there, because inequality has two ways of being measured. 0:14:18.440 --> 0:14:21.120 You can measure it before taxes and transfers are the 0:14:21.160 --> 0:14:25.280 federal government, or after so not one's not wrong or right. 0:14:25.440 --> 0:14:27.800 One of them is telling you how much inequality does 0:14:27.840 --> 0:14:30.600 the market generate, and the other one is telling you 0:14:30.640 --> 0:14:34.080 how much inequality does the government mitigate through its own 0:14:34.200 --> 0:14:37.840 taxes and transfers. The inequality that I focus on is 0:14:37.880 --> 0:14:42.760 the market generated inequality and the policies that we're not pursuing. 0:14:42.800 --> 0:14:46.120 There are things that would increase remuneration for people at 0:14:46.120 --> 0:14:48.840 the bottom. We have not raised the minimum wage in 0:14:48.960 --> 0:14:52.960 fourteen years. We do not have wage in hour enforcement 0:14:53.120 --> 0:14:55.320 at the Department of Labor to make sure that people's 0:14:55.320 --> 0:14:58.640 wages and over time are not being stolen. Right. We 0:14:58.680 --> 0:15:02.120 are not trying to make the labor market bend to 0:15:02.200 --> 0:15:04.440 be more remunerative for people at the bottom. In fact, 0:15:04.440 --> 0:15:07.200 we've kind of stepped away from regulating the labor market 0:15:07.200 --> 0:15:10.320 in so many ways. But that's a change the market's 0:15:10.720 --> 0:15:14.560 kind of output style policy. The back end, you know, 0:15:14.600 --> 0:15:16.760 on the government side, would be to have transfers that 0:15:16.760 --> 0:15:19.320 would say, Okay, look, the market's super unequal, like we 0:15:19.400 --> 0:15:21.800 can't change that. We're just going to tax and transfer 0:15:22.240 --> 0:15:26.200 in a way that evens it out. The transfer side, 0:15:26.880 --> 0:15:29.400 the government has been doing like a kind of a 0:15:29.800 --> 0:15:32.920 let's just maintain the minimum that we have now, but 0:15:32.960 --> 0:15:38.200 it's been systematically cutting taxes on the highest income earners 0:15:38.240 --> 0:15:42.000 and the wealthiest, so that our ability to tax and 0:15:42.040 --> 0:15:44.960 transfer this problem is being clipped by the fact that 0:15:45.000 --> 0:15:46.960 we don't seem willing to tax. So the example that 0:15:47.000 --> 0:15:52.479 I given the piece is that the estate tax exclusion 0:15:52.520 --> 0:15:57.720 amount is thirteen million dollars right now. It used to 0:15:57.800 --> 0:16:00.960 be six hundred thousand. If we continue this pace, by 0:16:01.000 --> 0:16:04.120 the time we're entering this period of terrible inequality and 0:16:04.160 --> 0:16:07.760 it's been compounding, we won't tax wealth you know, of 0:16:07.960 --> 0:16:11.160 estates less than twenty six million, which means that like 0:16:11.200 --> 0:16:13.960 the only wealth tax we have, we are decreasing the 0:16:14.000 --> 0:16:14.800 revenue from it. 0:16:15.520 --> 0:16:16.760 How did we get here? 0:16:17.440 --> 0:16:20.040 I think slowly and marginally, you know, with lots of 0:16:20.080 --> 0:16:24.080 small policy changes. You Know, something I try to reiterate 0:16:24.160 --> 0:16:27.640 is that we choose inequality on the margin. We have 0:16:27.760 --> 0:16:30.680 lowered the marginal tax rate on the highest incomes earners. 0:16:30.720 --> 0:16:33.400 We have lowered the taxes that we collect from the 0:16:33.440 --> 0:16:36.360 highest wealth households in the United States, and then we 0:16:36.440 --> 0:16:39.960 do things like put work requirements on a food subsidy. 0:16:40.160 --> 0:16:42.920 We do things like take a welfare program that provides 0:16:42.960 --> 0:16:45.160 money to people in times of need, and we've just 0:16:45.440 --> 0:16:47.680 ended it. And we don't do these things all at once, 0:16:47.720 --> 0:16:50.200 and let me design a perfectly unequal system. But we 0:16:50.320 --> 0:16:53.680 kind of on the margin, we make the inequality choice 0:16:53.720 --> 0:16:56.880 as opposed to the redistributive choice most of the time. 0:16:56.920 --> 0:17:00.160 I mean, we're probably we're ten years away from the 0:17:00.200 --> 0:17:03.800 probably likely outcome of cutting social security as opposed to 0:17:03.840 --> 0:17:06.200 reinforcing it. Right, there's lots of choices that we make 0:17:06.240 --> 0:17:09.760 that are small, and they compound to more wealth and 0:17:09.800 --> 0:17:13.600 income going to the top. That's been a truly breathtaking 0:17:13.680 --> 0:17:15.640 transfer of income and wealth to the top. 0:17:16.320 --> 0:17:18.840 I'm going to ask you something a little more esoteric here. 0:17:19.200 --> 0:17:21.600 When you are talking about changing the system, or at 0:17:21.680 --> 0:17:26.040 least tweaking the system, or somehow gently steering the ship 0:17:26.119 --> 0:17:29.720 a different direction, right to do that? When you're in 0:17:29.720 --> 0:17:32.000 a system of halves and have nots, which is what 0:17:32.080 --> 0:17:35.080 you are effectively describing, then it would be the halves 0:17:35.119 --> 0:17:37.440 who would have to do it, what would be their 0:17:37.480 --> 0:17:38.719 motivation to do it. 0:17:39.560 --> 0:17:45.199 Our economy's economic growth overall is clipped by inequality. We 0:17:45.240 --> 0:17:48.760 are making a worse version of economic strength when we 0:17:48.800 --> 0:17:51.399 don't include more people in it. And you can do 0:17:51.480 --> 0:17:54.520 that and from a kind of a colehearted calculation of 0:17:54.720 --> 0:17:56.760 you know, seventy percent of the US economy is the 0:17:56.760 --> 0:18:00.159 consumption of households. We're clipping the consumption of more or 0:18:00.200 --> 0:18:02.320 households and redistribute to the top. You can think of 0:18:02.320 --> 0:18:04.760 it that way, or that when income you know, when 0:18:04.840 --> 0:18:09.160 growth is shared, you're like your ability to what's this phrase. 0:18:09.640 --> 0:18:13.879 It's not about splitting up the pie. It's about making 0:18:13.880 --> 0:18:15.440 a bigger pie, right, not. 0:18:15.400 --> 0:18:18.119 A zero sum game with what we have, but making 0:18:18.240 --> 0:18:21.400 it bigger and more equitable for all. 0:18:21.960 --> 0:18:23.880 And that's not something of like, well, let's just cry 0:18:23.920 --> 0:18:25.920 in your sleeve about all the poor mothers out there 0:18:25.960 --> 0:18:28.800 that need help. Right. It's a stronger economic growth when 0:18:28.800 --> 0:18:31.720 it's shared by all because it increases the consumer base, 0:18:31.760 --> 0:18:35.760 which increases our economic potential. The IMF and the World 0:18:35.800 --> 0:18:38.720 Bank have done systematic studies of this type of growth. 0:18:38.720 --> 0:18:41.760 I mean they typically apply it to developing economies to 0:18:41.800 --> 0:18:44.160 try to get them in line with their lending standards, 0:18:44.200 --> 0:18:45.800 to say, look, you need to have you need to 0:18:45.800 --> 0:18:47.960 have more growth at the bottom and not just the top. 0:18:48.200 --> 0:18:49.920 But you apply it to the US and if it's 0:18:49.960 --> 0:18:53.040 a similar conclusion if our economy would be stronger if 0:18:53.040 --> 0:18:55.159 we weren't so hell bent on the market leaving so 0:18:55.240 --> 0:18:58.919 many people behind. And I would I would, you know, 0:18:59.040 --> 0:19:02.880 say to your listener that you might think that no 0:19:02.920 --> 0:19:06.840 one earns seven to twenty five an hour and that 0:19:06.880 --> 0:19:10.719 the minimum wage doesn't really apply, which is either an 0:19:10.760 --> 0:19:14.440 admission that people who earn less don't matter in the economy, 0:19:14.920 --> 0:19:17.800 or that it's a policy we've completely abandoned. And I 0:19:17.840 --> 0:19:22.399 don't think it's something to be proud of that, you know, 0:19:22.680 --> 0:19:25.399 a wage increasing measure for people who are at the 0:19:25.480 --> 0:19:28.040 very bottom of our labor market we've walked away from. 0:19:28.560 --> 0:19:32.199 Are there any moves anywhere on Capitol Hill, the White House, 0:19:32.440 --> 0:19:35.240 in private industry? Are there any moves anywhere that look 0:19:35.400 --> 0:19:39.600 like they might be leaning toward maybe trying to fix this? 0:19:40.640 --> 0:19:43.080 You know, economic research has told us, through kind of 0:19:43.160 --> 0:19:46.280 historical retrospectives that one of the most effective means of 0:19:46.320 --> 0:19:51.040 fighting income inequality is in fact, unionization. So having a 0:19:51.160 --> 0:19:54.160 national Labor Relations Board that is starting to actually tell 0:19:54.200 --> 0:19:57.920 companies you can't do illegal things in order to prevent 0:19:58.040 --> 0:20:00.240 unionization is a step in the right direction. But I 0:20:00.640 --> 0:20:03.720 wouldn't say I'm politically connected enough to understand what the 0:20:04.080 --> 0:20:08.000 notion is. I do think that more corporate and higher 0:20:08.000 --> 0:20:11.360 income tax cuts, it's just not going. It's not going 0:20:11.400 --> 0:20:13.119 to do it. It's going, and it's going in the 0:20:13.119 --> 0:20:13.879 wrong direction. 0:20:14.320 --> 0:20:18.120 Bloomberg Opinion columnist Catherine Edwards and coming up, the robust 0:20:18.240 --> 0:20:21.840 job market luring more young Americans to just skip college 0:20:21.920 --> 0:20:24.320 and go straight into the workforce. We'll take a look 0:20:24.320 --> 0:20:26.800 at what that could mean down the road. Don't forget 0:20:26.800 --> 0:20:29.960 We're available as a podcast on Apple, Spotify or your 0:20:30.000 --> 0:20:33.560 favorite podcast platform. This is Bloomberg Opinion. 0:20:41.880 --> 0:20:45.880 You're listening to the Bloomberg Opinion podcast counts Saturdays at 0:20:45.880 --> 0:20:49.000 one in seven pm Eastern on Bloomberg dot Com, the 0:20:49.080 --> 0:20:52.199 iHeartRadio app, and the Bloomberg Business App, or listen on 0:20:52.280 --> 0:20:54.359 demand wherever you get your podcasts. 0:20:56.160 --> 0:20:58.840 This is Bloomberg Opinion. I'm Amy Moore. As it's that 0:20:58.920 --> 0:21:02.080 time of year. Kids grew graduating or they've just graduated 0:21:02.119 --> 0:21:05.639 high school, enjoying a little summer relaxation before the big 0:21:05.680 --> 0:21:09.439 move to college. But wait, maybe your kid isn't interested 0:21:09.480 --> 0:21:12.480 in college or college can come later. While your son 0:21:12.560 --> 0:21:15.880 or daughter enters the workforce and makes little money there 0:21:15.960 --> 0:21:19.000 are expanding alternatives now to higher education. We're going to 0:21:19.080 --> 0:21:23.040 learn all about them now. Bloomberg Opinion editor Romeshratnazar joins us. 0:21:23.040 --> 0:21:27.359 He covers national security, education and immigration. Rome is always 0:21:27.400 --> 0:21:29.440