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Speaker 1: This is Wall Street Week. I'm David Weston bringing you

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Speaker 1: stories of capitalism. July four looms as the deadline for

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Speaker 1: the One Big Beautiful Bill, and Republicans are accusing the

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Speaker 1: Congressional Budget Office of overstating the price tag. We tell

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Speaker 1: you the story of the CBO, where it came from,

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Speaker 1: and how well it's done at predicting costs and benefits. Plus,

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Speaker 1: President Trump wants to help relieve some of the debt

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Speaker 1: burden by selling US residency through what he calls a

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Speaker 1: gold card. It turns out that an awful lot of

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Speaker 1: other countries have similar programs with mixed results. And the

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Speaker 1: stark economic choice New York City voters faced at the

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Speaker 1: polls this week what Zoron Mamdani's Democratic primary win could

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Speaker 1: mean for the home of Wall Street. But we start

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Speaker 1: with a story that dominated the news for much of

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Speaker 1: the week.

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Speaker 2: The US military carried out massive precision strikes on the

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Speaker 2: three key nuclear facilities.

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Speaker 3: Your bull decision to target Iran's nuclear facilities with the

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Speaker 3: awesome and righteous mind of the United States will change history.

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Speaker 4: The world must not forget that it was the United

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Speaker 4: States switch in the midst of a process to forge

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Speaker 4: a diplomatic outcome, midstrade diplomacy.

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Speaker 5: Just in the last few seconds or so, we're getting

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Speaker 5: President Trump announcing a twelve hour seas five between Iran

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Speaker 5: and Israel.

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Speaker 4: We basically have two countries that have been fighting so

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Speaker 4: long and so hard that they don't know what they're doing.

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Speaker 6: Are you interested in restarting negotiations with Iran?

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Speaker 7: And if so, have they so?

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Speaker 2: Our people marked, our cred answers, but our people are.

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Speaker 8: Not.

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Speaker 2: I'm not the way I look at they fought. The

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Speaker 2: war's done, and you know, I could get a statement

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Speaker 2: that they're not going to go nuclear. We're probably going

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Speaker 2: to ask for that, but they're not going to be

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Speaker 2: doing it. But they're not going to be doing it anyway.

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Speaker 2: They've had it. They've had it.

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Speaker 1: Whether or not Iran has had it. The question remains

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Speaker 1: how the conflict reshaped the landscape of politics and markets

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Speaker 1: in the Middle East. To help us find an answer,

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Speaker 1: we spoke with Karen Young, Senior fellow at the Middle

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Speaker 1: East Institute in Washington.

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Speaker 9: I think we are in the midst of some major

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Speaker 9: transition in the region. We don't know in which directions

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Speaker 9: at what speed it will go, but I think mainly

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Speaker 9: This is a transition that will have to happen. Inside

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Speaker 9: of Iran, the government and the security apparatus is extremely weakened.

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Speaker 9: They've been delegitimized in the eyes of their own people

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Speaker 9: in terms of their ability to defend them. The President

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Speaker 9: of Iran had to ask for Israel's permission to fly

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Speaker 9: out of the country. That just gives you a little

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Speaker 9: bit of a picture of the control the IDEF had

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Speaker 9: over Iran's airspace. And we don't know right now the

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Speaker 9: extent of you know, where the highly enriched uranium that

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Speaker 9: Iran has stockpiled where it is.

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Speaker 1: One of the big stories has been the Golf States,

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Speaker 1: Saudi Arabia and the Golf States and the investment into

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Speaker 1: there and their economic development. What possible ratifications could what

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Speaker 1: we've seen in Israel, Iran and with the United States

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Speaker 1: have on Saudi Arabia and the Golf States.

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Speaker 9: So the economic transformation that's happening in Saudi Arabia really

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Speaker 9: sends Mohammed bin Salman and his father, King Salmon, came

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Speaker 9: to power in twenty fifteen. Has been this idea of

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Speaker 9: Vision twenty thirty of opening up the economy, trying to

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Speaker 9: increase foreign direct investment, encouraging women's participation in the economy,

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Speaker 9: and opening up new sectors, particularly tourism, as well as

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Speaker 9: you know, new energy renewables, perhaps green hydrogen, a whole

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Speaker 9: lot of sports, investment, entertainment.

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Speaker 7: None of those.

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Speaker 9: Things work if we see a region where there are

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Speaker 9: ballistic missiles falling from the sky. So the missiles that

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Speaker 9: Iran sent into Doha to hit Thalu Daid Base as

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Speaker 9: a retaliation against the United States, I think for the

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Speaker 9: entire Golf Cooperation Council was a moment of real terror

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Speaker 9: and fear, even though it was pre communicated and was

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Speaker 9: not targeting the Katries themselves. It's just not something that

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Speaker 9: goes along with having the World Cup or having major

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Speaker 9: tourist destinations that will sit in people's memories for a

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Speaker 9: long time.

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Speaker 1: Investors like stability predictability. There has been a lot of

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Speaker 1: instability because of the relationship between Israel and Iran, fear

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Speaker 1: of Iran developing nuclear weapons. What are the prospects that actually,

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Speaker 1: over the longer term, this will bring stability to the

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Speaker 1: region rather than instability the region If in fact Iran

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Speaker 1: is substantial weakened.

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Speaker 9: Iran is weakened, but Iran can still lash out. And

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Speaker 9: that's why the location and the state of their stockpile

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Speaker 9: almost nine hundred pounds of highly enriched uranium. We need

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Speaker 9: to know where it is and we need to know

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Speaker 9: it's in safe hands. More and more Iran now has

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Speaker 9: a motive to weaponize, which maybe they truly did not

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Speaker 9: have before it.

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Speaker 1: And finally, we don't know, as you said, exactly how

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Speaker 1: this will play out in Iran, but it seems like

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Speaker 1: one possibility is some turmoil within Iran about leadership. There's

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Speaker 1: a lot of speculation about that. If in fact, there

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Speaker 1: is that turmoil and it's not clear who's in charge

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Speaker 1: for some protracted period of time, what does that mean

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Speaker 1: for the region.

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Speaker 9: I think that's the worst case scenario for the region,

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Speaker 9: particularly if we get rival military factions or breakoffs from

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Speaker 9: the IRGC, competing commanders so to speak. We're definitely not

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Speaker 9: there yet. There is still very much a command and

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Speaker 9: control system still in place in Iran. We have the

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Speaker 9: Supreme leader, we have the clerical leadership, we have the

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Speaker 9: elected leadership, and we have the military leadership, and those

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Speaker 9: are still intact, though particularly within the IERGC commanders and

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Speaker 9: the military structure, they have been decimated of a lot

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Speaker 9: of people killed, but they're still very much in control

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Speaker 9: of their armed forces. So do we see factions breaking off?

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Speaker 9: Do we see some sort of exiting the country and

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Speaker 9: taking riches with them, or taking materials with them and

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Speaker 9: living to fight another day, forming up with militias in

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Speaker 9: Iraq trying to enter into Syria and destabilize Syria further.

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Speaker 9: I think those are all possibilities that we have to consider.

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Speaker 1: Unless you're a defense contractor. War is never good for business.

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Speaker 1: But what President Trump calls his twelve day war involving Israel, Iran,

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Speaker 1: and ultimately the United States had remarkable little effect on markets,

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Speaker 1: apart from a short term spike in oil price. Is

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Speaker 1: We asked our special contributor, Larry Summers of Harvard why.

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Speaker 8: David, It's something I've noticed over long periods of time.

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Speaker 8: Geopolitics are much less significant for markets than geopolitical people

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Speaker 8: think that they should be, whether it's events in the

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Speaker 8: Taiwan Straits or events with respect in North Korea and

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Speaker 8: what happens in South Korea. Markets have a life of

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Speaker 8: their own, driven by longer term assessments and less responsive

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Speaker 8: to even very dramatic short term events. So I think

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Speaker 8: this is just something we should all be used to.

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Speaker 8: It's a version of my observation about events ultimately being

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Speaker 8: less important than trends. I think on top of that,

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Speaker 8: you have the reality that it sure doesn't look like

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Speaker 8: oil is as important to the global economy as used

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Speaker 8: to be, that imported oil is much less important to

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Speaker 8: the US economy than it used to be. And there's

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Speaker 8: a sense that there's some excess capacity around, particularly in

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Speaker 8: Saudi Arabia, that might cover any sets of gaps. So

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Speaker 8: I think it's all of that. It's also the fact

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Speaker 8: that a larger fraction of the market is tech stocks

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Speaker 8: than once used to be the case, and they are

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Speaker 8: relatively impervious to these developments.

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Speaker 1: One of the long term trends that may happen, we

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Speaker 1: have one data point or two at this point, but

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Speaker 1: one trend is somewhat more assertive the United States more

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Speaker 1: than we thought originally with President Trump, with his getting

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Speaker 1: involved in Iran, even the visit to NATO and his

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Speaker 1: apparent shift in his position. If in fact the United

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Speaker 1: States is relatively more assertive on the international stage as less,

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Speaker 1: does that have potential raleifications for economics as well as

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Speaker 1: for markets.

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Speaker 8: I mean It depends on what the form that US

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Speaker 8: assertiveness takes. I had been concerned about a growing US isolationism,

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Speaker 8: that an outward looking United States could be a very

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Speaker 8: important stabilizing force in the world, and I continue to

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Speaker 8: believe that. So I think a sense of the US

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Speaker 8: as being willing to be a security guaranteur is a

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Speaker 8: potentially significant positive.

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Speaker 1: Coming up. Everybody likes to complain about Congressional Budget Office

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Speaker 1: estimates of the costs and benefits of big legislation. We

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Speaker 1: take a look at its track record.

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Speaker 6: You're listening to Bloomberg Wall Street Week with David Weston

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Speaker 6: from Bloomberg Radio. This is Bloomberg Wall Street Week with

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Speaker 6: David Weston from Bloomberg Radio.

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Speaker 1: This is a story about trust. Trust that Congress has

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Speaker 1: some sense of the consequences of major economic legislation before

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Speaker 1: it votes on it. In the United States, a statute

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Speaker 1: puts that trust in the Congressional Budget Office. Bloomberg Economics

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Speaker 1: editor Michael McKee brings us the tale of the CBO

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Speaker 1: and its track record in making those predictions.

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Speaker 10: Sometimes our numbers are welcome, and sometimes they're inconvenient.

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Speaker 11: Philip Swaegel has held the Congressional Budget office since twenty nineteen,

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Speaker 11: after stints at the US Treasury Department under President George W.

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Speaker 11: Bush during the financial crisis and teaching international economic policy

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Speaker 11: at the University of Maryland. The fact is a lot

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Speaker 11: of his job in methods are not up to him.

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Speaker 11: They're dictated by legislation, including the Congressional Budget Act of

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Speaker 11: nineteen seventy four.

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Speaker 10: The cost testaments we do of legislation are based on

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Speaker 10: the legislative text and they're measured against current law. So,

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Speaker 10: for example, the reconciliation legislation that we're evaluating now, we

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Speaker 10: evaluate that against current law, in which there's certain provisions

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Speaker 10: of the twenty seventeen Tax Act that expire, and that's

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Speaker 10: by statute, and we understand that some policymakers prefer to

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Speaker 10: look at it on a current policy basis. Their view

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Speaker 10: is that they meant for the twenty seventeen Tax Act

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Speaker 10: to continue to be permanent, and they like to evaluate

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Speaker 10: the cost against that baseline. And that's a legitimate way

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Speaker 10: to look at it, and we can provide that information

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Speaker 10: if they want. Is just not the standard way that

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Speaker 10: we do things.

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Speaker 12: The history of the CBO is it was born out

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Speaker 12: of this growth of peacetime deficits that happened in the

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Speaker 12: nineteen seventies. And the reason why that is relevant is

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Speaker 12: what CBO is sort of statutorily required to do. What

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Speaker 12: it was created to do is to provide these cost

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Speaker 12: estimates to policy makers about the likely impacts of different

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Speaker 12: policy proposals on what the budgetary outlook is going to

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Speaker 12: look like for the country. And so the precise mechanics

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Speaker 12: of how they do that do they give you one

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Speaker 12: year cost estimate or what is now convention a sort

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Speaker 12: of ten year budget window horizon that's changed over time.

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Speaker 12: But the idea of setting up this organization and kind

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Speaker 12: of empowering them to do the important work of being

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Speaker 12: able to keep score about what deficits are going to

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Speaker 12: look like because of choices that federal policy makers are

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Speaker 12: making is something that is very much in keeping with

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Speaker 12: what their mission is.

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Speaker 11: That's Natasha Sarin, president of the Yale Budget Lab. Once

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Speaker 11: the CBO gets the best grip it can on the

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Speaker 11: country's costs and tax policies, it has to do the

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Speaker 11: math on future estimates, and not just once. There are

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Speaker 11: two other important concepts here, static and dynamic.

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Speaker 10: No, that's right, So the static estimate or we sometimes

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Speaker 10: call it. The conventional estimate assumes that the economy is

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Speaker 10: not affected by legislation. So, for example, there's a big

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Speaker 10: tax component of the reconciliation legislation being considered now, and

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Speaker 10: big enough that one would expect the tax cut to

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Speaker 10: affect the economy. We think it would lead to a

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Speaker 10: larger economy with more people working. By convention, that's not

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Speaker 10: in our static estimate, and that's what we've already put out.

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Speaker 10: But now we're working on a dynamic estimate in which

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Speaker 10: we look at the legislation, we look at the effect

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Speaker 10: on the economy, and then we look at the feedback

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Speaker 10: from the change in the economy back to the budget.

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Speaker 10: And so that provides more information, it just takes longer

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Speaker 10: for us to do.

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Speaker 11: It's where CBO scoring meets legislation that things get especially

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Speaker 11: tricky first, because predicting America's economic future a decade in

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Speaker 11: advance is just plain hard.

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Speaker 12: In theory, I'm just going to raise the tax rate

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Speaker 12: by one percentage point, and I'm going to have the

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Speaker 12: impact at least in one year. I'll then scale it

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Speaker 12: by ten and that'll tell me what the budget window

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Speaker 12: looks like. Even something that seems that easy is actually

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Speaker 12: more complicated. People are going to make different choices about

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Speaker 12: the extent to which they decide to participate in the

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Speaker 12: labor force and accumulate labor income as a result of

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Speaker 12: that tax shift. They might also make different choices, particularly

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Speaker 12: in industries like in finance, where you can be in

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Speaker 12: an industry where you might receive carried interest instead of

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Speaker 12: receiving labor market income has a different tax treatment. And

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Speaker 12: so these scorekeepers have like a really difficult task before

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Speaker 12: them as they try to do this type of analysis.

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Speaker 12: And that is a super difficult task to do when

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Speaker 12: they're trying to work as quickly as they are, just

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Speaker 12: given the speed at which things like the reconciliation process

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Speaker 12: invariables are moving.

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Speaker 11: Forecasting economic outcomes is hard enough in the most stable times.

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Speaker 11: But then of course there's responding to politics.

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Speaker 10: Any bill that's marked up by a committee, we produce

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Speaker 10: a cost estimate that's by statute. Then there's reports that

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Speaker 10: are requested of US. For example, earlier this month in June,

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Speaker 10: we provided policymakers with information on the revenues raised by

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Speaker 10: the tariffs that President Trump has put in place since

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Speaker 10: his inauguration of the second term that was requested by

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Speaker 10: a group of senators.

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Speaker 11: Well, sometimes it seems the requests you get come with

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Speaker 11: a political bias.

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Speaker 13: What do you do?

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Speaker 4: Then?

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Speaker 10: That is just part of life in Washington, and we

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Speaker 10: are here to support members. We have no opinion on

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Speaker 10: what the right legislation is. We're just trying to give

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Speaker 10: them the analysis. We're focused on the legislation, so anything

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Speaker 10: within the four corners of the legislative text that we evaluate.

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Speaker 10: But of course the president is doing many other things.

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Speaker 10: He's changed tariffs and that raises a considerable amount of revenue.

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Speaker 10: He's changed immigration in the United States, and he's changing

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Speaker 10: regulations and other aspects of the economy. We will eventually

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Speaker 10: provide information on the economic and budgetary impacts of those.

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Speaker 10: It's not part of our evaluation of the reconciliation legislation.

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Speaker 10: I just saw the New York Times, the Washington Post

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Speaker 10: all have articles making use of that distributional analysis, which,

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Speaker 10: of course the members of Congress who asked us the

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Speaker 10: question understood that it would get that kind of attention.

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Speaker 12: An important thing to understand and something that I've observed

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Speaker 12: as I've watched not just this reconciliation debate play out,

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Speaker 12: but this kind of tenor always takes place when CBO

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Speaker 12: is producing estimates of legislation. There are totally understandable critiques

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Speaker 12: that come and totally understandable frustrations with where CBO lands.

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Speaker 12: And that's not a partisan thing. It happens. Democrats have frustrations,

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Speaker 12: Republicans have frustrations. The thing that people sometimes miss, though,

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Speaker 12: is that a lot of the choices that CBO is

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Speaker 12: making that are being critiqued aren't actually choices that they

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Speaker 12: have any control over. So, in the context of this legislation,

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Speaker 12: something like having the baseline that they're measuring against be

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Speaker 12: what is current law, which is that the Trump tax

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Speaker 12: cuts are slated to expire at the end of the year,

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Speaker 12: and so their extension is judged against that expiration. That's

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Speaker 12: not a choice CBO is making. That's something that they

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Speaker 12: are sort of mandated to do.

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Speaker 11: Okay, As Yogi Berra said, making predictions is hard, especially

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Speaker 11: about the future. The administration has strongly criticized CBO for

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Speaker 11: underestimating growth in twenty twenty two when it analyzed the

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Speaker 11: twenty seventeen Tax Cut and Jobs Act.

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Speaker 10: When I look at our performance, I try to understand

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Speaker 10: the context of the performance and that one SoundBite. It's

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Speaker 10: sometimes the one point five trillion dollar miss I feel

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Speaker 10: like that's deeply misleading because it's almost as if someone

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Speaker 10: who says that is implying that somehow the twenty seventeen

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Speaker 10: Tax Act is what caused the high inflation or what

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Speaker 10: caused the immigration surge. And obviously you know that's not plausible,

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Speaker 10: and so I just don't think it's fair to think

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Speaker 10: that CBO in twenty eighteen could have predicted the pandemic,

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Speaker 10: the inflation, the immigration QI and all that.

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Speaker 11: Do you get mad when members of Congress use the

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Speaker 11: CBO as the whipping boy?

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Speaker 10: No, I don't don't. I certainly don't get mad. I

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Speaker 10: understand it. I understand the political process. CBO is next

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Speaker 10: to the political process. We're not part of it, but

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Speaker 10: we certainly understand it.

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Speaker 11: Well, you have something like two hundred and seventy analysts

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Speaker 11: here working for you. How do they feel about the

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Speaker 11: criticism they get?

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Speaker 10: I mean, you know, no one likes to be criticized.

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Speaker 10: No one likes the White House Press Secretary attacking you

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Speaker 10: or the president on truth social but that is part

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Speaker 10: of the political process.

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Speaker 11: Has this been sort of an unusually chaotic period. I

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Speaker 11: can just imagine the guys who are working on tariffs

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Speaker 11: doing all their maths and coming up with a number,

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Speaker 11: and then the President changes is by.

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Speaker 10: The tariffs has been an area of policy that is

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Speaker 10: just changing, and we do our best to keep up

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Speaker 10: with it. Members of Congress want to know, and so

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Speaker 10: we routinely provide members of Congress with information on the

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Speaker 10: budget impacts of the tariffs and the numbers that we've

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Speaker 10: given most recently earlier in June, we waited until the

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Speaker 10: tariffs has stabilized. They're very high tariffs on China, and

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Speaker 10: those came down and that's the moment at which we

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Speaker 10: did the analysis. Now since then there were actually subsequent changes,

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Speaker 10: but they were much smaller. It makes it hard, but

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Speaker 10: we do our best.

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Speaker 11: Are you ever wrong?

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Speaker 10: I start by saying, we're human and you just have

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Speaker 10: to have a humility that we will do our best. Inevitably,

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Speaker 10: we will get things wrong. Back in two thousand and nine,

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Speaker 10: in twenty ten, when President Obama was putting forward the

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Speaker 10: Affordable Care Act eventually called Obamacare, CBO expected that the

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Speaker 10: mandate provision in that legislation will be very impactful. That

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Speaker 10: the mandate on individuals and on businesses would lead to

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Speaker 10: a large increase in people gaining health insurance, and it

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Speaker 10: turned out that just wasn't the case. CBO looked at

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Speaker 10: the experience of Massachusetts and the Commonwealth had a mandate,

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Speaker 10: and in Massachusetts it was very impactful, but it turned

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Speaker 10: out it just wasn't the case for the rest of

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Speaker 10: the country. We have since gone back and evaluated what

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Speaker 10: happened and published a report on the mandate, and now

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Speaker 10: we've taken on board the different analysis in our healthcare projections.

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Speaker 10: When we get things wrong, we need to analyze it,

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Speaker 10: understand it, and adjust. I've been director for just over

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Speaker 10: six years, since June of twenty nineteen, but I own

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Speaker 10: every mistake CBO has ever made.

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Speaker 11: Errors Aside, the CBO's estimates have value that stretches far

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Speaker 11: beyond the beltwigh Wall Street pays close attention to what

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Speaker 11: Swegel's team says about growth and deficit expectations in an

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Speaker 11: effort to better understand what it all means for markets

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Speaker 11: and especially bonds. Priya Misra is a portfolio manager for

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Speaker 11: JP Morgan.

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Speaker 13: We look at their focus so they tend to judge

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Speaker 13: and come up with the cost of any legislation but

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Speaker 13: they give you the assumptions extremely transparent. We will look

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Speaker 13: at their growth assumptions, the inflation assumption, their interstrate assumptions.

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Speaker 13: So we absolutely look at the CBO number as a

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Speaker 13: I would say, a baseline for what the deficit will

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Speaker 13: look like, what legislation is going to do to the deficit,

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Speaker 13: and then we think about things that the CBO may

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Speaker 13: not be incorporating by law that we would want to

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Speaker 13: incorporate as we think about the impact.

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Speaker 2: Well, it's so beautiful to say.

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Speaker 11: With President Trump's one Big Beautiful Bill moving through Congress,

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Speaker 11: CBO projections are under scrutiny.

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Speaker 7: I think the scoring you and I have talked about

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Speaker 7: it quite a bit. It's Washington style scoring and it's

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Speaker 7: not real world scoring.

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Speaker 11: The new CBO assumptions on the Big Beautiful Bill, what do.

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Speaker 1: You think of that?

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Speaker 13: I think it looks pretty fair and it's in line

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Speaker 13: with a lot of the other estimates. Our estimate was

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Speaker 13: closer to three trillion. You're getting two point eight from

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Speaker 13: the dynamic CBO score. We do give more weight to

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Speaker 13: the dynamic score from the CBO where they try and

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Speaker 13: incorporate what would the legislation do to growth and inflation?

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Speaker 13: And interest rates, and they try and incorporate that sort

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Speaker 13: of dynamic workings of the economy. But whether it's Joint

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Speaker 13: Committee for Taxation or the Center for Responsible Budget, you're

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Speaker 13: hearing these estimates of between two point eight from the

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Speaker 13: CBO three three and a half as the estimate over

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Speaker 13: the next ten years.

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Speaker 1: Next, putting a price tag on citizenship or at least residency,

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Speaker 1: we take a look at President Trump's proposal to get

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Speaker 1: the deficit down by selling gold cards and how similar

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Speaker 1: programs have worked around the world.

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Speaker 6: You're listening to Bloomberg Wall Street Week with David Weston

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Speaker 6: from Bloomberg Radio. You're listening to Bloomberg Wall Street Week

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Speaker 6: with David Weston from Bloomberg Radio.

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Speaker 1: This is a story about the price of citizenship, or

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Speaker 1: at least the price tag we want to put on it.

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Speaker 1: For years, countries around the world have offered citizenship or

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Speaker 1: residency to those willing to put up the cash. President

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Speaker 1: Trump has a new proposal for the United States, and

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Speaker 1: as so often with the President, it involves his favorite color.

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Speaker 4: Five million for five million. Analysis could be used. That

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Speaker 4: was the first of the cards, and you know where

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Speaker 4: that card is old. It's the gold cut the Trump

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Speaker 4: Card gold cut.

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Speaker 1: There me President Trump's proposal to create a US gold

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Speaker 1: card isn't really new. Since eighteen eighty two, the United

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Speaker 1: States has charged immigrants and admission fee for coming to

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Speaker 1: the country, starting at fifty cents a person, raising it

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Speaker 1: to four dollars in nineteen oh seven. Today, the US

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Speaker 1: already has a special visa program for those able to

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Speaker 1: make substantial investments. Substantial as in eight hundred thousand dollars.

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Speaker 5: The US has had a golden visa program since the

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Speaker 5: early nineteen nineties. It comes in the form of EB five,

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Speaker 5: and it's been traditionally used to build big real estate

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Speaker 5: projects in the US. Now so even places like Hudson

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Speaker 5: Yards in New York City has been funded through this

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Speaker 5: sort of program.

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Speaker 1: Kristin Zurik is an assistant professor at the London School

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Speaker 1: of Economics, where she has studied what is known as

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Speaker 1: investment immigration. The revived push in the US parallels other

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Speaker 1: countries experimenting with golden visas and passports.

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Speaker 5: They're actually much more common than most people think, so

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Speaker 5: for thinking about the golden passport programs so citizenship, there's

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Speaker 5: over twenty countries with legal provisions that enable this and

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Speaker 5: there's about a dozen that regularly approve people through their programs.

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Speaker 5: For thinking about the residents. The golden visa programs, they're all.

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Speaker 10: Over the place.

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Speaker 5: You can find them in just about sixty countries five territories,

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Speaker 5: even in places like the US in half of the

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Speaker 5: EU member states.

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Speaker 1: The programs vary according to how much money is required,

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Speaker 1: whether it's an investment in the country and what kind

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Speaker 1: of investment or just a fee paid to the government,

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Speaker 1: and by the way, whether the immigrant only gets to

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Speaker 1: reside in the country or actually becomes a citizen.

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Speaker 5: Golden passports are sometimes also known as citizenship by investment,

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Speaker 5: So these are programs where you donate to a government

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Speaker 5: or invest in a country, and in pretty short order,

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Speaker 5: and sometimes without even ever going to the country, you

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Speaker 5: become a citizen. It's a little bit different to a

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Speaker 5: golden visa program, where you get not citizenship in the country,

443
00:25:58,920 --> 00:26:00,600
Speaker 5: but residents in the country.

444
00:26:01,320 --> 00:26:05,000
Speaker 1: Whatever form these programs take, the goal is always the same,

445
00:26:05,400 --> 00:26:08,760
Speaker 1: growing the economy of the host country, and the smaller

446
00:26:08,800 --> 00:26:11,040
Speaker 1: the country, the more of a difference they can make.

447
00:26:11,640 --> 00:26:14,480
Speaker 1: Investment immigration programs account for up to half of the

448
00:26:14,560 --> 00:26:18,320
Speaker 1: GDP of the island nations of Dominica, Saint Kitts, and

449
00:26:18,359 --> 00:26:19,320
Speaker 1: Saint Lucia.

450
00:26:19,400 --> 00:26:24,119
Speaker 5: So usually the idea is to bring investments into the country. Now,

451
00:26:24,240 --> 00:26:27,879
Speaker 5: if we're talking about very very small states, and usually

452
00:26:27,920 --> 00:26:30,960
Speaker 5: they're the ones who are doing the citizenship programs, the

453
00:26:31,000 --> 00:26:33,120
Speaker 5: amount of money that a government can bring in through

454
00:26:33,119 --> 00:26:36,719
Speaker 5: these programs can be absolutely enormous. So some countries see

455
00:26:37,160 --> 00:26:41,920
Speaker 5: well over thirty percent of GDP coming in through these programs. Now,

456
00:26:41,960 --> 00:26:44,520
Speaker 5: if you're thinking about the Golden Visa programs where you're

457
00:26:44,520 --> 00:26:47,840
Speaker 5: just getting residents, we're often talking about much bigger economies.

458
00:26:48,080 --> 00:26:50,640
Speaker 5: In terms of what countries get out of it will

459
00:26:50,680 --> 00:26:53,199
Speaker 5: be more targeted if we're looking at those investments.

460
00:26:53,680 --> 00:26:56,880
Speaker 1: But that's where the math doesn't always add up. One

461
00:26:56,960 --> 00:27:01,080
Speaker 1: immigrants investing can be one local citizen's outing out, as

462
00:27:01,119 --> 00:27:03,720
Speaker 1: in real estate. Take Spain for example.

463
00:27:04,040 --> 00:27:08,360
Speaker 5: We've seen Spain shut its program down, Ireland shred its

464
00:27:08,359 --> 00:27:10,600
Speaker 5: program down, the UK shut its program down. If you're

465
00:27:10,600 --> 00:27:13,560
Speaker 5: only approving a couple hundred you know, people per year,

466
00:27:13,680 --> 00:27:16,520
Speaker 5: a huntry one hundred applications per year, is it really

467
00:27:16,600 --> 00:27:18,879
Speaker 5: worth it to keep on the books given the potential

468
00:27:19,000 --> 00:27:20,040
Speaker 5: risks involved.

469
00:27:20,600 --> 00:27:24,600
Speaker 1: Spain's scramble for investment began after the European debt crisis

470
00:27:24,600 --> 00:27:27,160
Speaker 1: of two thousand and nine. Since the start of its

471
00:27:27,200 --> 00:27:31,320
Speaker 1: program in twenty thirteen, Spain granted more than fifteen thousand

472
00:27:31,480 --> 00:27:35,000
Speaker 1: visas tied to real estate investment. From twenty sixteen to

473
00:27:35,000 --> 00:27:39,359
Speaker 1: twenty twenty three. The program generated ten billion dollars in investments,

474
00:27:39,520 --> 00:27:43,240
Speaker 1: but that also helped drive up property values. Spain shut

475
00:27:43,280 --> 00:27:46,280
Speaker 1: down its program as of April, but even as countries

476
00:27:46,320 --> 00:27:49,680
Speaker 1: like Spain have cut back, others like New Zealand are

477
00:27:49,760 --> 00:27:50,360
Speaker 1: ramping up.

478
00:27:50,680 --> 00:27:54,359
Speaker 3: We've had about two hundred people apply, which is about

479
00:27:54,440 --> 00:27:56,760
Speaker 3: one hundred and fifty more than applied in the previous

480
00:27:56,760 --> 00:27:59,000
Speaker 3: two years, so it's becoming more and more popular.

481
00:27:59,520 --> 00:28:02,600
Speaker 1: Stuart Nash is a former Minister of Economic Development in

482
00:28:02,640 --> 00:28:05,679
Speaker 1: New Zealand and is now a principle in Nash Kelly,

483
00:28:05,960 --> 00:28:09,200
Speaker 1: which works to attract high net worth individuals to the country.

484
00:28:09,520 --> 00:28:12,120
Speaker 3: What are the requirements, Yeah, so there are two categories.

485
00:28:12,160 --> 00:28:14,240
Speaker 3: We've got the growth category and you've got to invest

486
00:28:14,320 --> 00:28:18,119
Speaker 3: five million kiwi, which is about three million US. And

487
00:28:18,160 --> 00:28:20,400
Speaker 3: then we've got one called the balance category, which you've

488
00:28:20,440 --> 00:28:24,359
Speaker 3: got to invest ten million kiwi, which are going is

489
00:28:24,359 --> 00:28:26,600
Speaker 3: about six million US. You've got to do that over

490
00:28:27,040 --> 00:28:30,040
Speaker 3: six months. For the growth category, it's got to be

491
00:28:30,080 --> 00:28:34,399
Speaker 3: in managed funds or companies. The balance category it's a

492
00:28:34,440 --> 00:28:36,480
Speaker 3: little wider. You can do bonds, you can do equities.

493
00:28:36,480 --> 00:28:39,000
Speaker 3: You can also do managed funds and businesses as well. So,

494
00:28:39,120 --> 00:28:41,400
Speaker 3: you know, we really get at Nash Kelly that if

495
00:28:41,480 --> 00:28:43,480
Speaker 3: you're sitting in America, you're looking at New Zealand, it

496
00:28:43,520 --> 00:28:45,400
Speaker 3: looks like this oasis that you want to go to.

497
00:28:45,480 --> 00:28:47,600
Speaker 3: You've read about it. Kiwis are really friendly. You know

498
00:28:47,640 --> 00:28:50,840
Speaker 3: about the golf courses, you know about the environment, but

499
00:28:50,920 --> 00:28:53,480
Speaker 3: you don't know much about the investment ecsystem. So it's

500
00:28:53,480 --> 00:28:54,560
Speaker 3: a little bit of a risk.

501
00:28:54,480 --> 00:28:56,960
Speaker 1: When you put together your program in New Zealand, did

502
00:28:57,000 --> 00:28:59,040
Speaker 1: you go to school as it were on some of

503
00:28:59,120 --> 00:29:01,640
Speaker 1: the other programs and say we don't want to do that,

504
00:29:01,800 --> 00:29:03,360
Speaker 1: We're going to structure it this way instead.

505
00:29:03,680 --> 00:29:06,800
Speaker 3: Yeah, very much so. So you're in Portugal, I think

506
00:29:06,800 --> 00:29:09,520
Speaker 3: you only have to invest two hundred thousand dollars. It's

507
00:29:09,560 --> 00:29:11,840
Speaker 3: not a lot of money. In New Zealand, we decided that,

508
00:29:12,400 --> 00:29:14,920
Speaker 3: you know, we want the people who can drive success,

509
00:29:14,920 --> 00:29:17,560
Speaker 3: who have been successful. The European Court of Justice is

510
00:29:17,720 --> 00:29:21,040
Speaker 3: just rule. The multi Golden visa illegal because it's bringing

511
00:29:21,080 --> 00:29:22,760
Speaker 3: in they think or has the potential to bring in

512
00:29:22,760 --> 00:29:24,960
Speaker 3: a whole lot of dirty money. We didn't want that

513
00:29:25,000 --> 00:29:27,280
Speaker 3: in New Zealand. Hence the reason why the high level

514
00:29:27,280 --> 00:29:29,880
Speaker 3: of integrity to prove that the money you're investing in

515
00:29:29,920 --> 00:29:32,320
Speaker 3: New Zealand has come from legitimate means. We didn't want

516
00:29:32,320 --> 00:29:34,720
Speaker 3: this to be a back door for criminal money coming.

517
00:29:34,520 --> 00:29:37,520
Speaker 1: In the cost of granting residency to the wrong people.

518
00:29:37,720 --> 00:29:40,160
Speaker 1: As Nash puts, it is just one of the things

519
00:29:40,160 --> 00:29:43,400
Speaker 1: countries have to take into account in determining whether investment

520
00:29:43,400 --> 00:29:44,840
Speaker 1: immigration is worth it.

521
00:29:45,040 --> 00:29:47,680
Speaker 5: There can be a lot of concerns about foreignurse coming

522
00:29:47,720 --> 00:29:51,560
Speaker 5: in xenophobic sentiments. You know, you can find them across

523
00:29:51,600 --> 00:29:55,080
Speaker 5: the world in various measures as well, So governments have

524
00:29:55,240 --> 00:29:58,600
Speaker 5: to balance what they think are appropriate trade offs in

525
00:29:58,680 --> 00:30:01,640
Speaker 5: terms of how many foreigners do we want to allow

526
00:30:01,720 --> 00:30:04,880
Speaker 5: in the country, because sometimes you can have people who

527
00:30:05,280 --> 00:30:06,920
Speaker 5: have a lot of money, but maybe they gained it

528
00:30:06,960 --> 00:30:10,959
Speaker 5: through nefarious means, or maybe you know, there could be

529
00:30:11,040 --> 00:30:13,840
Speaker 5: shady things in the background. So making sure that these

530
00:30:13,840 --> 00:30:15,760
Speaker 5: are the people you want to let in is also

531
00:30:16,840 --> 00:30:19,160
Speaker 5: a very important decision to make.

532
00:30:19,680 --> 00:30:23,280
Speaker 1: Screening out undesirable candidates for immigration may help make sure

533
00:30:23,320 --> 00:30:26,040
Speaker 1: the right people are admitted and that their money is

534
00:30:26,080 --> 00:30:28,880
Speaker 1: going into the right projects, but it also can get

535
00:30:28,920 --> 00:30:31,680
Speaker 1: in the way, as it does for the current US program.

536
00:30:31,760 --> 00:30:35,440
Speaker 1: According to Alex Norosta, vice president for Economic and Social

537
00:30:35,480 --> 00:30:38,280
Speaker 1: Policy Studies at Cato Institute.

538
00:30:37,760 --> 00:30:40,480
Speaker 14: So the EB five is a portion of the employment

539
00:30:40,480 --> 00:30:43,600
Speaker 14: based Green Card in the United States. There are ten

540
00:30:43,680 --> 00:30:47,480
Speaker 14: thousand of these visa set aside for EB five every year.

541
00:30:47,680 --> 00:30:50,200
Speaker 14: What we've seen in recent years is basically about five

542
00:30:50,240 --> 00:30:53,479
Speaker 14: thousand of those are taken up by actual investors. It

543
00:30:53,520 --> 00:30:55,880
Speaker 14: costs at least eight hundred thousand dollars or around eight

544
00:30:55,920 --> 00:30:58,000
Speaker 14: hundred thousand dollars to make an investment in the US,

545
00:30:58,000 --> 00:31:00,040
Speaker 14: it has to create a certain number of jobs. The

546
00:31:00,080 --> 00:31:02,280
Speaker 14: EB five system has not worked well, and the primary

547
00:31:02,360 --> 00:31:04,800
Speaker 14: reason is exactly what you said, which is it's an

548
00:31:04,840 --> 00:31:09,160
Speaker 14: incredibly complicated visa. It's very burdensome to work through. So

549
00:31:09,200 --> 00:31:14,960
Speaker 14: it's really suffered under this incredible burden of red tape

550
00:31:15,560 --> 00:31:19,280
Speaker 14: that just keeps piling on decade after decade in the

551
00:31:19,360 --> 00:31:19,959
Speaker 14: United States.

552
00:31:20,240 --> 00:31:23,320
Speaker 1: President Trump's gold card idea would cut through much of

553
00:31:23,360 --> 00:31:26,480
Speaker 1: this by simply putting a price tag on admission into

554
00:31:26,480 --> 00:31:27,000
Speaker 1: the country.

555
00:31:27,120 --> 00:31:29,280
Speaker 14: We don't know all the details at President Trump's gold

556
00:31:29,280 --> 00:31:32,240
Speaker 14: card proposal. It hasn't been passed into law by Congress,

557
00:31:32,400 --> 00:31:35,480
Speaker 14: and he doesn't have the legal authority to issue green

558
00:31:35,520 --> 00:31:37,520
Speaker 14: cards based on this. But as far as we know

559
00:31:37,600 --> 00:31:41,480
Speaker 14: the details, it would be selling lawful permanent residency also

560
00:31:41,520 --> 00:31:44,240
Speaker 14: known as a green card, and exchange for a five

561
00:31:44,360 --> 00:31:48,000
Speaker 14: million dollar fee pay to the US government. This is

562
00:31:48,040 --> 00:31:50,600
Speaker 14: a fee pay. This is not an investment. This is

563
00:31:50,680 --> 00:31:54,280
Speaker 14: not an investment that these foreigners would get to own

564
00:31:54,440 --> 00:31:56,120
Speaker 14: in the United States. But it is a straight up

565
00:31:56,160 --> 00:31:59,800
Speaker 14: fee pay to the United States government of five million dollars.

566
00:32:00,120 --> 00:32:04,080
Speaker 1: Truce Congress were to adopt this approach and pass legislation

567
00:32:04,520 --> 00:32:07,120
Speaker 1: so it was legal. Could it make a material difference

568
00:32:07,120 --> 00:32:09,080
Speaker 1: to the debt or the deficit of the United States.

569
00:32:09,280 --> 00:32:12,480
Speaker 14: It's very unlikely that selling gold cards like this would

570
00:32:12,480 --> 00:32:16,680
Speaker 14: make a material large difference to the US deficit or

571
00:32:16,760 --> 00:32:17,400
Speaker 14: US spending.

572
00:32:17,480 --> 00:32:19,040
Speaker 7: For one, the price is way too high.

573
00:32:19,480 --> 00:32:22,400
Speaker 1: But Neurasta does think that the President may be onto

574
00:32:22,440 --> 00:32:26,080
Speaker 1: something creating a market for US admission and letting Adam

575
00:32:26,120 --> 00:32:29,800
Speaker 1: Smith do the rest, something suggested some time ago by

576
00:32:29,840 --> 00:32:32,360
Speaker 1: Nobel Prize winning economist Gary Becker.

577
00:32:32,760 --> 00:32:36,640
Speaker 14: Our fiscal problems go far beyond what can be resolved

578
00:32:36,680 --> 00:32:39,520
Speaker 14: by selling a gold card. However, the price were a

579
00:32:39,520 --> 00:32:41,000
Speaker 14: lot lower. If the price we was, say like one

580
00:32:41,080 --> 00:32:44,360
Speaker 14: hundred thousand dollars or two hundred thousand dollars, I think

581
00:32:44,400 --> 00:32:47,400
Speaker 14: you could see a large increase in a number of

582
00:32:47,680 --> 00:32:51,120
Speaker 14: wealthier immigrants coming to the United States to settle. That

583
00:32:51,200 --> 00:32:54,760
Speaker 14: would produce extra economic activity here that the government attacks,

584
00:32:55,040 --> 00:32:58,280
Speaker 14: and there would be a huge increase in visa fees

585
00:32:58,320 --> 00:33:00,760
Speaker 14: paid to the US government. So I think ironically the

586
00:33:00,800 --> 00:33:04,360
Speaker 14: only way that we could actually make a difference in

587
00:33:04,440 --> 00:33:06,760
Speaker 14: the deficit through such a scheme would be by lowering

588
00:33:06,800 --> 00:33:08,160
Speaker 14: the price dramatically.

589
00:33:08,440 --> 00:33:12,440
Speaker 1: If you had total control and could design any system

590
00:33:12,480 --> 00:33:14,440
Speaker 1: that you wanted, what would it look like.

591
00:33:14,800 --> 00:33:18,360
Speaker 14: I probably go back to the nineteenth century and make

592
00:33:18,400 --> 00:33:20,640
Speaker 14: it just incredibly easy for people to come to the

593
00:33:20,680 --> 00:33:23,800
Speaker 14: United States lawfully, so long as they aren't a criminal

594
00:33:24,080 --> 00:33:26,280
Speaker 14: or a national security threat or a sick. But if

595
00:33:26,280 --> 00:33:28,680
Speaker 14: I have to charge a price, if I have to

596
00:33:28,680 --> 00:33:31,560
Speaker 14: have a restriction on the number of immigrants coming to

597
00:33:31,640 --> 00:33:34,560
Speaker 14: the US, I would charge a price. I would sell visas.

598
00:33:34,560 --> 00:33:36,200
Speaker 14: This is sort of economics.

599
00:33:35,680 --> 00:33:36,120
Speaker 7: One oh one.

600
00:33:36,400 --> 00:33:40,320
Speaker 14: If you have scarcity of a gooder service. That gooder

601
00:33:40,320 --> 00:33:43,920
Speaker 14: service can be efficiently allocated only through the pricing mechanism,

602
00:33:44,240 --> 00:33:47,760
Speaker 14: only by charging a price, and only by allocating those

603
00:33:47,840 --> 00:33:49,240
Speaker 14: visas to those who are willing to.

604
00:33:49,200 --> 00:33:49,800
Speaker 7: Pay the price.

605
00:33:50,000 --> 00:33:53,000
Speaker 14: So charging a price for a visa is a very

606
00:33:53,000 --> 00:33:56,080
Speaker 14: good way to allocate them to people who really want it.

607
00:33:56,240 --> 00:33:58,040
Speaker 1: How do we make sure we get the right people.

608
00:33:57,800 --> 00:34:00,840
Speaker 14: In So what a pricing system does is an internalizes

609
00:34:00,880 --> 00:34:03,560
Speaker 14: the cost and benefits of these decisions to the people

610
00:34:03,600 --> 00:34:06,239
Speaker 14: who actually make them, and as a result, we're going

611
00:34:06,320 --> 00:34:09,560
Speaker 14: to get a much better mix of people selected by

612
00:34:09,600 --> 00:34:12,680
Speaker 14: the market economy who can do much better here in

613
00:34:12,680 --> 00:34:16,960
Speaker 14: the United States than those who could be selected by Congress.

614
00:34:17,239 --> 00:34:20,000
Speaker 1: Neurosta says that a market based system could even help

615
00:34:20,040 --> 00:34:23,880
Speaker 1: address the country's struggles with illegal immigration by providing a

616
00:34:23,960 --> 00:34:24,640
Speaker 1: legal path.

617
00:34:24,920 --> 00:34:28,279
Speaker 14: A market based system would undermine illegal immigration into the

618
00:34:28,360 --> 00:34:31,399
Speaker 14: United States because they would give an avenue for even

619
00:34:31,600 --> 00:34:35,520
Speaker 14: low skilled immigrants like illegal immigrants, to come here lawfully. Currently,

620
00:34:35,560 --> 00:34:38,440
Speaker 14: what we see is that illegal immigrants pay upwards of

621
00:34:38,480 --> 00:34:41,960
Speaker 14: ten thousand dollars in smuggling fees to come to the

622
00:34:42,080 --> 00:34:44,719
Speaker 14: United States, and they don't even have a guaranteed way

623
00:34:44,800 --> 00:34:48,040
Speaker 14: to stay. So it's a highly risky investment. If instead

624
00:34:48,080 --> 00:34:51,879
Speaker 14: those individuals could borrow money, or could get loans from

625
00:34:51,880 --> 00:34:54,400
Speaker 14: their family members, or could otherwise save up wages in

626
00:34:54,440 --> 00:34:56,759
Speaker 14: their own country, then they can buy one of these

627
00:34:56,760 --> 00:34:59,040
Speaker 14: green cards come to the United States. They don't have

628
00:34:59,080 --> 00:35:01,880
Speaker 14: to come illegally. You actually have a goalpost where if

629
00:35:01,920 --> 00:35:03,640
Speaker 14: they make a certain amount of money in their home

630
00:35:03,640 --> 00:35:06,080
Speaker 14: country they could afford to buy one of these visas

631
00:35:06,080 --> 00:35:09,000
Speaker 14: and come here. It would really undermine the black market,

632
00:35:09,040 --> 00:35:12,280
Speaker 14: It would undermine human smuggling, It would destroy those markets,

633
00:35:12,600 --> 00:35:14,680
Speaker 14: and it would allow a way for even low and

634
00:35:14,760 --> 00:35:17,759
Speaker 14: mid skilled workers to be able to come here. Because ultimately,

635
00:35:17,800 --> 00:35:20,360
Speaker 14: it's just a price, It's just amount of money. You

636
00:35:20,440 --> 00:35:23,040
Speaker 14: and I know we're not super wealthy individuals in the US,

637
00:35:23,040 --> 00:35:25,839
Speaker 14: but we can borrow money for economic activities. I think

638
00:35:25,960 --> 00:35:29,759
Speaker 14: that banking systems throughout the world, the financial institutions would

639
00:35:29,800 --> 00:35:32,800
Speaker 14: be falling over themselves head over heels to give loans

640
00:35:32,800 --> 00:35:35,719
Speaker 14: to these individuals to buy green cards that come to

641
00:35:35,760 --> 00:35:37,480
Speaker 14: the United States to be able to work. Because the

642
00:35:37,600 --> 00:35:41,000
Speaker 14: returns on them are so high, these people would be

643
00:35:41,040 --> 00:35:45,040
Speaker 14: willing and able to repay them. There are enormous market

644
00:35:45,080 --> 00:35:47,879
Speaker 14: and profit opportunities for them. This is something that would

645
00:35:47,920 --> 00:35:50,160
Speaker 14: be a boon to the US financial system, to the

646
00:35:50,160 --> 00:35:53,040
Speaker 14: workers involved, and to the US economy at large.

647
00:35:54,840 --> 00:35:57,399
Speaker 1: Coming up the battle for the economic soul of New

648
00:35:57,440 --> 00:36:00,920
Speaker 1: York City, we take a look at the dramatic prescriptions

649
00:36:00,960 --> 00:36:05,320
Speaker 1: of Zoran Mamdani, the apparent winner of Tuesday's Democratic primary

650
00:36:05,640 --> 00:36:19,800
Speaker 1: that's next on Wall Street Week. This is a story

651
00:36:19,840 --> 00:36:24,480
Speaker 1: about socialism, or at least democratic socialism, striking close to

652
00:36:24,520 --> 00:36:27,239
Speaker 1: Wall Street. New Yorkers went to the polls this week

653
00:36:27,280 --> 00:36:30,600
Speaker 1: to choose the Democratic nominee for mayor, which traditionally has

654
00:36:30,600 --> 00:36:33,799
Speaker 1: determined who will win in November, and New York State

655
00:36:33,800 --> 00:36:38,719
Speaker 1: Assemblyman Zoran Mamdani, a self styled democratic socialist, came out

656
00:36:38,719 --> 00:36:42,480
Speaker 1: the winner over former Governor Andrew Cuomo. Catherine Wilde has

657
00:36:42,480 --> 00:36:45,640
Speaker 1: served as President and CEO of Partnership for New York

658
00:36:45,719 --> 00:36:49,560
Speaker 1: since twenty eleven. She takes us through what mister Mumdani's

659
00:36:49,640 --> 00:36:52,759
Speaker 1: decidedly progressive economic policies could mean.

660
00:36:54,800 --> 00:36:59,040
Speaker 15: Zorn Mandani is a very charismatic, thirty three year old

661
00:36:59,120 --> 00:37:02,920
Speaker 15: young man who has been an assemblyman for less than

662
00:37:02,960 --> 00:37:07,680
Speaker 15: four years and is somebody who from the business community standpoint,

663
00:37:07,800 --> 00:37:12,160
Speaker 15: came out of nowhere. He latched onto the issue that

664
00:37:12,360 --> 00:37:14,759
Speaker 15: is the biggest one in our city and in America,

665
00:37:14,840 --> 00:37:18,839
Speaker 15: which is financial insecurity. Ninety percent of the people in

666
00:37:18,880 --> 00:37:21,440
Speaker 15: New York are not sure they can continue to afford

667
00:37:21,480 --> 00:37:25,200
Speaker 15: to live here. We are the most expensive city in America,

668
00:37:25,600 --> 00:37:28,520
Speaker 15: the third most expensive city in the world. So there's

669
00:37:28,560 --> 00:37:33,240
Speaker 15: a disconnect between the winner of New York's Democratic primary

670
00:37:33,280 --> 00:37:37,040
Speaker 15: for mayor and much of the business and real estate community.

671
00:37:37,680 --> 00:37:39,960
Speaker 1: Let's talk about some of the policies, as you mentioned,

672
00:37:40,160 --> 00:37:43,520
Speaker 1: tax the rich, including both income tax and i think

673
00:37:43,560 --> 00:37:44,440
Speaker 1: property tax.

674
00:37:44,239 --> 00:37:46,440
Speaker 15: As well, and corporate taxes and.

675
00:37:46,400 --> 00:37:49,640
Speaker 1: Corporate taxes as well, a lot of free things given

676
00:37:49,680 --> 00:37:53,160
Speaker 1: for the less fortunate among us. What the likelihood that

677
00:37:53,200 --> 00:37:55,400
Speaker 1: he actually would be able to implement those as opposed

678
00:37:55,440 --> 00:37:56,319
Speaker 1: to just talk about them.

679
00:37:56,800 --> 00:38:02,600
Speaker 15: Mamdanni's position on all these issues is more government spending,

680
00:38:03,480 --> 00:38:08,359
Speaker 15: which honestly has been the position of generally of Democratic

681
00:38:08,440 --> 00:38:12,680
Speaker 15: candidates for a while. Right now, we're facing a situation

682
00:38:13,000 --> 00:38:17,359
Speaker 15: release in New York where our economy is stronger than ever,

683
00:38:17,440 --> 00:38:21,520
Speaker 15: where a trillion dollar economy, four point eight million jobs.

684
00:38:21,680 --> 00:38:25,000
Speaker 15: We're in good shape from an economic standpoint. Our tax

685
00:38:25,040 --> 00:38:29,000
Speaker 15: revenues are very strong, but there is coming down the

686
00:38:29,040 --> 00:38:33,160
Speaker 15: pike some reckoning. The federal government is cutting a number

687
00:38:33,200 --> 00:38:36,959
Speaker 15: of the programs we depend on. Local tax base, even

688
00:38:37,000 --> 00:38:42,200
Speaker 15: as strong as New York cannot support large federal cuts.

689
00:38:42,400 --> 00:38:45,400
Speaker 1: Well, we're here right now. This is good for Greenwich,

690
00:38:45,680 --> 00:38:48,000
Speaker 1: this is good for Florida, this is good for Texas.

691
00:38:48,200 --> 00:38:50,560
Speaker 1: What is the real risk that some of the mobile

692
00:38:50,640 --> 00:38:52,200
Speaker 1: rich will use their mobility.

693
00:38:52,680 --> 00:38:56,319
Speaker 15: We certainly are in a much more competitive situation in

694
00:38:56,360 --> 00:39:00,000
Speaker 15: New York historically than we were in the past because

695
00:39:00,120 --> 00:39:03,719
Speaker 15: again of our high cost environment, not just the cost

696
00:39:03,760 --> 00:39:05,919
Speaker 15: of living, but the cost of doing business here. There's

697
00:39:05,960 --> 00:39:10,239
Speaker 15: a twenty percent premium at least on salaries for employees

698
00:39:10,320 --> 00:39:13,640
Speaker 15: to maintain a lifestyle in New York as opposed to

699
00:39:13,640 --> 00:39:17,240
Speaker 15: what they could achieve in Tennessee, or Florida or wherever,

700
00:39:17,680 --> 00:39:22,560
Speaker 15: even New Jersey. So we are in a competitive situation.

701
00:39:23,080 --> 00:39:28,680
Speaker 15: We are at risk of losing business and jobs we have.

702
00:39:30,120 --> 00:39:36,720
Speaker 15: Our economy, fortunately has been very innovative and has grown

703
00:39:37,880 --> 00:39:44,720
Speaker 15: while we have outsourced jobs to other places. Jobs, administrative

704
00:39:44,800 --> 00:39:48,480
Speaker 15: jobs in the financial industry, back office jobs have been

705
00:39:48,600 --> 00:39:52,120
Speaker 15: leaving New York for forty years, but we've replaced them

706
00:39:52,200 --> 00:39:56,720
Speaker 15: with high paying technical and other jobs. The question now

707
00:39:56,960 --> 00:40:02,120
Speaker 15: is where's the breaking point. Certainly the high tax rate

708
00:40:02,239 --> 00:40:04,839
Speaker 15: is a big contributor, and I have to mention in

709
00:40:04,920 --> 00:40:09,960
Speaker 15: twenty eighteen, we lost something that was a tremendous asset

710
00:40:10,040 --> 00:40:14,160
Speaker 15: for New York, which was federal deductibility of state and

711
00:40:14,239 --> 00:40:20,719
Speaker 15: local taxes known as salt deductibility. When we lost that, everybody,

712
00:40:20,760 --> 00:40:24,240
Speaker 15: all the taxpayers that really support the city, their taxes

713
00:40:24,280 --> 00:40:26,760
Speaker 15: went up substantially in twenty eighteen.

714
00:40:27,280 --> 00:40:28,959
Speaker 1: Do you think what's playing out in New York City

715
00:40:29,000 --> 00:40:32,040
Speaker 1: actually gives some indication of where the Democratic Party may

716
00:40:32,040 --> 00:40:32,480
Speaker 1: be heading.

717
00:40:32,760 --> 00:40:37,239
Speaker 15: It's very fragmented, and so I'm not sure about the

718
00:40:37,320 --> 00:40:41,160
Speaker 15: role of parties in the future of our democracy. This

719
00:40:41,239 --> 00:40:47,080
Speaker 15: election was organized and driven in large part by a

720
00:40:47,160 --> 00:40:53,680
Speaker 15: relatively small group of the Democratic Socialists. It's a group

721
00:40:53,760 --> 00:40:56,759
Speaker 15: that I kind of trace back their power to occupy

722
00:40:56,960 --> 00:41:01,000
Speaker 15: Wall Street of almost twenty years ago. Oh, and so

723
00:41:01,200 --> 00:41:03,879
Speaker 15: I think we may be going through a similar kind

724
00:41:03,920 --> 00:41:08,759
Speaker 15: of transformation where we're seeing communities step up and say

725
00:41:08,840 --> 00:41:14,120
Speaker 15: our traditional organizations, political or otherwise are not doing for

726
00:41:14,200 --> 00:41:18,920
Speaker 15: us what we need done. We are feeling increasingly left

727
00:41:18,960 --> 00:41:22,480
Speaker 15: out any of the benefits we expect and the opportunities

728
00:41:22,560 --> 00:41:25,600
Speaker 15: we expect as Americans. We're priced out of the housing market.

729
00:41:25,960 --> 00:41:28,360
Speaker 15: I mean in New York our median rents are about

730
00:41:28,400 --> 00:41:32,960
Speaker 15: four thousand dollars a month. Who can afford that? The employers,

731
00:41:32,960 --> 00:41:35,840
Speaker 15: If you ask them what's the hardest thing about recruiting

732
00:41:35,920 --> 00:41:39,080
Speaker 15: new talent to the city, they'll say it's the rents.

733
00:41:39,600 --> 00:41:43,000
Speaker 15: They can't find an apartment. So these are the issues

734
00:41:43,680 --> 00:41:50,600
Speaker 15: that have been zeroed in on, particularly by all the candidates. Honestly,

735
00:41:50,640 --> 00:41:53,200
Speaker 15: these are the issues in our campaign, all the candidates.

736
00:41:53,880 --> 00:42:00,960
Speaker 15: But the most compelling solutions came from the socials. And

737
00:42:01,320 --> 00:42:04,920
Speaker 15: Mamdannie claims and I my door was knocked on in

738
00:42:05,000 --> 00:42:08,160
Speaker 15: Bay Ridge, Brooklyn, which is a purple neighborhood at best.

739
00:42:09,239 --> 00:42:13,520
Speaker 15: Mamdanni claims to have fifty thousand volunteers. The Democratic Socialists

740
00:42:13,600 --> 00:42:18,240
Speaker 15: organized this, so we're not talking about a situation where

741
00:42:18,320 --> 00:42:21,280
Speaker 15: he was delivered this by the Democratic Party.

742
00:42:21,640 --> 00:42:23,040
Speaker 7: Quite the opposite.

743
00:42:23,640 --> 00:42:26,640
Speaker 1: Whatever, mister Mumdani's primary victory in New York City this

744
00:42:26,680 --> 00:42:29,879
Speaker 1: week ends up, meaning this is not the first time

745
00:42:30,000 --> 00:42:33,360
Speaker 1: that a large city has turned to progressive policies. Harvard

746
00:42:33,360 --> 00:42:36,680
Speaker 1: economist Ed Glazer has made a study of American cities

747
00:42:36,719 --> 00:42:40,160
Speaker 1: over the years, and he's found structural factors that bring

748
00:42:40,239 --> 00:42:41,919
Speaker 1: such policies to the fore.

749
00:42:43,239 --> 00:42:45,439
Speaker 16: I think about the sort of you know, the great

750
00:42:45,520 --> 00:42:49,240
Speaker 16: challenge of cities is that there's a bent in natural

751
00:42:49,280 --> 00:42:52,120
Speaker 16: progressive element cities, mostly because cities tend to attract a

752
00:42:52,160 --> 00:42:56,439
Speaker 16: significant number of relatively poor people. And that's not because

753
00:42:56,480 --> 00:42:59,560
Speaker 16: cities are bad for poor people. It's actually because cities

754
00:42:59,680 --> 00:43:02,800
Speaker 16: are good for poor people because you have better social services,

755
00:43:02,840 --> 00:43:04,600
Speaker 16: because you have the ability to get around without a

756
00:43:04,640 --> 00:43:08,080
Speaker 16: car for every adult, and so you have this built

757
00:43:08,120 --> 00:43:12,080
Speaker 16: in kind of progressive thing. And yet if cities veer

758
00:43:12,320 --> 00:43:16,840
Speaker 16: too much towards this sort of progressive urge, they risk

759
00:43:17,480 --> 00:43:20,800
Speaker 16: inducing the firms to leave. They risk inducing the businesses

760
00:43:20,840 --> 00:43:24,239
Speaker 16: to go somewhere else, to relocate, to suburbanize, to leave

761
00:43:24,320 --> 00:43:26,880
Speaker 16: for a lower cost country, and of course they induce

762
00:43:27,239 --> 00:43:29,560
Speaker 16: the wealthy to want to leave as well, because the

763
00:43:29,680 --> 00:43:33,920
Speaker 16: fundamental essence of a city is geographic mobility, is the

764
00:43:33,920 --> 00:43:36,640
Speaker 16: fact that this is a smaller geographic unit. It's not

765
00:43:36,840 --> 00:43:39,880
Speaker 16: like the United States, where people are relatively fixed.

766
00:43:40,560 --> 00:43:43,040
Speaker 1: Has socialism ever worked where we have a candidate mister

767
00:43:43,080 --> 00:43:46,640
Speaker 1: rham Donnie who says he is a democratic socialist. Has

768
00:43:46,719 --> 00:43:49,760
Speaker 1: socialism ever worked in any city you know.

769
00:43:49,880 --> 00:43:53,960
Speaker 16: I kind of think Soewer socialism was pretty successful. So

770
00:43:54,360 --> 00:43:58,840
Speaker 16: the key mayor is Daniel Webster Hone, who is mayor

771
00:43:59,000 --> 00:44:03,120
Speaker 16: twenty four years mayor of Milwaukee, just absolutely amazing. He's

772
00:44:03,280 --> 00:44:05,719
Speaker 16: one of the prime examples of what's called Sewer socialism,

773
00:44:06,080 --> 00:44:09,839
Speaker 16: which was incredibly pragmatic socialism. Right, so this is very

774
00:44:09,880 --> 00:44:13,040
Speaker 16: far away from the sort of you know, European coffee

775
00:44:13,040 --> 00:44:15,640
Speaker 16: house kind of socialism, but it's a socialism that's determined

776
00:44:15,680 --> 00:44:20,320
Speaker 16: to figure out how to provide ordinary services for poor people.

777
00:44:21,080 --> 00:44:23,319
Speaker 16: He was mayor for twenty four years, and he was

778
00:44:23,360 --> 00:44:27,040
Speaker 16: really one of the great mayors. Now he was checked

779
00:44:27,360 --> 00:44:30,280
Speaker 16: in perhaps his most destructive impulses by the city council,

780
00:44:30,760 --> 00:44:32,520
Speaker 16: and so there were things that he wanted to do

781
00:44:32,600 --> 00:44:35,880
Speaker 16: in terms of turning an electric company into a public

782
00:44:35,880 --> 00:44:36,600
Speaker 16: company and so forth.

783
00:44:36,640 --> 00:44:37,280
Speaker 7: It was stopped.

784
00:44:37,680 --> 00:44:40,720
Speaker 16: But by and large he was focused on the basics

785
00:44:40,760 --> 00:44:43,080
Speaker 16: of city government. I think this makes a larger point, right,

786
00:44:43,320 --> 00:44:46,719
Speaker 16: It's not that a mayor needs to put the interests

787
00:44:46,800 --> 00:44:47,880
Speaker 16: of the rich.

788
00:44:47,719 --> 00:44:50,800
Speaker 7: First, but the mayor has to balance two things.

789
00:44:50,840 --> 00:44:54,760
Speaker 16: But it requires a level of progressivism that's just vastly

790
00:44:54,800 --> 00:44:57,480
Speaker 16: more pragmatic and vastly more focused on the nuts and

791
00:44:57,480 --> 00:44:59,680
Speaker 16: bolts of government than I think most of what we

792
00:44:59,680 --> 00:45:01,040
Speaker 16: see around us today, what.

793
00:45:01,080 --> 00:45:03,279
Speaker 1: You identify is exactly what's being discussed in New York

794
00:45:03,320 --> 00:45:05,840
Speaker 1: City right now. We have mister Rondani who is putting

795
00:45:05,840 --> 00:45:10,080
Speaker 1: forward proposals for the less fortunate, things like free transportation

796
00:45:10,600 --> 00:45:14,880
Speaker 1: and freezing rent and taxing the wealthy much much more.

797
00:45:15,080 --> 00:45:17,200
Speaker 1: And on the other side, you say, boy, the wealthy

798
00:45:17,239 --> 00:45:19,759
Speaker 1: are mobile, and they will become mobile if you do that.

799
00:45:20,640 --> 00:45:24,760
Speaker 1: Does history prove that out? Will you lose the wealthy?

800
00:45:25,239 --> 00:45:26,720
Speaker 7: The wealthy certainly are mobile.

801
00:45:26,960 --> 00:45:30,560
Speaker 16: There is a healthy economics debate about how elastic the

802
00:45:30,560 --> 00:45:34,000
Speaker 16: mobile are and how quickly they move out. But certainly

803
00:45:34,080 --> 00:45:38,120
Speaker 16: people respond to incentives, and it seems to me that

804
00:45:38,160 --> 00:45:40,959
Speaker 16: this is a maximally risky moment for New York City

805
00:45:41,000 --> 00:45:44,440
Speaker 16: to be trying an experiment of hyper taxing the hyper rich.

806
00:45:44,800 --> 00:45:48,040
Speaker 1: From your experience having studied cities in the United States

807
00:45:48,080 --> 00:45:50,680
Speaker 1: over the years, how much difference can a mayor make

808
00:45:51,080 --> 00:45:53,960
Speaker 1: in the economic fortunes of a city.

809
00:45:54,120 --> 00:45:58,160
Speaker 16: Well, it's very hard to turn around a city that

810
00:45:58,280 --> 00:46:02,879
Speaker 16: is suffering from enormous headwinds. And there are sometimes when

811
00:46:02,920 --> 00:46:06,480
Speaker 16: a city is thriving so well that even the worst

812
00:46:06,480 --> 00:46:09,400
Speaker 16: mayor can do little harm. But if a city is

813
00:46:09,400 --> 00:46:12,960
Speaker 16: on the edge, it really matters. And I think New

814
00:46:13,040 --> 00:46:15,160
Speaker 16: York City right now is not a city in which

815
00:46:15,400 --> 00:46:18,960
Speaker 16: success is foreordained, and it's a city in which failure

816
00:46:19,239 --> 00:46:20,040
Speaker 16: can be avoided.

817
00:46:20,360 --> 00:46:22,960
Speaker 7: So I think in this case it really does matter.

818
00:46:24,600 --> 00:46:25,200
Speaker 1: That does it?

819
00:46:25,239 --> 00:46:25,520
Speaker 16: For us?

820
00:46:25,520 --> 00:46:27,960
Speaker 1: Here at Wall Street Week, I'm David Weston. See you

821
00:46:28,080 --> 00:46:42,680
Speaker 1: next week for more stories of capitalism.