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Speaker 1: New York's obitry has been written plenty of times, and

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Speaker 1: they've proven premature. This time, the city may just have

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Speaker 1: found its match. Not war, not terrorism, stock market implosion,

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Speaker 1: or subway collapse. The perpetrator may turn out to be

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Speaker 1: the tax cut law signed by Donald Trump late last year.

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Speaker 1: Welcome to Benjamin, a show about the global economy. I'm

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Speaker 1: Daniel Moss, economics writer and editor at Bloomberg View in

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Speaker 1: New York, and I'm Scott Landman, economics editor with Bloomberg

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Speaker 1: News in Washington. The new law limits the deductibility of

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Speaker 1: state and local taxes. While that might not be a

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Speaker 1: problem if you live in a low tax state, i e.

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Speaker 1: In the South or the West, it's a huge problem

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Speaker 1: if you live in a high tax state such as

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Speaker 1: New York, Connecticut, or California. And by the way, those

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Speaker 1: states just happened to be overwhelmingly democratic. According to today's guests,

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Speaker 1: the changes will go a lot further than denting a

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Speaker 1: couple of property prices in Westchester County. It will mean

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Speaker 1: nothing more than a steady, inexorable shift in economic, political, cultural,

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Speaker 1: and financial power towards the South and the West, where

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Speaker 1: state and local taxes aren't as high now. Some of

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Speaker 1: this isn't particularly new if you look at population data

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Speaker 1: over the last few decades, there's already been quite a

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Speaker 1: shift to the sun Belt away from the Rust Belt

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Speaker 1: and other northern Northeast areas. But certainly since A four

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Speaker 1: one of America's two main political parties has become increasingly

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Speaker 1: southern in flavor. It's really the idea that the cultural

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Speaker 1: and financial center of the country, or the centers, might

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Speaker 1: also shift. That's the new part of this idea. Let's

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Speaker 1: welcome our guest, Jared Dillion. He's editor of an investor

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Speaker 1: newsletter called The Daily Dirt Nap, and he's also an

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Speaker 1: outside contributor to Bloomberg View. Jared, thanks for being with

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Speaker 1: us today. Thanks for having me Jared. First up, why

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Speaker 1: collon newsletter the Daily Dirt Nap? What is a dirt Nap?

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Speaker 1: I used to be a clerk on the Pacific Options

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Speaker 1: Exchange back during the dot com bubble, and a lot

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Speaker 1: of the traders in San Francisco were surfers, and they

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Speaker 1: would get off of work at one o'clock and go surfing.

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Speaker 1: And as you know, surfers kind of have their own

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Speaker 1: lexicon and dirt nap was the word they used for

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Speaker 1: any time the market was going down. So they would

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Speaker 1: look at the screens and then they would say, dude,

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Speaker 1: the spoons or taking a hell of dirt nap, which

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Speaker 1: meant that the market was going down. So I sort

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Speaker 1: of co opted the term and brought it back east.

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Speaker 1: And you've served in the U. S. Coast Guard, where

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Speaker 1: you were an expert in fisheries. That's correct. I was

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Speaker 1: actually a boarding officer, a law enforcement officer for a

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Speaker 1: couple of years. I boarded fishing vessels in the Pacific

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Speaker 1: Northwest and up in Alaska in the Bering Sea. UM.

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Speaker 1: And then I was actually a fisheries analyst for a

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Speaker 1: few years, working out of the San Francisco Bay area.

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Speaker 1: And you also had the misfortune or maybe fortune to

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Speaker 1: be working at Lehman Brothers in September two thousand and night.

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Speaker 1: And now you're in South Carolina. Aside from Lehman's collapse,

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Speaker 1: what drew you from the northeast to the South. Well,

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Speaker 1: we moved, you know, sort of for family reasons. My

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Speaker 1: wife got a job here in Myrtle Beach, South Carolina. Um,

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Speaker 1: we were I didn't really know what to expect with

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Speaker 1: regards to the move, and I have to say that

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Speaker 1: culturally it was a pretty big adjustment that took a

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Speaker 1: few years. We've been here for about eight years now

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Speaker 1: and it's been a terrific move and we absolutely love

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Speaker 1: it now. Jared, you wrote a recent Bloomberg View column,

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Speaker 1: very interesting piece about a potential death spiral for states

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Speaker 1: like New York or Connecticut. I know that the tax

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Speaker 1: cut law is probably going to have some effect on

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Speaker 1: those kinds of states because people won't be able to

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Speaker 1: deduct their state taxes the same way they were before.

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Speaker 1: But a death spiral, I mean, we've heard these kinds

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Speaker 1: of things before. What do you mean by that and

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Speaker 1: why do you think that's going to happen now? Well,

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Speaker 1: you know, the migration from the Northeast and the Midwest

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Speaker 1: to the South and the West has been going on

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Speaker 1: for a few decades, and I can tell you just

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Speaker 1: living here in South Carolina, the amount of development that

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Speaker 1: there's been since I moved here in eight years is

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Speaker 1: actually pretty remarkable. I even heard somebody refer to Myrtle

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Speaker 1: Beach as the city the other day, which is pretty new.

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Speaker 1: Myrtle Beach is not a big town, but when people

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Speaker 1: start calling at the city. Um, you've reached sort of

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Speaker 1: a critical mass. So this has been going on for

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Speaker 1: a long time. And you know, the cost of living

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Speaker 1: in New York, Connecticut, New Jersey is very high, and um,

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Speaker 1: probably the biggest contributor to the cost of living is

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Speaker 1: state and local taxes, especially property taxes. Property taxes in

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Speaker 1: places like you know, Westchester County for a pretty average

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Speaker 1: house can get upwards of thirty thousand, forty thousand a

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Speaker 1: year or higher. Lots of places in New Jersey taxes

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Speaker 1: are twenty thousand or thirty thousand a year for a house.

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Speaker 1: And it's one of those things, the things that are

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Speaker 1: already expensive as it is, and when you eliminate the

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Speaker 1: deductibility of these taxes and you add twenty or thirty

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Speaker 1: thousand to an already very expensive place to live, I

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Speaker 1: think that this will be the one thing that pushes

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Speaker 1: a lot of businesses over the edge to relocate someplace cheaper. So,

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Speaker 1: in a trend that's been building for a couple of decades,

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Speaker 1: this would be the tipping point in your view, I

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Speaker 1: think so. Yes. I mean, for years, corporations, businesses, they've

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Speaker 1: been relocating to southern, lower tech states that you have

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Speaker 1: lots and lots of corporate headquarters businesses in these places,

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Speaker 1: and yet places like New York, Chicago, San Francisco, l A.

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Speaker 1: They are still far and away the cultural, economic, and

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Speaker 1: financial capitals in a lot of ways of this country.

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Speaker 1: What is the tipping point really that moves them from

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Speaker 1: being the cultural and financial capitals to being also ran

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Speaker 1: cities behind say Dallas, Atlanta, Miami and so on. Yeah,

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Speaker 1: I think I think the tipping point is really having

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Speaker 1: a lot of businesses relocate. I actually had this discussion

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Speaker 1: with my dad years ago, who lives out in Arizona,

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Speaker 1: and he's, you know, he says, it's great here. You know,

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Speaker 1: why why doesn't Lehman Brothers moved to Scottsdale? And it's

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Speaker 1: it's sort of a naive question, but it's not really like,

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Speaker 1: why wouldn't a large financial firm relocate from New York

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Speaker 1: to Miami? And I think we've seen a little bit

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Speaker 1: of that already. I mean, David Tepper's firm relocated to Miami.

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Speaker 1: And I think that a lot of the hedge funds

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Speaker 1: in Greenwich are gonna consider after this tax change moved.

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Speaker 1: I think Miami, Austin, Texas, Uh, to a lesser extent

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Speaker 1: in Nashville, where state income taxes are zero percent. You know,

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Speaker 1: this isn't going to happen over nine This happens over

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Speaker 1: a period of decades. And if you go back to

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Speaker 1: if you take a look at Miami in the eighties,

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Speaker 1: I mean, it's where it is today, it's unrecognizable from

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Speaker 1: where it was in the eighties. And I just think

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Speaker 1: that trend continues. Our listeners may be familiar with an

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Speaker 1: iconic newspaper headline, forward to New York coal and dropped dead,

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Speaker 1: the Ford being then President Gerald Ford and Washington's refusal

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Speaker 1: to help rescue New York from looming bankruptcy. Yet the

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Speaker 1: rescue did happen. It happened largely at the hands of

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Speaker 1: the private sector and concerned citizens. What makes you confident

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Speaker 1: that that same effort can't be repeated, Well, there's a

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Speaker 1: lot of there's a lot of factors here. I mean,

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Speaker 1: first of all, New York City had a remarkable turnaround

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Speaker 1: in the eighties and nineties and two thousands, and a

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Speaker 1: lot of that was because of good governance. It wasn't

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Speaker 1: really because it became less expensive, but there was a

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Speaker 1: lot of factors. Crime went down, people were moving to cities,

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Speaker 1: migration to cities that all sort of helped out New York. UM.

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Speaker 1: You know, you can make the argument that government's has

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Speaker 1: not been as good the last four years, but really

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Speaker 1: it gets back to an expensive place where your tax

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Speaker 1: bill is going up multiple five figures, and you're talking

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Speaker 1: about people who have high six figure incomes Wall Street employees, attorneys, professionals,

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Speaker 1: and there I hesitate to say struggling, but college tuition,

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Speaker 1: property taxes, state income taxes, there's not a lot left over.

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Speaker 1: And when they look at you know, I could maybe

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Speaker 1: make a little less money living someplace else and keeping

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Speaker 1: a lot more of it, it looks pretty attractive. Jared,

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Speaker 1: I'm curious about another issue, how to game this out politically.

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Speaker 1: I mean, how is this going to play out. Even

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Speaker 1: though we're talking about southern states or lower tech states

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Speaker 1: that tend to lean Republican overall that they might be

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Speaker 1: the beneficiaries, you would still have say a lot of

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Speaker 1: people from blue states or Democratic state moving there, and

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Speaker 1: you know that could conceivably change the political landscape. Even

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Speaker 1: in the southern states, the cities tend to be places that,

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Speaker 1: uh go more democratic, whereas the more rural parts of

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Speaker 1: the state's go Republican. So couldn't you conceivably see the

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Speaker 1: country shift even more in a democratic direction if you

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Speaker 1: have these demographic movements. Yeah, you're actually you're starting to

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Speaker 1: see that. Just in Myrtle Beach. You know, Myrtle Beach

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Speaker 1: is voting to raise property taxes now, not a lot.

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Speaker 1: The average property tax bill here in South Carolina is

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Speaker 1: about a thousand dollars a year, and the increase will

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Speaker 1: be very small, it'll be about forty dollars a year.

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Speaker 1: But the direction is what's important. A lot of people

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Speaker 1: from blue states have moved here, and they view their

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Speaker 1: taxes as being so low that they're willing to pay

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Speaker 1: a little bit more. So already the dynamics are changing here.

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Speaker 1: It would take a really, really long time to get

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Speaker 1: taxes up to Northeastern levels, but the direction has changed

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Speaker 1: a little bit. And people flock to New York not

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Speaker 1: just to work in the street and everything else. I mean,

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Speaker 1: this is a culturally iconic city, not just in the

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Speaker 1: United States, but the world. To share a bit of

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Speaker 1: my own story, I moved up here two years ago

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Speaker 1: from suburban Maryland, swapped Potomac for Brooklyn. I find it

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Speaker 1: almost intoxicating in its vibrancy. How do you replicate the

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Speaker 1: cultural aspect of things? And if we're talking about schools,

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Speaker 1: isn't it true that in the South half the schools

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Speaker 1: don't even teach science. It's god and guns. There's a

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Speaker 1: couple of things that play here culturally. I'm a New Yorker.

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Speaker 1: I lived in New York for a decade and I'm

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Speaker 1: a trader. My knuckles dragged on the ground. I walk

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Speaker 1: and talk like a New Yorker. I'm a Yankee fan

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Speaker 1: and I'm used to having bars, restaurants, clubs, everything open

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Speaker 1: until four in the morning. And you know, I moved

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Speaker 1: to South Carolina and I have three restaurants to choose from.

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Speaker 1: How many of them do a good martini? Actually? Quite

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Speaker 1: with there. It's not bad. There's some good martinis here. Um,

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Speaker 1: But it was a little bit. Like I said, it

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Speaker 1: was a bit of an adjustment moving here. But there's

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Speaker 1: you know, my cash flow has gone up significantly and

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Speaker 1: to me, to me, it's not to everybody. Some people

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Speaker 1: they can't exist outside of New York. But to me,

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Speaker 1: it's been a good trade. I would do that trade again.

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Speaker 1: I enjoy it. I think the biggest thing, the biggest

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Speaker 1: hurdle for people to move is definitely the schools. The

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Speaker 1: schools are just not as good and not even really close.

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Speaker 1: They don't compare to the Northeast. And and I talk

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Speaker 1: with people all the time who think about, you know,

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Speaker 1: even moving to a place like Charleston, And they asked

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Speaker 1: me what do I do with my kids? And I'm like,

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Speaker 1: I don't know. That's you know, that's when you start

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Speaker 1: talking about boarding schools and things like that, private schools,

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Speaker 1: because you know, the public schools aren't very good. And Jared,

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Speaker 1: just to press you on the cultural point, how is

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Speaker 1: the Birmingham Metropolitan Opera doing? So, you know, we don't

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Speaker 1: have the opera, we have Oprey, we have the Carolina Opery.

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Speaker 1: Um there's look, you know, I live about ninety minutes

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Speaker 1: from Charleston, so a long drive. You know, you can

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Speaker 1: definitely go there and back in a day. Some of

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Speaker 1: the best restaurants in the world. No theater, there's one playhouse,

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Speaker 1: but really some of the best food and culture and

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Speaker 1: it's ninety minutes away. Um, so you just gotta drive

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Speaker 1: a little bit. It's not in your backyard. Let me

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Speaker 1: go back to the point you were making about your

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Speaker 1: own move to Myrtle Beach. You probably have a job

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Speaker 1: that lets you have some flexibility. You can do a

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Speaker 1: newsletter from various places, or do your job from various

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Speaker 1: places around the country. And yet, something we occasionally touch

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Speaker 1: on in our economic coverage is how mobility has gone

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Speaker 1: down for many Americans in recent years. People just aren't

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Speaker 1: willing to move to get two jobs like they used to.

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Speaker 1: What makes you think that this tax plan is going

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Speaker 1: to help reverse that trend? Is it purely the amount

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Speaker 1: of money that people are getting now? You know, first

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Speaker 1: of all, I'm very lucky to have a job where,

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Speaker 1: you know, I sort of have a little bit of

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Speaker 1: an arbitrage. I can make New York money and still

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Speaker 1: live here, So that's not available to a lot of people.

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Speaker 1: A lot of the factors that go into a reduction

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Speaker 1: and mobility are you know, the housing implosion from ten

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Speaker 1: years ago got people stuck in their houses, and also

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Speaker 1: health insurance people are really tied to their job in

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Speaker 1: order to get benefits. I would say those are the

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Speaker 1: two big factors that have red used to mobility. And

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Speaker 1: you know, if you're X y Z trader at a

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Speaker 1: bank or a hedge fund in New York. You know,

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Speaker 1: you can't just go look at jobless things and see

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Speaker 1: what's available in Charleston, because it really isn't anything. You

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Speaker 1: have to change careers. You have to become a financial

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Speaker 1: advisor or a real estate agent, or just do something

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Speaker 1: different because that financial industry doesn't exist here yet it

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Speaker 1: does in some places. There's a commodities industry in Memphis.

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Speaker 1: Atlanta is a big financial center. Charlotte is a big

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Speaker 1: financial center. Charlotte is a great town. So yeah, I mean,

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Speaker 1: that's what people can do. Jared. Don't get me wrong.

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Speaker 1: I'm sympathetic with a lot of your arguments, and when

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Speaker 1: it gets down to I'm a bit of an economic determinist.

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Speaker 1: I'm just wondering whether New York really is different. And

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Speaker 1: I'll ask you another question that puts you on the

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Speaker 1: spot a little bit. What is the theme song of say, Houston,

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Speaker 1: and did Frank Sinatra sing it? I'm ruggling to think

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Speaker 1: of another city in the world. But if we use

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Speaker 1: that as a proxy for the cultural soft power of

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Speaker 1: New York, there's not a single person I would argue

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Speaker 1: on the globe who's not familiar with that song. I mean,

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Speaker 1: I don't know what the Biloxi song is. When you

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Speaker 1: move away from New York, you sort of have a

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Speaker 1: different view. Now. I come back to the city every

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Speaker 1: two or three months for business, so I'm kind of

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Speaker 1: always in the city. I'm always coming back. I'm seeing people,

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Speaker 1: and I get re energized. I sort of get recharged

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Speaker 1: when I get back to the city. You mean the

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Speaker 1: city as in Myrtle Beach or the city as in

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Speaker 1: New York. The city is in New York for sure. Yeah,

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Speaker 1: so I love coming back to New York. But my

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Speaker 1: view has changed since I left. When I tell my

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Speaker 1: wife is New York is full of crazy people. If

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Speaker 1: I'm in Starbucks here and I get stuck in a

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Speaker 1: slow line like everything's cool, like I'm just hanging out,

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Speaker 1: I got time, things are okay. I've seen people just

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Speaker 1: come unglued in the line at Starbucks in New York.

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Speaker 1: So it's been I think to move away from the city,

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Speaker 1: as fun as it is, has been psychologically healthy because

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Speaker 1: New York is a bit too much, especially when you

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Speaker 1: get a little older. I'm coming up on forty four,

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Speaker 1: so it's a bit too much for me at this

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Speaker 1: stage of my life. The idea that New York's financial

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Speaker 1: cloud is under siege isn't all that new either. In

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Speaker 1: the mid two thousands, it was supposedly under threat from London. Well,

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Speaker 1: that didn't work out too well. Britain voted to quote

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Speaker 1: take back control unquote, and that seems to have been

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Speaker 1: the end of London's threat to anyone as a financial center. Jared, again,

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Speaker 1: are we riding new York's a bitchery too fast? Sure?

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Speaker 1: I mean too fast. I think all of this is

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Speaker 1: going to play out over a period of decades. But

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Speaker 1: I think, you know, to sort of we bought a

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Speaker 1: little bit. A city as a financial center is taking

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Speaker 1: on less meaning nowadays, with so much trading being computerized,

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Speaker 1: the exchanges are completely hollowed out. Employment has been reduced.

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Speaker 1: I mean this is measurable. You've seen, uh, financial jobs disappear.

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Speaker 1: So that you know, the statement that you know New

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Speaker 1: York or London is the financial capital of the world

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Speaker 1: is I think it's just a little bit less relevant.

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Speaker 1: Could Miami become the financial capital over a period of

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Speaker 1: thirty years, sure, but I mean it really would take

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Speaker 1: that long. I think New York is probably pretty safe

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Speaker 1: for the time being. Jared Dillion, thanks for joining us.

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Speaker 1: Thanks for having me. Benchmark will be back next week.

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Speaker 1: Until then, you can find us on the Bloomberg terminal,

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Speaker 1: Bloomberg dot com, out, Bloomberg App, as well as Apple Podcasts,

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Speaker 1: Pocket Costs, and stitch Up. Why do they take a

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Speaker 1: minute to write and review the show so more listeners

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Speaker 1: can find us and do let us know what you thought.

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Speaker 1: You can follow me on Twitter at Moss Underscore, Echo

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Speaker 1: and Scott is at scott Landmen and our guest is

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Speaker 1: at Daily Dirt Now. Benchmark is produced by TOFA for

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Speaker 1: As the head of Bloomberg Podcast is Francesco Levie. Thanks

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Speaker 1: for listening, See you next time.