1 00:00:02,720 --> 00:00:07,240 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:18,960 --> 00:00:21,720 Speaker 2: This is Wall Street Week. I'm David Weston, bringing you 3 00:00:21,920 --> 00:00:26,320 Speaker 2: stories of capitalism. Early childhood education is as important as 4 00:00:26,360 --> 00:00:29,800 Speaker 2: it is challenging for millions of Americans. It turns out 5 00:00:29,840 --> 00:00:33,040 Speaker 2: that it's also an investment opportunity. We look at the 6 00:00:33,159 --> 00:00:36,800 Speaker 2: large and growing role of private equity in raising our children, 7 00:00:37,400 --> 00:00:40,920 Speaker 2: plus what that one big beautiful bill means for childcare 8 00:00:41,159 --> 00:00:45,240 Speaker 2: and healthcare. Our special contributor Larry Summers takes us through 9 00:00:45,280 --> 00:00:48,559 Speaker 2: where he thinks we may be going wrong. And the 10 00:00:48,640 --> 00:00:51,880 Speaker 2: World Cup is coming to North America with all the excitement, 11 00:00:52,120 --> 00:00:55,800 Speaker 2: all the potential, and all the costs surrounding it. We 12 00:00:55,840 --> 00:00:58,560 Speaker 2: bring you to the host city of Toronto to hear 13 00:00:58,640 --> 00:01:02,200 Speaker 2: why it thinks it's making a sound investment. But we 14 00:01:02,240 --> 00:01:05,520 Speaker 2: start with the question puzzling so many investors these days. 15 00:01:06,000 --> 00:01:09,240 Speaker 2: Why are the US equity markets poised for growth while 16 00:01:09,280 --> 00:01:13,440 Speaker 2: economists are predicting a slowdown. Rick Reader is Blackrug's Chief 17 00:01:13,520 --> 00:01:16,520 Speaker 2: investment Officer of Global Fixed Income and head of the 18 00:01:16,520 --> 00:01:19,560 Speaker 2: Global Allocation Investment Team. 19 00:01:20,440 --> 00:01:23,679 Speaker 3: The service economy is what drives this economy today. It's 20 00:01:23,680 --> 00:01:25,679 Speaker 3: not a goods oriented economy. It's not a commodity. 21 00:01:25,720 --> 00:01:26,280 Speaker 4: It's not an. 22 00:01:26,160 --> 00:01:30,400 Speaker 3: Export oriented, not a heavy manufacturing, service oriented, so most 23 00:01:30,400 --> 00:01:34,200 Speaker 3: of what drives the economy is resilient to what is 24 00:01:34,240 --> 00:01:38,120 Speaker 3: a goods slowdown in goods. Second thing that I wouldn't 25 00:01:38,120 --> 00:01:40,560 Speaker 3: have anticipated. I would have thought, you've got more pricing 26 00:01:40,640 --> 00:01:45,360 Speaker 3: transmission in but it's pretty incredible how companies moved. In fact, 27 00:01:45,360 --> 00:01:47,480 Speaker 3: now some of it in the near term, companies took 28 00:01:47,480 --> 00:01:48,200 Speaker 3: it into margin. 29 00:01:48,520 --> 00:01:51,280 Speaker 2: So give us a sense rick of where this economy 30 00:01:51,320 --> 00:01:53,160 Speaker 2: is headed, because if you look at the stock market, 31 00:01:53,360 --> 00:01:56,240 Speaker 2: it looks really good, it's really going places. At the 32 00:01:56,240 --> 00:01:58,160 Speaker 2: same time, if you look at the markets, they say, 33 00:01:58,160 --> 00:02:01,240 Speaker 2: well, we're going to have a rip cutter two who this year. 34 00:02:01,760 --> 00:02:05,600 Speaker 2: Normally you wouldn't cut rates into robustly growing market. 35 00:02:05,920 --> 00:02:08,160 Speaker 3: So it's pretty extraordinary. I mean, it almost never happens 36 00:02:08,200 --> 00:02:10,240 Speaker 3: in time. So the a couple things happen. First thing, 37 00:02:10,280 --> 00:02:13,480 Speaker 3: I think all financial assets there is an extraordinary amount 38 00:02:13,480 --> 00:02:15,920 Speaker 3: of cash and money that has to flow somewhere. And 39 00:02:15,960 --> 00:02:18,120 Speaker 3: the technicals and equities are great because companies are buying 40 00:02:18,160 --> 00:02:19,960 Speaker 3: back their stock. So I think the equity markets are 41 00:02:19,960 --> 00:02:23,560 Speaker 3: reflecting really good technicals. Earnings have been pretty good. But 42 00:02:23,639 --> 00:02:26,720 Speaker 3: I think there's something different at play in terms of inflation. 43 00:02:27,000 --> 00:02:29,960 Speaker 3: What's going to happen with productivity and innovation, Inflation is 44 00:02:30,000 --> 00:02:32,560 Speaker 3: going to come down. And the reason to bring interest 45 00:02:32,600 --> 00:02:35,040 Speaker 3: rates down, which I'm a believer in, is the housing 46 00:02:35,080 --> 00:02:38,240 Speaker 3: market is under pressure. So the real impact of interest 47 00:02:38,280 --> 00:02:41,240 Speaker 3: rates on the economy today, I don't think it is 48 00:02:41,360 --> 00:02:44,320 Speaker 3: in the historic sectors of who spends on coppacks, anything 49 00:02:44,360 --> 00:02:47,800 Speaker 3: about AI spend, how the banks manage the risk. It's 50 00:02:47,880 --> 00:02:50,320 Speaker 3: about housing and today if you look at the housing 51 00:02:50,320 --> 00:02:53,120 Speaker 3: market and particularly what impacts lower income. The people that 52 00:02:53,200 --> 00:02:57,240 Speaker 3: borrow today are lower income and they're adversely impacted infected 53 00:02:57,280 --> 00:02:59,880 Speaker 3: by where these rates are. If we get the rate down, 54 00:03:00,000 --> 00:03:02,400 Speaker 3: you actually can bring how home prices down, you build 55 00:03:02,440 --> 00:03:05,280 Speaker 3: more houses, you'll actually reduce inflation. So I think it's 56 00:03:05,360 --> 00:03:07,799 Speaker 3: quite consistent to bring the interest rate down even though 57 00:03:07,800 --> 00:03:10,320 Speaker 3: the economy is operating at a pretty good level. Where 58 00:03:10,320 --> 00:03:12,960 Speaker 3: we're going is to a lower level of inflation, and 59 00:03:13,000 --> 00:03:14,440 Speaker 3: I think we can bring it down. I mean, think 60 00:03:14,440 --> 00:03:17,240 Speaker 3: about inflation break evens today depending on which part of 61 00:03:17,240 --> 00:03:19,440 Speaker 3: the curve are two and a half to two and 62 00:03:19,520 --> 00:03:22,600 Speaker 3: three quarters. So the funes rate, even if you bring 63 00:03:22,600 --> 00:03:24,520 Speaker 3: it down to three and a quarter you're still above 64 00:03:24,560 --> 00:03:27,000 Speaker 3: the rate of inflation, so I think we got plenty 65 00:03:27,040 --> 00:03:28,760 Speaker 3: of room to drop it. Even though the economy is 66 00:03:28,800 --> 00:03:29,480 Speaker 3: operating well. 67 00:03:29,680 --> 00:03:33,520 Speaker 2: Does the yield curve on the treasury indicate we do 68 00:03:33,600 --> 00:03:35,360 Speaker 2: have a bigger problem in the place we think. Look 69 00:03:35,360 --> 00:03:38,160 Speaker 2: at the thirty year for example, we're significally over five 70 00:03:38,240 --> 00:03:41,600 Speaker 2: down hanging in up there. So the short end nice 71 00:03:41,680 --> 00:03:43,480 Speaker 2: under control, long end not so much. 72 00:03:43,840 --> 00:03:45,440 Speaker 3: So I think the long end of the yield curve 73 00:03:45,560 --> 00:03:48,400 Speaker 3: becomes untethered. First of all, the Fed generally can control 74 00:03:48,440 --> 00:03:50,320 Speaker 3: the front end, and the front end stays tethered to 75 00:03:50,360 --> 00:03:52,680 Speaker 3: the Fed funds rate. Long end of the yield curve 76 00:03:52,720 --> 00:03:54,760 Speaker 3: has a couple of things that I think are not 77 00:03:54,920 --> 00:03:56,840 Speaker 3: to its benefit. One, we've got to issue a lot 78 00:03:56,840 --> 00:03:58,840 Speaker 3: of debt going forward. I mean, think about the size 79 00:03:59,240 --> 00:04:01,520 Speaker 3: of the bill side, the deficits. We're going to issue 80 00:04:01,560 --> 00:04:03,080 Speaker 3: a lot of debt. The long end is a hard 81 00:04:03,080 --> 00:04:05,600 Speaker 3: place to invest. It used to be that the long 82 00:04:05,680 --> 00:04:09,200 Speaker 3: end protected you against the equity market. If inflation ends 83 00:04:09,280 --> 00:04:12,000 Speaker 3: up being higher, which I don't necessarily anticipate, then what 84 00:04:12,040 --> 00:04:14,400 Speaker 3: will happen is equities and long end will get hit. 85 00:04:14,520 --> 00:04:17,159 Speaker 3: So the long end of the yield curve today, given 86 00:04:17,160 --> 00:04:18,880 Speaker 3: that you can get so much yield if you're an 87 00:04:18,920 --> 00:04:21,239 Speaker 3: investor in the front end, the long end doesn't become 88 00:04:21,279 --> 00:04:21,960 Speaker 3: that attractive. 89 00:04:22,080 --> 00:04:23,560 Speaker 2: You say, one of the problems with the long end 90 00:04:23,560 --> 00:04:26,039 Speaker 2: of the yield curve actually how much debt the United 91 00:04:26,040 --> 00:04:29,320 Speaker 2: States government has to take on, and the so called 92 00:04:29,440 --> 00:04:31,440 Speaker 2: one big Beautiful Bill doesn't seem to be helping that 93 00:04:31,480 --> 00:04:34,480 Speaker 2: situation much. How big a problem is that, and how 94 00:04:34,520 --> 00:04:36,040 Speaker 2: much of the problem right now we're saying is we 95 00:04:36,440 --> 00:04:38,640 Speaker 2: term premiu. People are starting to doubt a little bit 96 00:04:38,680 --> 00:04:39,680 Speaker 2: whether we're going to repay it. 97 00:04:40,040 --> 00:04:43,159 Speaker 3: So there's only one way to deliver the economy. You've 98 00:04:43,160 --> 00:04:45,080 Speaker 3: got to outrun the debt. You've got to outgrow it. 99 00:04:45,680 --> 00:04:48,839 Speaker 3: So there is a plausible outcome where you get nominal 100 00:04:48,839 --> 00:04:52,160 Speaker 3: GDP running at four and a half to five. If 101 00:04:52,160 --> 00:04:55,400 Speaker 3: we get that interest rate down to three, gosh, now 102 00:04:55,400 --> 00:04:57,080 Speaker 3: you could start to deliver, but it takes a really 103 00:04:57,160 --> 00:04:59,600 Speaker 3: long period of time. Listen, I think the one engine 104 00:04:59,600 --> 00:05:01,599 Speaker 3: today's we are going to have a bigger debt burden. 105 00:05:01,640 --> 00:05:02,800 Speaker 3: And not only do it, are we going to have 106 00:05:02,800 --> 00:05:04,640 Speaker 3: a bigger debt burden, you have to fund it domestically 107 00:05:04,880 --> 00:05:08,000 Speaker 3: because international doesn't buy as much as long as we grow, 108 00:05:08,760 --> 00:05:10,640 Speaker 3: then you could work through it. You know what I 109 00:05:10,680 --> 00:05:12,480 Speaker 3: worry about is you get shocks to the system. 110 00:05:12,600 --> 00:05:14,880 Speaker 2: Well, how big is AI? I mean you mentioned that's capex, 111 00:05:14,920 --> 00:05:17,040 Speaker 2: a lot of capacks going for right now, a possible 112 00:05:17,480 --> 00:05:21,280 Speaker 2: engine for growth, I guess in productivity principally right, how 113 00:05:21,320 --> 00:05:21,960 Speaker 2: big could that be? 114 00:05:22,279 --> 00:05:26,200 Speaker 3: I think if you take it with AI, you take robotics, 115 00:05:26,240 --> 00:05:28,960 Speaker 3: you take automation, you take software, you take cloud, you 116 00:05:29,000 --> 00:05:33,240 Speaker 3: take energy, you take cooling. I think people underestimate how 117 00:05:33,320 --> 00:05:36,120 Speaker 3: dramatic this is going to be. And I think our 118 00:05:36,279 --> 00:05:39,360 Speaker 3: world a year or two hence is going to see 119 00:05:39,360 --> 00:05:43,039 Speaker 3: things that nobody's ever seen before in terms of innovation, productivity. 120 00:05:43,720 --> 00:05:45,880 Speaker 3: And you think about what happens the things that you know, 121 00:05:45,880 --> 00:05:48,960 Speaker 3: everybody talks about autonomous cars, but you talk about all 122 00:05:49,000 --> 00:05:51,520 Speaker 3: the services, all the things that can be created at 123 00:05:51,560 --> 00:05:54,760 Speaker 3: a lower price point. I think it's remarkable. I think 124 00:05:54,800 --> 00:05:56,960 Speaker 3: it's remarkable. You know, part of why we talk about 125 00:05:57,040 --> 00:05:58,760 Speaker 3: you know, who do you own in the equity market, 126 00:05:59,000 --> 00:06:02,159 Speaker 3: these big cap company that utilize data effectively. It doesn't 127 00:06:02,160 --> 00:06:04,040 Speaker 3: have to be necessarily the bag seven, although they're pretty 128 00:06:04,080 --> 00:06:06,880 Speaker 3: good companies generally. Gosh, you think about the companies to 129 00:06:07,000 --> 00:06:09,640 Speaker 3: utilize data to expand their mode and how they utilize 130 00:06:09,680 --> 00:06:11,480 Speaker 3: how you know, the price points they got operated at, 131 00:06:11,520 --> 00:06:15,760 Speaker 3: how they advertise, how they run their business efficiently using software, 132 00:06:15,800 --> 00:06:17,480 Speaker 3: et cetera. Part of what I think this is the 133 00:06:17,520 --> 00:06:20,200 Speaker 3: most exciting investment period I've ever been around. We're going 134 00:06:20,279 --> 00:06:23,960 Speaker 3: to see more dramatic change than Internet, than really mobile telephony. 135 00:06:24,279 --> 00:06:25,920 Speaker 3: It's a pretty amazing time. 136 00:06:26,120 --> 00:06:28,479 Speaker 2: You mentioned Internet, which is the last time I reased 137 00:06:28,480 --> 00:06:31,000 Speaker 2: when there was really a substantial increase in productivity the 138 00:06:31,080 --> 00:06:34,880 Speaker 2: late nineties into the early ought we saw is AI 139 00:06:35,360 --> 00:06:36,560 Speaker 2: bigger than that, So. 140 00:06:36,560 --> 00:06:38,320 Speaker 3: You know, there's interesting thing around. I've spent a lot 141 00:06:38,360 --> 00:06:41,479 Speaker 3: of time thinking through this. Internet took some time to 142 00:06:41,560 --> 00:06:43,800 Speaker 3: develop and the adoption rate and by the way, if 143 00:06:43,839 --> 00:06:49,560 Speaker 3: you go back in time, electricity, telephone, rail, it all 144 00:06:49,600 --> 00:06:53,800 Speaker 3: took a period of time. This is almost instantaneous. How 145 00:06:53,880 --> 00:06:55,800 Speaker 3: fast and by the way, you know, I think one 146 00:06:55,839 --> 00:06:58,080 Speaker 3: of the incredible technologies the last couple of decades was 147 00:06:58,120 --> 00:07:01,039 Speaker 3: GPS technology. Part of while literally get up every morning 148 00:07:01,080 --> 00:07:03,080 Speaker 3: and in the weekends and you try and think about 149 00:07:03,080 --> 00:07:05,520 Speaker 3: which companies are going to benefit from these all these 150 00:07:05,560 --> 00:07:08,159 Speaker 3: new companies that are that are coming about. I said 151 00:07:08,200 --> 00:07:10,600 Speaker 3: I think it's going to happen faster and be more profound. 152 00:07:10,960 --> 00:07:13,160 Speaker 3: You know, it's hard to say the Internet was pretty incredible. 153 00:07:13,160 --> 00:07:16,600 Speaker 3: It's hard to say it'll be bigger. But it's certainly 154 00:07:16,600 --> 00:07:17,360 Speaker 3: gonna happen faster. 155 00:07:17,760 --> 00:07:20,680 Speaker 2: But the market must be pricing in some of that already. 156 00:07:20,760 --> 00:07:23,680 Speaker 2: We're seeing a lot of the AI. Why are you 157 00:07:23,720 --> 00:07:25,240 Speaker 2: confident it's not pricing all of it in? 158 00:07:25,720 --> 00:07:27,120 Speaker 3: You know, if you go back to the Internet public, 159 00:07:27,160 --> 00:07:29,240 Speaker 3: you go back to ninety eight, ninety nine, two thousand, 160 00:07:29,680 --> 00:07:33,120 Speaker 3: you were putting multiples on no cash flow. Most of 161 00:07:33,120 --> 00:07:35,240 Speaker 3: these companies that I so first certainly when you look 162 00:07:35,240 --> 00:07:38,120 Speaker 3: at the bags seven and you look at the multiples 163 00:07:38,120 --> 00:07:40,840 Speaker 3: on those companies, actually they're not that scary. I mean, 164 00:07:40,920 --> 00:07:43,320 Speaker 3: if you when you assume their growth rate, these companies 165 00:07:43,360 --> 00:07:45,680 Speaker 3: throwing off thirty to thirty five forty percent return on 166 00:07:45,720 --> 00:07:48,480 Speaker 3: equity or higher for a couple of them, and you're 167 00:07:48,520 --> 00:07:50,400 Speaker 3: throwing off cash, which by the way, allows them to 168 00:07:50,400 --> 00:07:53,200 Speaker 3: buy back their stock. You think about those companies in 169 00:07:53,240 --> 00:07:55,720 Speaker 3: the ninety eight ninety nine he was sort of hoping 170 00:07:56,200 --> 00:07:58,120 Speaker 3: that they would take off, and most of them didn't. 171 00:07:58,920 --> 00:08:01,400 Speaker 3: These companies are well and trench and thought, now you 172 00:08:01,480 --> 00:08:04,440 Speaker 3: go into other areas and you think about, gosh, you know, 173 00:08:04,480 --> 00:08:06,240 Speaker 3: there are some parts of it, they're a bit of 174 00:08:06,320 --> 00:08:09,080 Speaker 3: a flyer, and there are some multiples on some things, 175 00:08:09,120 --> 00:08:10,880 Speaker 3: and so that you have to evaluate what is the 176 00:08:10,920 --> 00:08:13,880 Speaker 3: business prospect, what's the available market. But I would say 177 00:08:13,880 --> 00:08:17,440 Speaker 3: that you know, the big hyper scalers, the big semiconductor companies, 178 00:08:17,440 --> 00:08:20,880 Speaker 3: the big software companies, and I would argue, you know, 179 00:08:20,960 --> 00:08:26,440 Speaker 3: even the companies that utilize data efficiently, even the huge retailers, 180 00:08:27,680 --> 00:08:32,600 Speaker 3: media delivery companies like Boy, they're pretty pretty spectacular as 181 00:08:32,600 --> 00:08:35,920 Speaker 3: to their rate of growth and making money along the way. 182 00:08:35,960 --> 00:08:37,000 Speaker 3: And that's that's different. 183 00:08:37,120 --> 00:08:39,520 Speaker 2: Given that view on the economy and the markets where 184 00:08:39,520 --> 00:08:42,160 Speaker 2: they are, where they're headed. What's the best way to invest? 185 00:08:42,320 --> 00:08:45,559 Speaker 2: Give us your perspective from Blackrock. Yeah, what are you 186 00:08:45,600 --> 00:08:47,160 Speaker 2: seeing that's particularly attractive right now? 187 00:08:47,240 --> 00:08:49,359 Speaker 3: So, you know, I still believe in growth and technology 188 00:08:49,400 --> 00:08:53,080 Speaker 3: and equities and and I think, you know, running more 189 00:08:53,120 --> 00:08:55,840 Speaker 3: of a barbell, that is, you know, I don't like 190 00:08:55,960 --> 00:08:58,760 Speaker 3: a lot of the small cap equities that you know, 191 00:08:58,800 --> 00:09:02,120 Speaker 3: there's some and some areas that are okay. I like 192 00:09:02,200 --> 00:09:04,679 Speaker 3: these big caps, particularly in and around tech by the way, 193 00:09:04,679 --> 00:09:08,280 Speaker 3: healthcare technology, by the way, leisure and hospitality. I think 194 00:09:08,320 --> 00:09:10,559 Speaker 3: the world part of this is the derivative ais people 195 00:09:10,600 --> 00:09:14,400 Speaker 3: have more time. Leisure, travel, entertainment, I think is a 196 00:09:14,400 --> 00:09:16,600 Speaker 3: big part. So that's what I like. On the equity side, well, 197 00:09:16,640 --> 00:09:18,720 Speaker 3: I think rates should come down. I'm kind of hoping 198 00:09:18,760 --> 00:09:22,120 Speaker 3: they don't because this environment, we can build six six 199 00:09:22,160 --> 00:09:25,720 Speaker 3: and a half seven percent yielding assets or portfolios that 200 00:09:25,840 --> 00:09:28,679 Speaker 3: don't really have to stretch and that can stay in an 201 00:09:28,640 --> 00:09:32,560 Speaker 3: investment gray generally on average bad. I mean, if you 202 00:09:32,559 --> 00:09:34,920 Speaker 3: could buy growth and income and then, by the way, 203 00:09:34,920 --> 00:09:37,640 Speaker 3: maybe a little bit of hard asset, whether that's gold 204 00:09:37,800 --> 00:09:40,760 Speaker 3: or some crypto, you know, not scale to the size 205 00:09:40,760 --> 00:09:43,480 Speaker 3: of your debt and equity, but I think that creates 206 00:09:43,559 --> 00:09:44,840 Speaker 3: balance in a portfolio. 207 00:09:45,160 --> 00:09:48,360 Speaker 2: You mentioned crypto, which has become quite the topic in 208 00:09:48,440 --> 00:09:51,320 Speaker 2: Washington these days, and to be stable coin, because all 209 00:09:51,320 --> 00:09:53,720 Speaker 2: of a sudden everybody wants a stable coin. It seems 210 00:09:53,760 --> 00:09:57,000 Speaker 2: like is that really fundamentally going to change the financial system. 211 00:09:57,200 --> 00:09:59,520 Speaker 3: So crypto war stable coiner both, I mean, they're you know, 212 00:09:59,600 --> 00:10:02,240 Speaker 3: relate it's stable coin. I actually think will be quite 213 00:10:02,240 --> 00:10:05,680 Speaker 3: helpful in that it will utilize it a there's a 214 00:10:05,720 --> 00:10:09,560 Speaker 3: benefit to the currency and the dollar utilization. Ultimately, b 215 00:10:09,960 --> 00:10:11,560 Speaker 3: it will soak up some of it. Do we have 216 00:10:11,600 --> 00:10:13,840 Speaker 3: a lot of treasures, We've got an issue. It will 217 00:10:13,880 --> 00:10:15,760 Speaker 3: soak up some of that. Not a tremendous but it 218 00:10:15,800 --> 00:10:17,480 Speaker 3: will soak up some of that. So I think that'll 219 00:10:17,480 --> 00:10:21,400 Speaker 3: be real utility. How we moved in the tokenized assets, 220 00:10:21,920 --> 00:10:25,679 Speaker 3: in tokenized investments, how we think about payments mechanism. I 221 00:10:25,720 --> 00:10:28,400 Speaker 3: think stable coin will be a very big deal crypto. 222 00:10:28,480 --> 00:10:31,760 Speaker 3: I think general crypto, I actually think. I mean, I 223 00:10:31,800 --> 00:10:35,480 Speaker 3: own some of the portfolios. You talk about volatility. I 224 00:10:35,520 --> 00:10:37,760 Speaker 3: own it in moderate size. But it's one of those things. 225 00:10:37,800 --> 00:10:42,480 Speaker 3: The adoption rate around the world is so extraordinary coming up. 226 00:10:42,640 --> 00:10:45,320 Speaker 2: We trust an awful lot to the markets, but does 227 00:10:45,360 --> 00:10:48,480 Speaker 2: that include caring for our children. We look into the 228 00:10:48,480 --> 00:10:52,640 Speaker 2: growing role of private equity in early childhood education. That's 229 00:10:52,720 --> 00:11:03,360 Speaker 2: next on Wall Street Week. This is a story about 230 00:11:03,400 --> 00:11:06,920 Speaker 2: having the markets raise our children. Since the days of 231 00:11:06,960 --> 00:11:10,400 Speaker 2: Adam Smith, we've trusted the invisible hand to do all 232 00:11:10,440 --> 00:11:12,800 Speaker 2: sorts of things for us, from telling us when our 233 00:11:12,840 --> 00:11:14,400 Speaker 2: government is borrowing too much. 234 00:11:14,640 --> 00:11:16,839 Speaker 4: The ninety three deaths production purgem it was very heavily 235 00:11:16,840 --> 00:11:19,080 Speaker 4: focused on depth production, and I think rightly argument it 236 00:11:19,080 --> 00:11:21,600 Speaker 4: turned out to be correct that markets would react very 237 00:11:21,600 --> 00:11:24,880 Speaker 4: favorably if we were serious to guiding us in our 238 00:11:24,960 --> 00:11:25,640 Speaker 4: career path. 239 00:11:25,840 --> 00:11:29,400 Speaker 5: The number of jobs that we've created in life sciences 240 00:11:29,400 --> 00:11:31,200 Speaker 5: over the last couple of years ago thousands of new 241 00:11:31,280 --> 00:11:34,480 Speaker 5: life sciences jobs in Jersey. But we're making major investments 242 00:11:34,480 --> 00:11:37,199 Speaker 5: because we know it's a crowded field. 243 00:11:38,679 --> 00:11:39,480 Speaker 4: And another flat. 244 00:11:40,280 --> 00:11:44,240 Speaker 2: As parents, our children are priceless, which means that any 245 00:11:44,320 --> 00:11:47,560 Speaker 2: value attached to them or their well being cannot be enough. 246 00:11:48,160 --> 00:11:51,480 Speaker 2: But there is a business built around early childcare, with 247 00:11:51,600 --> 00:11:55,760 Speaker 2: consumers and suppliers setting prices based on revenue and costs, 248 00:11:56,280 --> 00:11:59,480 Speaker 2: and even investors putting up capital on which they expect 249 00:11:59,559 --> 00:12:00,280 Speaker 2: a return. 250 00:12:00,760 --> 00:12:02,840 Speaker 6: I was kind of like, at my wits end at 251 00:12:02,880 --> 00:12:04,880 Speaker 6: the end of twenty twenty four, I had taken a 252 00:12:04,880 --> 00:12:07,400 Speaker 6: break from real estate because I was like, I don't 253 00:12:07,440 --> 00:12:11,760 Speaker 6: know how to do this without full time childcare, okay, 254 00:12:12,480 --> 00:12:14,840 Speaker 6: And I just remember opening up my journal and the 255 00:12:14,880 --> 00:12:17,920 Speaker 6: first thing I wrote down was like fine childcare, and 256 00:12:18,040 --> 00:12:19,679 Speaker 6: I was like, I don't know how to do this. 257 00:12:19,960 --> 00:12:21,120 Speaker 6: The eggs are done now. 258 00:12:21,400 --> 00:12:25,280 Speaker 2: Ashley Perdy's kids are one of roughly eleven million children 259 00:12:25,400 --> 00:12:28,560 Speaker 2: under the age of fifteen who spend time in paid 260 00:12:28,720 --> 00:12:30,360 Speaker 2: childcare in the United. 261 00:12:30,000 --> 00:12:36,000 Speaker 6: States in the car, being home with three kids was 262 00:12:36,040 --> 00:12:38,960 Speaker 6: amazing for time, but then it was like I would 263 00:12:39,000 --> 00:12:43,680 Speaker 6: be home, just like daydreaming and like fantasizing about going back. 264 00:12:43,559 --> 00:12:45,040 Speaker 7: To work here. 265 00:12:45,600 --> 00:12:49,920 Speaker 2: Childcare is uniquely expensive in the US, comprising a higher 266 00:12:49,960 --> 00:12:53,320 Speaker 2: proportion of average income than it does anywhere else in 267 00:12:53,360 --> 00:12:57,840 Speaker 2: the world. According to Childcare Aware of America, the national 268 00:12:57,920 --> 00:13:01,160 Speaker 2: average cost for children under school age for one year 269 00:13:01,360 --> 00:13:04,679 Speaker 2: was eleven five hundred and eighty two dollars in twenty 270 00:13:04,720 --> 00:13:07,960 Speaker 2: twenty three. But that cost is only the tip of 271 00:13:08,000 --> 00:13:08,679 Speaker 2: the iceberg. 272 00:13:09,160 --> 00:13:12,319 Speaker 1: This isn't a gym, right, This is a sector where 273 00:13:12,840 --> 00:13:16,719 Speaker 1: educators are literally building the brains of young children and 274 00:13:16,760 --> 00:13:19,400 Speaker 1: providing the care that families rely on to be able 275 00:13:19,400 --> 00:13:19,920 Speaker 1: to flourish. 276 00:13:20,200 --> 00:13:23,840 Speaker 2: Elliott Haspell is a senior fellow at Kapita and author 277 00:13:23,880 --> 00:13:27,320 Speaker 2: of the forthcoming book Raising a Nation Right Now. 278 00:13:27,360 --> 00:13:30,080 Speaker 1: We see middle income and upper middle income and affluent 279 00:13:30,120 --> 00:13:33,760 Speaker 1: parents using licensed formal childcare. Largely that's because they can, 280 00:13:33,840 --> 00:13:36,840 Speaker 1: they can afford it, or at least try to afford it, 281 00:13:37,000 --> 00:13:39,319 Speaker 1: and also because those tend to have the highest proportion 282 00:13:39,400 --> 00:13:42,119 Speaker 1: of families that have two earners in the workforce. 283 00:13:42,840 --> 00:13:45,920 Speaker 2: What can be a major challenge for young parents turns 284 00:13:45,960 --> 00:13:49,640 Speaker 2: out to be a potential opportunity for equity investors. 285 00:13:50,040 --> 00:13:52,679 Speaker 1: They take up right now somewhere between ten to twelve 286 00:13:52,760 --> 00:13:56,240 Speaker 1: percent of the childcare sector, and they're growing at a 287 00:13:56,280 --> 00:13:59,199 Speaker 1: time when many childcare programs are struggling to stay open. 288 00:13:59,520 --> 00:14:02,440 Speaker 1: The profit chains are growing because they're able to do 289 00:14:02,559 --> 00:14:06,040 Speaker 1: debt financing right. They're able to access capital markets in 290 00:14:06,080 --> 00:14:10,160 Speaker 1: a way that the individual programs, nonprofit programs, church based 291 00:14:10,200 --> 00:14:11,400 Speaker 1: programs just can't. 292 00:14:12,360 --> 00:14:15,360 Speaker 2: The strong demand for early childcare is one way for 293 00:14:15,480 --> 00:14:18,720 Speaker 2: private equity investors to make money, but there is another 294 00:14:18,800 --> 00:14:22,680 Speaker 2: potential revenue source, the real estate the centers occupy. 295 00:14:23,640 --> 00:14:26,160 Speaker 1: Classic sort of part of the private equity playbook that 296 00:14:26,200 --> 00:14:29,080 Speaker 1: we know from other sectors is what are no sale leasebacks? 297 00:14:29,120 --> 00:14:29,240 Speaker 8: Right? 298 00:14:29,240 --> 00:14:31,640 Speaker 1: This idea that you take a site that owns its 299 00:14:31,680 --> 00:14:34,760 Speaker 1: own facility or owns the land and basically force it 300 00:14:34,800 --> 00:14:37,760 Speaker 1: to sell off to to another landlord. The profits from 301 00:14:37,760 --> 00:14:39,880 Speaker 1: those sale go up to the private equity firm as 302 00:14:39,920 --> 00:14:42,120 Speaker 1: opposed to back into the site. The site now has 303 00:14:42,160 --> 00:14:45,280 Speaker 1: to lease back the facility or the land that they 304 00:14:45,360 --> 00:14:47,320 Speaker 1: previously own, so they now have a new line of 305 00:14:47,360 --> 00:14:51,360 Speaker 1: debt We have definitely seen this strategy play out in childcare, 306 00:14:51,400 --> 00:14:53,640 Speaker 1: and in fact, the childcare real estate is one of 307 00:14:53,680 --> 00:14:57,920 Speaker 1: the most valuable pieces of assets that many of these 308 00:14:58,080 --> 00:14:58,760 Speaker 1: chains have. 309 00:15:00,000 --> 00:15:03,560 Speaker 2: Adam Newman is founder and managing partner of Titan Partners, 310 00:15:03,800 --> 00:15:08,560 Speaker 2: specializing in early childhood education, and he knows the long history. 311 00:15:08,840 --> 00:15:12,240 Speaker 7: Some of the first and earliest investors in early childhood 312 00:15:12,520 --> 00:15:17,360 Speaker 7: education started back in the eighties. The two largest players today, 313 00:15:17,880 --> 00:15:23,480 Speaker 7: KinderCare Learning and Bright Horizons Family Solutions, received investment from 314 00:15:23,520 --> 00:15:28,080 Speaker 7: private equity firms late seventies mid eighties and really served 315 00:15:28,120 --> 00:15:31,160 Speaker 7: as bellweathers for what has become over the last couple 316 00:15:31,240 --> 00:15:35,760 Speaker 7: decades a much more active and vibrant private equity investment 317 00:15:35,840 --> 00:15:38,200 Speaker 7: community focused on early childhood education. 318 00:15:38,800 --> 00:15:42,240 Speaker 2: What about the nature of the marketplace in early childhood 319 00:15:42,360 --> 00:15:45,520 Speaker 2: education makes it attractive for private equity? I mean, what's 320 00:15:45,520 --> 00:15:46,280 Speaker 2: the opportunity? 321 00:15:46,720 --> 00:15:50,640 Speaker 7: It is a capital intensive market that requires a degree 322 00:15:50,640 --> 00:15:57,400 Speaker 7: of professionalism and investment that oftentimes exceeds what individual owner 323 00:15:57,480 --> 00:16:02,000 Speaker 7: operators can do themselves. There's also a fair degree of complexity, 324 00:16:02,200 --> 00:16:06,320 Speaker 7: particularly as you move across states. What they are doing 325 00:16:06,400 --> 00:16:11,240 Speaker 7: is taking a fragmented ecosystem and striving to drive efficiency 326 00:16:11,280 --> 00:16:16,840 Speaker 7: and scale in ways that more independent owner operators are 327 00:16:16,880 --> 00:16:18,880 Speaker 7: oftentimes unable to do themselves. 328 00:16:19,520 --> 00:16:21,840 Speaker 2: But that's not to say that private equity plays as 329 00:16:21,960 --> 00:16:25,320 Speaker 2: large role in all parts of the early childcare business. 330 00:16:25,840 --> 00:16:28,840 Speaker 2: At least thus far, investors have been careful to pick 331 00:16:28,880 --> 00:16:29,560 Speaker 2: their spots. 332 00:16:30,000 --> 00:16:32,840 Speaker 7: The part that the private equity world tends to play 333 00:16:32,840 --> 00:16:36,760 Speaker 7: in are those two middle segments, the national chains and 334 00:16:36,800 --> 00:16:38,040 Speaker 7: the independent centers. 335 00:16:38,720 --> 00:16:42,200 Speaker 2: Newman estimates that the two segments targeted by private equity, 336 00:16:42,520 --> 00:16:46,560 Speaker 2: national chains and independent centers account for about thirty nine 337 00:16:46,600 --> 00:16:50,200 Speaker 2: percent of the children in care today, and he expects 338 00:16:50,240 --> 00:16:52,600 Speaker 2: that portion of the business to grow to about forty 339 00:16:52,640 --> 00:16:55,480 Speaker 2: five percent of the total market over the next five years. 340 00:16:56,080 --> 00:17:00,320 Speaker 2: But all that private equity participation is not without its detracts. 341 00:17:00,840 --> 00:17:04,479 Speaker 1: There's a for profit chain called Guidepost Monatssory, and it 342 00:17:04,560 --> 00:17:07,760 Speaker 1: was it's a venture capital backed chain, and what happened 343 00:17:07,840 --> 00:17:11,600 Speaker 1: is they ended up growing so fast, they got way 344 00:17:11,600 --> 00:17:13,960 Speaker 1: over leveraged, they stopped being able to pay their rent, 345 00:17:14,000 --> 00:17:17,440 Speaker 1: and they actually ended up having to close over forty 346 00:17:17,800 --> 00:17:20,360 Speaker 1: to fifty of their sites in a matter of months, 347 00:17:20,640 --> 00:17:23,520 Speaker 1: and then the parent company just a few weeks ago 348 00:17:23,600 --> 00:17:28,240 Speaker 1: actually filed for bankruptcy. Other countries have seen childcare chain collapses. 349 00:17:28,359 --> 00:17:32,000 Speaker 1: The largest for profit chain in the Netherlands in the 350 00:17:32,040 --> 00:17:35,520 Speaker 1: twenty tens, which was private equity owned, collapse the government 351 00:17:35,560 --> 00:17:38,120 Speaker 1: had to step in. In Australia in two thousand and eight, 352 00:17:38,480 --> 00:17:41,880 Speaker 1: the largest for profit childcare company in the world, called 353 00:17:41,920 --> 00:17:45,919 Speaker 1: ABC Learning, collapsed because it was again over leveraged. 354 00:17:46,640 --> 00:17:50,000 Speaker 2: On the other hand, those who deal regularly with private 355 00:17:50,080 --> 00:17:53,920 Speaker 2: equity investments in early childhood care say that in some 356 00:17:53,960 --> 00:17:57,720 Speaker 2: ways it's the safest form of investment, as investors will 357 00:17:57,760 --> 00:18:00,840 Speaker 2: make sure things go right for their own self interest. 358 00:18:01,280 --> 00:18:04,320 Speaker 7: If you think about it, the headline risk for a 359 00:18:04,359 --> 00:18:09,720 Speaker 7: bad investment in early childhood business is pretty significant. If 360 00:18:09,720 --> 00:18:12,119 Speaker 7: you think about the LPs that sit behind a lot 361 00:18:12,160 --> 00:18:14,880 Speaker 7: of these private equity firms, the last thing they want 362 00:18:14,920 --> 00:18:18,040 Speaker 7: to read about or see is an investment made by 363 00:18:18,119 --> 00:18:22,840 Speaker 7: one of their private equity firms that has had a 364 00:18:22,840 --> 00:18:26,960 Speaker 7: pretty nasty headline because of quality or other concerns. So 365 00:18:27,000 --> 00:18:30,960 Speaker 7: in many ways, a private equity owner theoretically should be 366 00:18:30,960 --> 00:18:34,119 Speaker 7: bringing a greater degree of rigor and attention to some 367 00:18:34,160 --> 00:18:37,440 Speaker 7: of those issues. Now, the reality is, as some of 368 00:18:37,480 --> 00:18:42,000 Speaker 7: these chains get increasingly large, you're still dealing with hundreds 369 00:18:42,000 --> 00:18:45,479 Speaker 7: of sites and there is a degree to which you 370 00:18:45,560 --> 00:18:48,960 Speaker 7: lose control over what might happen at the edges of 371 00:18:49,000 --> 00:18:51,360 Speaker 7: that network, but that can happen in any environment. 372 00:18:51,800 --> 00:18:56,040 Speaker 2: Two investors rolling up childcare centers requires careful calculation to 373 00:18:56,080 --> 00:18:59,960 Speaker 2: stay profitable, But to parents, the math isn't as important 374 00:19:00,280 --> 00:19:00,920 Speaker 2: as the care. 375 00:19:01,560 --> 00:19:04,320 Speaker 9: Kids are not widgets, kids are not products, and you 376 00:19:04,400 --> 00:19:07,399 Speaker 9: really don't see the outcome for years to come. 377 00:19:08,040 --> 00:19:11,840 Speaker 2: Becca Balance is now a Democratic congresswoman representing her home 378 00:19:11,840 --> 00:19:15,399 Speaker 2: state of Vermont. She earlier served for eight years in 379 00:19:15,440 --> 00:19:19,560 Speaker 2: the Vermont Senate, including as Majority Leader and as President 380 00:19:19,640 --> 00:19:24,080 Speaker 2: pro Tempore, where she worked to get legislation passed addressing 381 00:19:24,119 --> 00:19:26,560 Speaker 2: the lack of adequate childcare in her state. 382 00:19:27,000 --> 00:19:31,360 Speaker 9: It's been a challenging landscape for many years now. We 383 00:19:31,440 --> 00:19:34,280 Speaker 9: have a confluence of forces that has made it very 384 00:19:34,320 --> 00:19:38,240 Speaker 9: challenging for us here in this very rural state. So 385 00:19:38,280 --> 00:19:42,239 Speaker 9: we have a demographic crisis. We have a lot of 386 00:19:42,760 --> 00:19:46,119 Speaker 9: elderly folks here in Vermont, not as many young families. 387 00:19:46,520 --> 00:19:50,240 Speaker 9: You have had a situation from out where there hasn't 388 00:19:50,320 --> 00:19:55,119 Speaker 9: been enough childcare slots in childcare centers for the number 389 00:19:55,160 --> 00:19:58,520 Speaker 9: of people that want to go back into the workforce. 390 00:19:58,920 --> 00:20:02,199 Speaker 2: In twenty twenty three, Vermont passed a childcare bill that 391 00:20:02,280 --> 00:20:05,480 Speaker 2: provides one hundred and twenty five million dollars of public funding, 392 00:20:05,880 --> 00:20:10,000 Speaker 2: giving more than seven thousand families access to childcare assistance. 393 00:20:10,480 --> 00:20:14,520 Speaker 9: Over the early years of this, you know, ten year push, 394 00:20:14,880 --> 00:20:18,520 Speaker 9: we set benchmarks for ourselves, and some of them were 395 00:20:18,680 --> 00:20:22,720 Speaker 9: very ambitious trying to get to a solution. By twenty 396 00:20:22,800 --> 00:20:26,280 Speaker 9: twenty five, you had champions within the legislature, you had 397 00:20:26,280 --> 00:20:29,960 Speaker 9: a governor who also understood that it was holding us back, 398 00:20:30,040 --> 00:20:34,240 Speaker 9: and you had a democratic legislature a Republican governor. 399 00:20:34,320 --> 00:20:36,560 Speaker 10: It was clearly a bipartisan issue. 400 00:20:36,960 --> 00:20:39,160 Speaker 9: And then we worked really hard to bring in business 401 00:20:39,160 --> 00:20:42,879 Speaker 9: partners from across the state in all different industries for 402 00:20:43,000 --> 00:20:45,199 Speaker 9: them to make the case that this was not just 403 00:20:45,280 --> 00:20:48,159 Speaker 9: good for the individual kids and their families, it was 404 00:20:48,200 --> 00:20:50,440 Speaker 9: good for businesses, it was good for the economy. 405 00:20:50,480 --> 00:20:52,320 Speaker 10: And it's not easy to raise a payroll tax. 406 00:20:52,520 --> 00:20:55,080 Speaker 9: You know, you can imagine all of the forces at 407 00:20:55,119 --> 00:20:58,760 Speaker 9: work there that didn't necessarily want to go down that road. 408 00:20:59,320 --> 00:21:03,439 Speaker 9: But we had so many large scale meetings with so 409 00:21:03,520 --> 00:21:06,120 Speaker 9: many stakeholders from across the states saying, well, what are 410 00:21:06,160 --> 00:21:09,520 Speaker 9: all the different possibilities that we could look at and 411 00:21:10,200 --> 00:21:12,959 Speaker 9: in the end, that was the one that we felt 412 00:21:13,040 --> 00:21:16,720 Speaker 9: like in Vermont was the case that we could make 413 00:21:16,840 --> 00:21:17,920 Speaker 9: because we had. 414 00:21:17,760 --> 00:21:19,520 Speaker 10: So many businesses already on board. 415 00:21:19,520 --> 00:21:23,840 Speaker 9: That might not be the case in another state or municipality. 416 00:21:24,760 --> 00:21:28,760 Speaker 2: A Vermont nonprofit organization estimates that the law will serve 417 00:21:28,800 --> 00:21:31,399 Speaker 2: as a three hundred and seventy five million dollars boost 418 00:21:31,400 --> 00:21:34,639 Speaker 2: to the economy when parents are able to enter or 419 00:21:34,720 --> 00:21:38,520 Speaker 2: re enter the workforce. Vermont's efforts may be a step 420 00:21:38,520 --> 00:21:42,560 Speaker 2: in the right direction, but nationally, early childhood education is 421 00:21:42,640 --> 00:21:47,399 Speaker 2: still a pressing problem for many American parents. Whatever the 422 00:21:47,560 --> 00:21:51,080 Speaker 2: risks and opportunities in private equity's growing role in early 423 00:21:51,160 --> 00:21:57,800 Speaker 2: childcare for both investors and for children and their parents, 424 00:21:58,200 --> 00:22:01,159 Speaker 2: everyone agrees that it's not the ultimate answer for the 425 00:22:01,280 --> 00:22:05,280 Speaker 2: lack of affordable care, and it doesn't address large segments 426 00:22:05,320 --> 00:22:08,960 Speaker 2: of the population where the needs don't match investors' goals. 427 00:22:09,359 --> 00:22:12,160 Speaker 7: The portion of the population right now that is probably 428 00:22:12,280 --> 00:22:16,600 Speaker 7: underserved are not the affluent, but it is probably the 429 00:22:16,600 --> 00:22:20,479 Speaker 7: bottom two quartiles who are desperately looking for options that 430 00:22:20,520 --> 00:22:24,119 Speaker 7: are reasonably high quality, but where there's just a fixed 431 00:22:24,160 --> 00:22:26,800 Speaker 7: number of seats available at the local public pre K 432 00:22:26,960 --> 00:22:30,320 Speaker 7: program or the local head start program. So I think 433 00:22:30,440 --> 00:22:35,320 Speaker 7: private equity, you know, increases capacity a bit, but doesn't 434 00:22:35,359 --> 00:22:38,280 Speaker 7: I don't think fundamentally change solving for the demand that 435 00:22:38,359 --> 00:22:39,080 Speaker 7: exists out there. 436 00:22:39,359 --> 00:22:45,399 Speaker 9: That kind of investment is really looking at short term 437 00:22:45,480 --> 00:22:52,560 Speaker 9: gains and looking at solutions that are very much oriented 438 00:22:52,600 --> 00:22:53,399 Speaker 9: towards the. 439 00:22:53,800 --> 00:22:55,160 Speaker 10: Economy of the thing. 440 00:22:55,880 --> 00:23:00,320 Speaker 9: And I think when you're dealing with children, those be 441 00:23:00,400 --> 00:23:03,520 Speaker 9: the drivers. You have kids who are coming from all 442 00:23:03,520 --> 00:23:07,240 Speaker 9: different backgrounds right now, and it's critically important that the 443 00:23:07,320 --> 00:23:12,359 Speaker 9: childcare facility, that early education site is meeting the needs 444 00:23:12,400 --> 00:23:16,400 Speaker 9: of those kids and their experiences as they come through 445 00:23:16,440 --> 00:23:20,119 Speaker 9: the door. And the experiences of families here in Brattleborough 446 00:23:20,119 --> 00:23:22,080 Speaker 9: are not going to be the same as families up 447 00:23:22,119 --> 00:23:25,679 Speaker 9: in Little Fairfax, Vermont, or in Burlington, Vermont. And so 448 00:23:26,400 --> 00:23:30,240 Speaker 9: that is my hesitation with believing that the solution is. 449 00:23:30,320 --> 00:23:33,120 Speaker 10: Private equity investing in these chains. 450 00:23:33,400 --> 00:23:37,280 Speaker 9: And I also think it's not a great solution for 451 00:23:37,560 --> 00:23:44,159 Speaker 9: rural America because families want to know the people and 452 00:23:44,200 --> 00:23:47,720 Speaker 9: the entities that are watching their children. It's the most 453 00:23:47,720 --> 00:23:48,680 Speaker 9: precious thing that you. 454 00:23:48,680 --> 00:23:53,480 Speaker 2: Have coming up. Speaking of children, what does that one big, 455 00:23:53,560 --> 00:23:57,080 Speaker 2: beautiful bill mean for the children of America? And the sick. 456 00:23:57,680 --> 00:24:01,159 Speaker 2: Our special contributor Larry Summers, that's why he doesn't like 457 00:24:01,480 --> 00:24:15,800 Speaker 2: what he sees. This is a story about borrowing from 458 00:24:15,840 --> 00:24:19,920 Speaker 2: Peter to pay Paul. President Trump's One Big Beautiful Bill 459 00:24:20,080 --> 00:24:22,560 Speaker 2: found a way to pay a lot of Paul's through 460 00:24:22,600 --> 00:24:26,439 Speaker 2: reduced taxes, but taking funds away from Peters who have 461 00:24:26,520 --> 00:24:30,200 Speaker 2: been dependent on things like Medicaid. Our special contributor Larry 462 00:24:30,240 --> 00:24:33,359 Speaker 2: Summers of Harvard has been outspoken about what he says 463 00:24:33,400 --> 00:24:35,639 Speaker 2: it will cost us over the long run. 464 00:24:37,520 --> 00:24:40,800 Speaker 8: David, this is the biggest cutback in the US social 465 00:24:40,840 --> 00:24:46,560 Speaker 8: safety net in history. Measured relative to GDP. It's substantially 466 00:24:46,680 --> 00:24:50,919 Speaker 8: larger than anything that happened in Ronald Reagan's revolutionary nineteen 467 00:24:50,960 --> 00:24:55,840 Speaker 8: eighty one tax cut legislation. It's substantially larger relative to 468 00:24:56,440 --> 00:24:59,960 Speaker 8: the economy than the welfare reform that took place during 469 00:25:00,119 --> 00:25:06,080 Speaker 8: Bill Clinton's time. So this is a big deal. It's 470 00:25:06,080 --> 00:25:09,280 Speaker 8: going to mean that some number it's hard to evaluate exactly, 471 00:25:09,440 --> 00:25:12,560 Speaker 8: might be ten million, might be twelve million. People are 472 00:25:12,600 --> 00:25:16,320 Speaker 8: going to lose their Medicaid benefits. It's going to mean 473 00:25:16,359 --> 00:25:21,399 Speaker 8: that ancillary services that are hugely important for people getting 474 00:25:21,440 --> 00:25:25,480 Speaker 8: a ride to the hospital, so they can get their dialysis, 475 00:25:26,119 --> 00:25:28,720 Speaker 8: being able to go to a rehab facility when they 476 00:25:28,800 --> 00:25:31,480 Speaker 8: can't take care of themselves, but they no longer need 477 00:25:31,520 --> 00:25:34,199 Speaker 8: to be in a hospital. That kind of thing is 478 00:25:34,280 --> 00:25:36,879 Speaker 8: going to be cut back. It's going to mean no 479 00:25:37,040 --> 00:25:43,080 Speaker 8: economic lifeline for desperately important rural hospitals, some of which 480 00:25:43,200 --> 00:25:48,639 Speaker 8: are going to close. But here's a crucial point that 481 00:25:48,680 --> 00:25:51,760 Speaker 8: I don't think has gotten enough attention in the debate. 482 00:25:52,320 --> 00:25:56,000 Speaker 8: People focus on the moral aspect, and that's important what's 483 00:25:56,040 --> 00:25:59,399 Speaker 8: going to happen to some of the most vulnerable among us, 484 00:26:00,119 --> 00:26:04,280 Speaker 8: But this has consequences for everybody. When people come to 485 00:26:04,320 --> 00:26:09,239 Speaker 8: the hospital later and secker with more that needs to 486 00:26:09,280 --> 00:26:13,480 Speaker 8: be done and there's no government support for their care, 487 00:26:14,200 --> 00:26:16,879 Speaker 8: the bills of all the rest of us are going 488 00:26:16,960 --> 00:26:21,400 Speaker 8: to go up. When hospitals are filled with people who 489 00:26:21,440 --> 00:26:24,200 Speaker 8: don't need to be in a hospital, but are there 490 00:26:24,359 --> 00:26:27,120 Speaker 8: only because there's no other place for them to go, 491 00:26:27,800 --> 00:26:32,840 Speaker 8: there's less access to care for others when they have 492 00:26:34,000 --> 00:26:41,000 Speaker 8: an emergency. When rural hospitals close, that means less access, 493 00:26:41,200 --> 00:26:49,160 Speaker 8: not just for the poorest people. When these costs mountain 494 00:26:49,480 --> 00:26:53,679 Speaker 8: ultimately have to be born, that's ultimately going to translate 495 00:26:53,800 --> 00:26:59,919 Speaker 8: into higher taxes and greater premiums when the people have 496 00:27:00,000 --> 00:27:06,959 Speaker 8: eventually get second enough that they qualify for the supported 497 00:27:08,000 --> 00:27:08,840 Speaker 8: medical care. 498 00:27:09,320 --> 00:27:11,720 Speaker 10: So this is both. 499 00:27:11,480 --> 00:27:17,600 Speaker 8: Immral and wrong, and it is imprudent and is going 500 00:27:17,720 --> 00:27:21,520 Speaker 8: to burden the American middle class. 501 00:27:22,000 --> 00:27:25,240 Speaker 2: It's part of a larger pattern I think many people 502 00:27:25,280 --> 00:27:28,520 Speaker 2: have detected in the bill overall, which is a shift 503 00:27:29,200 --> 00:27:33,239 Speaker 2: in wealth from some of the poorest among us to 504 00:27:33,320 --> 00:27:36,000 Speaker 2: some of the wealthiest among us. We can talk about 505 00:27:36,000 --> 00:27:37,919 Speaker 2: whether that's a moral thing to do or an immoral 506 00:27:37,960 --> 00:27:41,080 Speaker 2: thing to do, but what does it mean in macroeconomic terms, 507 00:27:41,160 --> 00:27:44,080 Speaker 2: in terms of growth over the long term. 508 00:27:44,080 --> 00:27:48,760 Speaker 8: David, My values point me towards wanting us to be 509 00:27:48,920 --> 00:27:55,200 Speaker 8: a more equal society. I don't think that those making 510 00:27:56,040 --> 00:28:00,320 Speaker 8: a state wills to their children of thirty million dollar 511 00:28:01,119 --> 00:28:05,800 Speaker 8: should be the beneficiary of new large esh at a 512 00:28:05,840 --> 00:28:11,040 Speaker 8: time when we've got a massive budget deficit. But I'm 513 00:28:11,080 --> 00:28:15,119 Speaker 8: going to be honest with you. I don't think honest 514 00:28:15,280 --> 00:28:20,960 Speaker 8: economists should make all arguments in favor of the policies 515 00:28:21,080 --> 00:28:25,720 Speaker 8: they prefer. And the reason to oppose this bill is 516 00:28:25,760 --> 00:28:31,480 Speaker 8: that it's unfair, that it's inefficient, that the deficits are 517 00:28:31,520 --> 00:28:35,600 Speaker 8: going to do a great deal of damage. But I'm 518 00:28:35,640 --> 00:28:39,760 Speaker 8: not going to tell you that because of the inequality, 519 00:28:40,280 --> 00:28:44,280 Speaker 8: we're going to get major reductions in economic growth. Yes, 520 00:28:44,400 --> 00:28:47,560 Speaker 8: we're gonna get major reductions in economic growth because we're 521 00:28:47,600 --> 00:28:50,920 Speaker 8: on a trajectory to cutting back R and D in 522 00:28:51,080 --> 00:28:56,080 Speaker 8: very dangerous ways. Yes, we're going to get reductions in 523 00:28:56,640 --> 00:29:00,280 Speaker 8: economic growth because we're going to cut back support or 524 00:29:00,760 --> 00:29:06,600 Speaker 8: other kinds of public investment in education and in infrastructure. 525 00:29:07,080 --> 00:29:12,920 Speaker 8: But the main reason to be against inequality is because 526 00:29:13,320 --> 00:29:17,000 Speaker 8: it's wrong, and because some of the investments you make 527 00:29:17,160 --> 00:29:22,080 Speaker 8: to reduce inequality have very high payoffs. 528 00:29:22,640 --> 00:29:23,840 Speaker 10: But while it. 529 00:29:23,800 --> 00:29:28,400 Speaker 8: Would support the policies I generally favor, I am not, 530 00:29:28,520 --> 00:29:31,960 Speaker 8: as an economist going to say that we have convincing 531 00:29:32,040 --> 00:29:38,480 Speaker 8: evidence that as a systematic matter, reducing inequality raises economic growth. 532 00:29:39,280 --> 00:29:42,440 Speaker 2: Even as Trump's big bill will shrink the country's social 533 00:29:42,520 --> 00:29:46,320 Speaker 2: safety net, overall, one increase in federal spending will go 534 00:29:46,400 --> 00:29:49,960 Speaker 2: towards supporting families, including through a single payment of one 535 00:29:50,000 --> 00:29:53,520 Speaker 2: thousand dollars for a savings account for newborns. But Summer 536 00:29:53,600 --> 00:29:55,720 Speaker 2: says he's worried it isn't enough. 537 00:29:56,560 --> 00:30:00,800 Speaker 8: My suspicion is that it is so sub scale that 538 00:30:01,600 --> 00:30:05,720 Speaker 8: most of the costs will go into administering the thing 539 00:30:06,400 --> 00:30:11,200 Speaker 8: relative to benefits that will change people's lives. So I 540 00:30:11,240 --> 00:30:13,840 Speaker 8: don't think we know yet. And maybe this will be 541 00:30:13,920 --> 00:30:17,600 Speaker 8: an acorn that plants a very valuable trade that will 542 00:30:17,680 --> 00:30:24,240 Speaker 8: grow over time. But I haven't yet seen the blueprint 543 00:30:24,600 --> 00:30:30,880 Speaker 8: that convinces me of feasibility. At the current scale. 544 00:30:29,640 --> 00:30:31,760 Speaker 1: We put in some of the lowest percentage of our 545 00:30:31,800 --> 00:30:34,840 Speaker 1: GDP into early care and education in the United States 546 00:30:34,840 --> 00:30:37,480 Speaker 1: of any developed country, and it's because we haven't yet 547 00:30:37,520 --> 00:30:40,680 Speaker 1: made that leap from the idea that actually the care 548 00:30:40,800 --> 00:30:44,280 Speaker 1: and learning of young children is very much a public concern. 549 00:30:44,920 --> 00:30:48,640 Speaker 2: Elliott Haspell at the think tank Campita says market forces 550 00:30:48,680 --> 00:30:51,720 Speaker 2: alone aren't enough to solve the childcare crisis in the 551 00:30:51,800 --> 00:30:55,000 Speaker 2: United States, and the government needs to be doing more. 552 00:30:55,960 --> 00:30:58,800 Speaker 1: Child care is not a market good. This fair former 553 00:30:58,880 --> 00:31:01,720 Speaker 1: Terachery Secretary Janet and Is called it a textbook example 554 00:31:01,760 --> 00:31:04,200 Speaker 1: of the failed market doesn't work, so you're going to 555 00:31:04,280 --> 00:31:06,840 Speaker 1: need some sort of government intervention. We can also look 556 00:31:06,840 --> 00:31:10,360 Speaker 1: across the world and see other countries inclaning just above 557 00:31:10,440 --> 00:31:12,640 Speaker 1: us in Canada that have made major reforms in the 558 00:31:12,640 --> 00:31:17,560 Speaker 1: past few decades, all of which are underpinned by significant 559 00:31:17,920 --> 00:31:22,280 Speaker 1: permanent increases in public support of a public private system 560 00:31:22,920 --> 00:31:26,600 Speaker 1: to make sure that families have access to good childcare options, 561 00:31:26,800 --> 00:31:30,440 Speaker 1: that educators are paid well, programs are high quality, and 562 00:31:30,480 --> 00:31:33,960 Speaker 1: again there are guardrails in place to make sure that 563 00:31:34,240 --> 00:31:36,080 Speaker 1: public money is serving the public good. 564 00:31:36,800 --> 00:31:39,760 Speaker 2: Haspell's view that government should play a bigger role in 565 00:31:39,840 --> 00:31:43,960 Speaker 2: helping new parents is shared by Congresswoman Becca Ballant, who 566 00:31:44,040 --> 00:31:45,640 Speaker 2: was a former teacher herself. 567 00:31:46,200 --> 00:31:49,080 Speaker 9: The struggles that working families have right now, they are 568 00:31:49,120 --> 00:31:52,600 Speaker 9: not the same struggles as people had twenty years ago. 569 00:31:52,920 --> 00:31:55,000 Speaker 9: You know, you've got young people carrying. 570 00:31:54,720 --> 00:31:55,640 Speaker 10: A lot more debt. 571 00:31:56,520 --> 00:32:00,720 Speaker 9: They have costs that did not keep paid with inflation. 572 00:32:00,800 --> 00:32:03,680 Speaker 9: They exceeded them, whether they were housing costs or healthcare costs. 573 00:32:03,680 --> 00:32:06,440 Speaker 9: So I always say to people, I'm in my fifties, 574 00:32:06,480 --> 00:32:10,560 Speaker 9: I always say to voters who are grousing about younger families, 575 00:32:10,600 --> 00:32:14,440 Speaker 9: I say, what they're doing actually is something very different. 576 00:32:14,080 --> 00:32:14,800 Speaker 10: Than I did. 577 00:32:15,440 --> 00:32:20,200 Speaker 9: And what folks in you know, my parents' generation did 578 00:32:20,640 --> 00:32:25,440 Speaker 9: that the economic strain on them is more acute. And 579 00:32:25,480 --> 00:32:29,480 Speaker 9: so there is this understanding that we need to gain 580 00:32:30,000 --> 00:32:34,680 Speaker 9: that you've got families who are absolutely stretched, and it 581 00:32:34,720 --> 00:32:39,160 Speaker 9: is within our best interest as legislators, as people looking 582 00:32:39,200 --> 00:32:44,120 Speaker 9: for solutions to see this as part of the ecosystem 583 00:32:44,200 --> 00:32:47,160 Speaker 9: of the economy and not an add on. This is 584 00:32:47,200 --> 00:32:50,440 Speaker 9: how you make economies thrive, and certainly other countries have 585 00:32:50,520 --> 00:32:52,000 Speaker 9: figured this out before we did. 586 00:32:52,840 --> 00:32:56,120 Speaker 2: Even as state and federal lawmakers take steps to invest 587 00:32:56,200 --> 00:33:00,680 Speaker 2: more in American families and childcare, Summers says, we shouldn't 588 00:33:00,720 --> 00:33:03,160 Speaker 2: be looking to Trump's big bill to save our kids. 589 00:33:03,680 --> 00:33:08,760 Speaker 2: The costs might well outweigh the benefits, especially for future generations. 590 00:33:09,640 --> 00:33:13,800 Speaker 8: I think the borrowing that we're engaging in and the 591 00:33:13,920 --> 00:33:17,800 Speaker 8: risks that that posures to the economy may well do 592 00:33:18,080 --> 00:33:22,320 Speaker 8: more harm to my children and my one year old 593 00:33:22,360 --> 00:33:31,400 Speaker 8: granddaughter than the putative new programs that are contained. 594 00:33:32,640 --> 00:33:35,600 Speaker 2: Up Next, the World Cup is coming to North America 595 00:33:35,680 --> 00:33:39,200 Speaker 2: in a year's time. Cities across the US, Mexico, and 596 00:33:39,360 --> 00:33:42,280 Speaker 2: Canada are stepping up big time to make it possible. 597 00:33:42,560 --> 00:33:46,040 Speaker 2: But is the investment likely to pay off? That's next 598 00:33:46,120 --> 00:34:01,120 Speaker 2: on Wall Street Week. If this is a story about 599 00:34:01,120 --> 00:34:05,240 Speaker 2: the beautiful game. From Maradona to Messi, Pelly to Pushkash, 600 00:34:05,760 --> 00:34:08,359 Speaker 2: the biggest stars in the world have left their mark 601 00:34:08,400 --> 00:34:11,040 Speaker 2: on the FIFA World Cup, and whether you call it 602 00:34:11,080 --> 00:34:14,399 Speaker 2: football or soccer. The world will be watching as new 603 00:34:14,440 --> 00:34:17,680 Speaker 2: stars are born when the US, Canada and Mexico play 604 00:34:17,760 --> 00:34:20,360 Speaker 2: host the next year. While many of us will be 605 00:34:20,400 --> 00:34:23,319 Speaker 2: focused on who wins on the pitch, the sixteen host 606 00:34:23,440 --> 00:34:26,160 Speaker 2: cities face a challenge to make sure they win off 607 00:34:26,200 --> 00:34:33,000 Speaker 2: of it. The FIFA World Cup is one of the 608 00:34:33,040 --> 00:34:37,000 Speaker 2: biggest spectacles in sport. Forty eight teams, one hundred and 609 00:34:37,000 --> 00:34:41,800 Speaker 2: four matches, one winner or maybe two. Sure one team 610 00:34:41,920 --> 00:34:45,240 Speaker 2: will lift the iconic trophy, but with an estimated eleven 611 00:34:45,400 --> 00:34:48,839 Speaker 2: billion dollars in revenue coming in, FIFA might be the 612 00:34:48,880 --> 00:34:51,640 Speaker 2: real winner before a single ball is kicked. 613 00:34:52,200 --> 00:34:56,880 Speaker 11: It's the biggest event ever. It's more than four billion 614 00:34:57,080 --> 00:35:00,680 Speaker 11: viewers all around the world, and we will make it 615 00:35:01,239 --> 00:35:04,680 Speaker 11: the biggest not only sports event, but the biggest social 616 00:35:04,719 --> 00:35:06,400 Speaker 11: event that we can think of. 617 00:35:06,680 --> 00:35:09,400 Speaker 12: Johnny, We're going to have to extend my second term 618 00:35:09,880 --> 00:35:12,600 Speaker 12: because twenty twenty six, I'm going to have to extend 619 00:35:12,640 --> 00:35:14,879 Speaker 12: it for a couple of years. I don't think any 620 00:35:14,920 --> 00:35:17,360 Speaker 12: of you would have a problem with that, but I 621 00:35:17,400 --> 00:35:20,000 Speaker 12: hope you're going to remember me in twenty four for sure. 622 00:35:20,600 --> 00:35:23,440 Speaker 2: Since the World Cup was awarded to the US Canada, 623 00:35:23,480 --> 00:35:27,680 Speaker 2: and Mexico. During President Trump's first term, sixteen host cities 624 00:35:27,719 --> 00:35:31,400 Speaker 2: have been ramping up infrastructure spending to prepare for the tournament. 625 00:35:31,920 --> 00:35:33,640 Speaker 13: I think as a host city, you know, we know 626 00:35:33,840 --> 00:35:34,960 Speaker 13: this is a big investment. 627 00:35:35,400 --> 00:35:39,040 Speaker 2: Sharon Bollenbach is the executive director of the FIFA World 628 00:35:39,080 --> 00:35:41,880 Speaker 2: Cup twenty twenty six Toronto Secretariat. 629 00:35:42,239 --> 00:35:44,480 Speaker 13: Our budget here in Toronto is three hundred and eighty 630 00:35:44,520 --> 00:35:48,480 Speaker 13: million and that has been approved by council. It is 631 00:35:48,920 --> 00:35:52,560 Speaker 13: in terms of funding partners, we have significant funding partners 632 00:35:52,600 --> 00:35:56,440 Speaker 13: from our federal government as well as our provincial government 633 00:35:56,480 --> 00:35:58,520 Speaker 13: and then of course the City of Toronto, so it's 634 00:35:58,560 --> 00:36:02,560 Speaker 13: really all three levels government are contributing and the City 635 00:36:02,600 --> 00:36:05,520 Speaker 13: of Toronto's portion is around one hundred and eighty million, 636 00:36:05,719 --> 00:36:08,120 Speaker 13: and much of that comes from so that we can 637 00:36:08,239 --> 00:36:12,359 Speaker 13: reduce the burden on sort of the tax space. Much 638 00:36:12,360 --> 00:36:15,480 Speaker 13: of that portion that the city is contributing to the 639 00:36:15,520 --> 00:36:18,719 Speaker 13: event is coming from some reserve funds. We're putting in 640 00:36:18,760 --> 00:36:22,400 Speaker 13: place a municipal accommodation tax as a source of revenue 641 00:36:22,680 --> 00:36:25,719 Speaker 13: for a temporary period over the course leading into the 642 00:36:25,719 --> 00:36:29,120 Speaker 13: tournament and for the couple of months after as well. 643 00:36:29,160 --> 00:36:33,640 Speaker 13: We have a big commercial revenue strategy around bringing in 644 00:36:34,239 --> 00:36:39,640 Speaker 13: host city supporters and other hospitality, sales and opportunities for 645 00:36:40,040 --> 00:36:43,640 Speaker 13: corporate and other businesses and so on in the city. 646 00:36:44,400 --> 00:36:48,080 Speaker 2: Toronto's upgrades include better public transit and the development of 647 00:36:48,120 --> 00:36:51,279 Speaker 2: training centers, but a sizable portion of the budget is 648 00:36:51,320 --> 00:36:54,840 Speaker 2: going towards upgrading Bimo Field, where Nick Eves is the 649 00:36:54,920 --> 00:36:56,240 Speaker 2: Chief Operating Officer. 650 00:36:56,880 --> 00:36:59,200 Speaker 14: FIFA minimum requirement is to get the stadium up to 651 00:36:59,200 --> 00:37:02,600 Speaker 14: a forty five thousan five hundred capacity. Today the stadium 652 00:37:02,640 --> 00:37:06,120 Speaker 14: holds about thirty thousand, so we'll be building a temporary 653 00:37:06,400 --> 00:37:08,960 Speaker 14: ten thousand on the north end, another seven thousand on 654 00:37:09,800 --> 00:37:12,120 Speaker 14: the south end. The north end structure in addition to 655 00:37:12,120 --> 00:37:15,360 Speaker 14: that temporary seating, will also have a permanent two levels 656 00:37:16,040 --> 00:37:19,200 Speaker 14: of hospitality suites, which of course will be usable for 657 00:37:19,280 --> 00:37:23,640 Speaker 14: the World Cup matches. All of that work must be 658 00:37:23,680 --> 00:37:26,120 Speaker 14: complete by March in order for us to then go 659 00:37:26,160 --> 00:37:28,600 Speaker 14: and host some test matches here to really sort of 660 00:37:28,680 --> 00:37:31,440 Speaker 14: dry run and experience some of this new infrastructure that's 661 00:37:31,719 --> 00:37:32,560 Speaker 14: been put into place. 662 00:37:32,600 --> 00:37:33,920 Speaker 11: So on the first phase of. 663 00:37:33,840 --> 00:37:36,640 Speaker 14: Construction we're on schedule. We will be on schedule for 664 00:37:36,680 --> 00:37:39,040 Speaker 14: the second phase because ultimately we have to hit that 665 00:37:39,120 --> 00:37:41,799 Speaker 14: March date. To host the test matches and then we 666 00:37:41,800 --> 00:37:43,920 Speaker 14: need to hand the stadium over to FIFA thirty days 667 00:37:44,120 --> 00:37:45,360 Speaker 14: from the opening match. 668 00:37:45,640 --> 00:37:48,520 Speaker 2: As it turns out, FIFA requires a lot from hosts 669 00:37:48,560 --> 00:37:53,440 Speaker 2: beyond just stadium capacity. In a published list of government guarantees, 670 00:37:53,920 --> 00:37:57,880 Speaker 2: FIFA lists the quote significant mid and long term socioeconomic 671 00:37:57,920 --> 00:38:01,799 Speaker 2: benefits for host countries that to justify a list of 672 00:38:01,840 --> 00:38:05,320 Speaker 2: requirements that include tax exemptions for the tournament and support 673 00:38:05,400 --> 00:38:09,520 Speaker 2: in security, public transport and infrastructure. And it also takes 674 00:38:09,520 --> 00:38:14,960 Speaker 2: over external advertising spaces. So Toronto's Beimo Field becomes Toronto 675 00:38:15,000 --> 00:38:19,800 Speaker 2: Stadium and MetLife Stadium becomes New York New Jersey Stadium. 676 00:38:20,040 --> 00:38:25,280 Speaker 13: It's the biggest, broadest, most diverse, kind of far reaching 677 00:38:25,320 --> 00:38:28,560 Speaker 13: World Cup there has ever been, and so with that 678 00:38:28,719 --> 00:38:31,000 Speaker 13: has come a lot of learnings, and I think FIFA 679 00:38:31,040 --> 00:38:33,760 Speaker 13: have learned a lot quite frankly as well about working 680 00:38:33,800 --> 00:38:37,560 Speaker 13: with three countries, working with sixteen host cities. So there's 681 00:38:37,600 --> 00:38:41,480 Speaker 13: been some things and elements of the agreement and of 682 00:38:41,520 --> 00:38:44,839 Speaker 13: the requirements that have been laid out from day one, 683 00:38:45,400 --> 00:38:48,120 Speaker 13: there's been some elements that have shifted, and that's been 684 00:38:48,280 --> 00:38:52,200 Speaker 13: open dialogue and open communication and an understanding of what 685 00:38:52,239 --> 00:38:54,960 Speaker 13: are some of the realities that are happening in Toronto 686 00:38:55,080 --> 00:38:58,400 Speaker 13: that might be different than the realities happening in Vancouver 687 00:38:58,840 --> 00:39:01,520 Speaker 13: or happening in Los angele are happening in New York 688 00:39:01,600 --> 00:39:05,960 Speaker 13: or Dallas. So there's been some shifts and some ability 689 00:39:06,000 --> 00:39:09,279 Speaker 13: for us to work together with FIFA to determine what 690 00:39:09,440 --> 00:39:12,520 Speaker 13: some of those things are. But FIFA, definitely, you know, 691 00:39:12,560 --> 00:39:15,640 Speaker 13: this is their tournament. This is their tournament. They own 692 00:39:15,800 --> 00:39:18,239 Speaker 13: the property as it were, and so they will come 693 00:39:18,280 --> 00:39:20,920 Speaker 13: in I think it's May early May and sort of 694 00:39:21,080 --> 00:39:24,600 Speaker 13: take over the stadium. They will manage their portions of 695 00:39:24,640 --> 00:39:28,800 Speaker 13: this tournament and work with us. They understand our budget, 696 00:39:29,040 --> 00:39:31,880 Speaker 13: they know what our budget is. We've had to push 697 00:39:31,920 --> 00:39:35,560 Speaker 13: back on some things. You know, there's been some good 698 00:39:35,600 --> 00:39:38,919 Speaker 13: dialogue on some of the items where we just don't 699 00:39:38,960 --> 00:39:41,400 Speaker 13: have the budget to maybe meet some of some of 700 00:39:41,440 --> 00:39:43,680 Speaker 13: the requirements that have been in place, and so that's 701 00:39:43,719 --> 00:39:45,440 Speaker 13: been a bit of give and take. You know, what 702 00:39:45,520 --> 00:39:47,760 Speaker 13: are the primary things that we want to make sure 703 00:39:47,760 --> 00:39:49,799 Speaker 13: in place and what are those things that maybe we 704 00:39:49,840 --> 00:39:52,160 Speaker 13: can we can adjust and change a little bit. So 705 00:39:52,360 --> 00:39:56,560 Speaker 13: that's again been an open dialogue FIFA. So I have 706 00:39:56,680 --> 00:39:59,160 Speaker 13: to say I have been great partners. We've had the 707 00:39:59,239 --> 00:40:05,080 Speaker 13: ability to really discuss openly some of the elements, understanding 708 00:40:05,120 --> 00:40:08,440 Speaker 13: it's their tournament and they've run it for many, many 709 00:40:08,560 --> 00:40:09,600 Speaker 13: years as we all know. 710 00:40:10,480 --> 00:40:13,120 Speaker 2: And FIFA certainly knows how to make money off of it. 711 00:40:13,600 --> 00:40:16,720 Speaker 2: The eleven billion dollars in revenue it expects to receive 712 00:40:16,880 --> 00:40:20,720 Speaker 2: will come largely from broadcast deals, ticket packages and sponsorships. 713 00:40:21,280 --> 00:40:24,600 Speaker 2: Andrew Zimboleist is a professor of economics at Smith College 714 00:40:24,800 --> 00:40:29,200 Speaker 2: and author of Circus Maximus, The economic gamble behind hosting 715 00:40:29,200 --> 00:40:32,360 Speaker 2: the World Cup and Olympics. There's a good deal of 716 00:40:32,400 --> 00:40:34,839 Speaker 2: revenue that doesn't come back to the cities who are 717 00:40:34,880 --> 00:40:39,280 Speaker 2: sponsoring these things, particularly, it goes to FIFA. What happens 718 00:40:39,320 --> 00:40:41,000 Speaker 2: to the money to FIFA? Where does that money go? 719 00:40:41,920 --> 00:40:45,600 Speaker 15: Well, it goes to making sure that Jiohnny Infantino has 720 00:40:45,600 --> 00:40:49,279 Speaker 15: a very comfortable and luxurious life for one and his 721 00:40:49,400 --> 00:40:53,680 Speaker 15: various deputies. But more importantly, the vast majority of the 722 00:40:53,680 --> 00:40:57,560 Speaker 15: money goes to soccer federations around the world. So each 723 00:40:57,560 --> 00:41:02,320 Speaker 15: of the participants in FIFA, the Internet Soccer Association, each 724 00:41:02,360 --> 00:41:05,799 Speaker 15: of the country participants has a national soccer association and 725 00:41:05,840 --> 00:41:09,680 Speaker 15: they're in charge of developing soccer in their country. They 726 00:41:09,719 --> 00:41:12,919 Speaker 15: spend money for youth youth soccer programs, They spend money 727 00:41:12,960 --> 00:41:17,480 Speaker 15: for facilities, they spend money to train referees and officials 728 00:41:17,480 --> 00:41:20,200 Speaker 15: and so on. So most of the money, the overwhelming majority, 729 00:41:20,239 --> 00:41:23,440 Speaker 15: probably ninety percent of the money that is generated for 730 00:41:23,560 --> 00:41:29,480 Speaker 15: FEVER gets reinvested back into reinvested back into the soccer 731 00:41:29,520 --> 00:41:30,800 Speaker 15: development worldwide. 732 00:41:31,440 --> 00:41:34,440 Speaker 2: So where do the host cities see a return. They 733 00:41:34,480 --> 00:41:37,520 Speaker 2: get none of FIFA's windfall, but expect to make money 734 00:41:37,520 --> 00:41:42,239 Speaker 2: through revenue streams like increased tourism, job creation, and global exposure. 735 00:41:42,600 --> 00:41:45,400 Speaker 2: For Toronto, that's expected to result in six hundred and 736 00:41:45,400 --> 00:41:49,360 Speaker 2: eighty six million dollars of positive economic output for the 737 00:41:49,400 --> 00:41:52,600 Speaker 2: greater area, according to a report from Deloitte and FIFA. 738 00:41:53,440 --> 00:41:57,200 Speaker 2: Adam vancouverden Is Canada's Secretary of State for Sport and 739 00:41:57,280 --> 00:41:59,719 Speaker 2: a former Olympic champion in kayaking. 740 00:42:00,160 --> 00:42:02,400 Speaker 16: It is a big upfront investment, but we know that 741 00:42:02,440 --> 00:42:04,960 Speaker 16: it's going to pay off. For example, the federal government 742 00:42:05,040 --> 00:42:08,120 Speaker 16: is investing two hundred and twenty million dollars between Toronto 743 00:42:08,239 --> 00:42:12,040 Speaker 16: and Vancouver to ensure that these thirteen games are world class, 744 00:42:12,080 --> 00:42:15,480 Speaker 16: safe and really really exciting for Canadians. The provincial governments 745 00:42:15,480 --> 00:42:18,040 Speaker 16: are also coming forward with hundreds of millions of dollars, 746 00:42:18,120 --> 00:42:22,360 Speaker 16: and the cities are also investing, as our private companies 747 00:42:22,400 --> 00:42:26,719 Speaker 16: and FIFA especially, So it's an exercise and collaboration, like 748 00:42:26,760 --> 00:42:29,920 Speaker 16: I said, but the result is a massive positive economic 749 00:42:30,000 --> 00:42:34,040 Speaker 16: output that Canadians, Canada, Canadian businesses, everybody will see the 750 00:42:34,080 --> 00:42:36,680 Speaker 16: benefit from that. Likely we're going to see about two 751 00:42:36,760 --> 00:42:39,399 Speaker 16: billion dollars increase to our GDP, as well as about 752 00:42:39,400 --> 00:42:41,919 Speaker 16: three point eight billion dollars efforts of four billion dollars 753 00:42:41,960 --> 00:42:44,839 Speaker 16: in positive economic output. We're talking about almost twenty five 754 00:42:44,880 --> 00:42:47,799 Speaker 16: thousand jobs to be attributed to the FIFA World Cup 755 00:42:47,800 --> 00:42:51,160 Speaker 16: in twenty twenty six, So the economics are very very sound. 756 00:42:51,480 --> 00:42:53,680 Speaker 16: It looks like it's going to be a huge boon 757 00:42:53,760 --> 00:42:56,480 Speaker 16: for Canada's economy, but I'm sure the same is true 758 00:42:56,520 --> 00:42:58,560 Speaker 16: in the United States and New Mexico as well. 759 00:42:58,680 --> 00:43:01,280 Speaker 2: Yet not everyone is convinced. 760 00:43:01,520 --> 00:43:03,800 Speaker 15: So you put the costs and the revenues together, you 761 00:43:03,800 --> 00:43:06,479 Speaker 15: can get a variety of different outcomes, but more likely 762 00:43:06,520 --> 00:43:09,680 Speaker 15: than not, there's not a financial benefit for the host city, 763 00:43:09,920 --> 00:43:14,239 Speaker 15: although virtually every one of the sixteen cities in North 764 00:43:14,280 --> 00:43:18,960 Speaker 15: America will have an increased flow of tourism into the city. 765 00:43:19,360 --> 00:43:23,680 Speaker 15: Virtually everyone I suspect very often the soccer tourists, the 766 00:43:23,760 --> 00:43:27,440 Speaker 15: soccer fans, replace the normal fans. So somebody who might 767 00:43:27,480 --> 00:43:31,799 Speaker 15: otherwise be thinking about a trip to Vancouver, Canada to 768 00:43:31,800 --> 00:43:34,080 Speaker 15: watch some of the World Cup games might decide Ge 769 00:43:34,239 --> 00:43:36,239 Speaker 15: is as nice as Vancouver is, and it is a 770 00:43:36,239 --> 00:43:38,759 Speaker 15: great city. As nice as it is, I'm not going 771 00:43:38,840 --> 00:43:40,439 Speaker 15: to go there when the World Cup is happening because 772 00:43:40,480 --> 00:43:41,600 Speaker 15: I'm not going to be able to get a ticket 773 00:43:41,640 --> 00:43:43,120 Speaker 15: to the game, or I don't want to spend five 774 00:43:43,200 --> 00:43:44,960 Speaker 15: hundred dollars to get a ticket to the game, and 775 00:43:45,000 --> 00:43:46,279 Speaker 15: so why would I want to put up with the 776 00:43:46,280 --> 00:43:49,600 Speaker 15: congestion and the higher hotel prices. And so what happens 777 00:43:49,640 --> 00:43:53,640 Speaker 15: is the soccer tourists substitute for the normal tourists. The 778 00:43:53,680 --> 00:43:56,320 Speaker 15: normal tourists are the ones that spread the word best 779 00:43:56,360 --> 00:43:59,919 Speaker 15: about the city, and tourism in cities is best at 780 00:44:00,000 --> 00:44:02,680 Speaker 15: advertised by the actual visitors who come and they go 781 00:44:02,719 --> 00:44:04,840 Speaker 15: home and they talk to their friends, neighbors and relatives 782 00:44:05,080 --> 00:44:06,960 Speaker 15: about what a nice city it is and the different 783 00:44:07,000 --> 00:44:08,840 Speaker 15: pleasures that they had when they were in the city. 784 00:44:08,960 --> 00:44:11,800 Speaker 15: If the World Cup tourists are replacing the normal tourists. 785 00:44:11,840 --> 00:44:15,000 Speaker 15: That's not good for long run tourism as a general principle. 786 00:44:15,080 --> 00:44:17,799 Speaker 15: The other thing that's true is that FIFA requires the 787 00:44:17,800 --> 00:44:22,120 Speaker 15: host city to basically cancel all sales taxes and related 788 00:44:22,160 --> 00:44:25,399 Speaker 15: taxes on things that are related to the games. If 789 00:44:25,440 --> 00:44:27,719 Speaker 15: the tourists come to the city and they go to 790 00:44:27,800 --> 00:44:30,440 Speaker 15: what's called the fan fest for the World Cup in 791 00:44:30,480 --> 00:44:32,200 Speaker 15: the city, the city is required to put on a 792 00:44:32,239 --> 00:44:34,160 Speaker 15: fan fest and they buy things at the fan fest, 793 00:44:34,160 --> 00:44:37,279 Speaker 15: say they buy food, that's money being spent on hamburgers 794 00:44:37,280 --> 00:44:40,960 Speaker 15: and hot dogs. That's not being spent at a normal 795 00:44:41,160 --> 00:44:44,279 Speaker 15: tourist restaurant in the city. A normal tourist restaurant in 796 00:44:44,320 --> 00:44:47,759 Speaker 15: the city will produce sales taxes and revenue for the 797 00:44:47,800 --> 00:44:50,719 Speaker 15: host city, but if it's being spent at FanFest, there's 798 00:44:50,719 --> 00:44:53,920 Speaker 15: no taxes allowed. Same thing with ticket prices. They're not 799 00:44:53,920 --> 00:44:56,480 Speaker 15: allowed to charge a sales tax on ticket prices. So 800 00:44:56,520 --> 00:44:58,640 Speaker 15: the city can actually be losing money because if they 801 00:44:58,640 --> 00:45:02,799 Speaker 15: were playing a normal sport in the summertime and people 802 00:45:02,840 --> 00:45:04,920 Speaker 15: were buying tickets to be a sales tax on that, 803 00:45:04,920 --> 00:45:06,960 Speaker 15: that would be revenue to the city. But when they're 804 00:45:07,000 --> 00:45:09,080 Speaker 15: hosting the World Cup, they're not allowed to have that. 805 00:45:09,239 --> 00:45:13,040 Speaker 2: There's a lot of talk about long term benefits from 806 00:45:13,080 --> 00:45:17,279 Speaker 2: hosting World Cup Games. How sure can we ever be 807 00:45:17,760 --> 00:45:18,960 Speaker 2: that in fact it's worth it. 808 00:45:19,520 --> 00:45:22,400 Speaker 15: There's always the hope when you host a sport mega 809 00:45:22,400 --> 00:45:26,239 Speaker 15: event and you're put in quotes onto the world stage 810 00:45:26,920 --> 00:45:29,960 Speaker 15: to a degree that you hadn't been before. There's always 811 00:45:29,960 --> 00:45:33,080 Speaker 15: the hope that there'll be more people around the world 812 00:45:33,400 --> 00:45:35,400 Speaker 15: who now want to visit your city, and there'll be 813 00:45:35,440 --> 00:45:37,640 Speaker 15: more companies around the world who now want to trade 814 00:45:38,120 --> 00:45:41,520 Speaker 15: with them for your products, and there'll be more investors 815 00:45:41,560 --> 00:45:44,920 Speaker 15: around the world who now want to invest in your city. 816 00:45:45,480 --> 00:45:47,920 Speaker 15: We don't have any evidence that that happens. Those claims 817 00:45:47,920 --> 00:45:51,360 Speaker 15: have been made frequently, they're made, certainly abundantly in the 818 00:45:51,360 --> 00:45:53,719 Speaker 15: case of London in twenty twelve when they hosted the 819 00:45:53,760 --> 00:45:57,520 Speaker 15: Summer Games, but there really isn't any evidence. Good companies 820 00:45:57,960 --> 00:46:00,920 Speaker 15: don't trade with a city or the country because they 821 00:46:00,920 --> 00:46:03,600 Speaker 15: hosted a sport mega event, and they don't invest in 822 00:46:03,640 --> 00:46:05,960 Speaker 15: a city for that reason. They invest in cities because 823 00:46:06,080 --> 00:46:08,440 Speaker 15: they have good resources, because they have a good labor force, 824 00:46:08,480 --> 00:46:12,000 Speaker 15: because they have good fiscal legislation, because they have good transportation, 825 00:46:12,200 --> 00:46:14,759 Speaker 15: and good location visa via their markets. And I think 826 00:46:14,840 --> 00:46:18,439 Speaker 15: that if everything aligns properly, if the city already has 827 00:46:18,480 --> 00:46:22,080 Speaker 15: the ready made soccer stadium or stadiums, and they already 828 00:46:22,120 --> 00:46:27,759 Speaker 15: have the transportation infrastructure and security infrastructure, and FIFA is 829 00:46:27,760 --> 00:46:31,040 Speaker 15: giving them some of the more interesting games during the 830 00:46:31,040 --> 00:46:33,959 Speaker 15: course of the World Cup, then the revenue side could 831 00:46:34,000 --> 00:46:35,640 Speaker 15: go up a little bit and the cost side could 832 00:46:35,680 --> 00:46:37,760 Speaker 15: be moderated, and at the end of the day, maybe 833 00:46:38,040 --> 00:46:40,920 Speaker 15: they generate a small surplus. 834 00:46:41,640 --> 00:46:45,359 Speaker 2: Ultimately surplus or not. The World Cup's reach goes far 835 00:46:45,480 --> 00:46:49,120 Speaker 2: beyond the spreadsheet, and perhaps few know that better than 836 00:46:49,160 --> 00:46:51,719 Speaker 2: Canada's Olympic champion turned politician. 837 00:46:52,080 --> 00:46:53,920 Speaker 16: I know the power of sport. It has the power 838 00:46:54,000 --> 00:46:56,600 Speaker 16: to change lives for the better. When we invest in 839 00:46:56,600 --> 00:47:01,360 Speaker 16: physical activity programs and recreation opportunities young people, for families, 840 00:47:01,400 --> 00:47:04,760 Speaker 16: and for older folks alike, we get positive social outcomes. 841 00:47:04,960 --> 00:47:07,440 Speaker 16: But we also see the economic benefits. We see reductions 842 00:47:07,440 --> 00:47:09,840 Speaker 16: in healthcare costs, we see less of a strain on 843 00:47:09,840 --> 00:47:13,920 Speaker 16: our judicial system. We see kids happier, healthier and more connected, 844 00:47:13,960 --> 00:47:16,480 Speaker 16: and our community is really coming to life. And that's 845 00:47:16,480 --> 00:47:18,279 Speaker 16: what I expect to see with FIFA when it comes 846 00:47:18,320 --> 00:47:20,200 Speaker 16: to town We're going to celebrate the beautiful game. We're 847 00:47:20,239 --> 00:47:22,839 Speaker 16: going to celebrate the opportunity to play host for six 848 00:47:22,920 --> 00:47:26,560 Speaker 16: incredible games here in Toronto and seven across the country 849 00:47:26,560 --> 00:47:29,440 Speaker 16: in Vancouver. But I know that in every city across Canada, 850 00:47:29,520 --> 00:47:31,320 Speaker 16: you're going to be celebrating the great game of soccer. 851 00:47:35,239 --> 00:47:37,840 Speaker 2: Much has been made in recent years about the booming 852 00:47:37,880 --> 00:47:41,160 Speaker 2: business of sports, and next year's World Cup looks set 853 00:47:41,200 --> 00:47:44,440 Speaker 2: to be no different. But perhaps the lasting legacy of 854 00:47:44,480 --> 00:47:47,480 Speaker 2: a successful tournament won't lie on the bottom line, but 855 00:47:47,600 --> 00:47:51,440 Speaker 2: what happens inside the white lines that does it for us. 856 00:47:51,480 --> 00:47:53,960 Speaker 2: Here at Wall Street Week, I'm David Weston. See you 857 00:47:54,040 --> 00:48:06,680 Speaker 2: next week for more stories of capitalism.