Speaker 1: Hi, I'm Molly John Fast and this is Fast Politics,
Speaker 1: where we discussed the top political headlines with some of
Speaker 1: today's best minds. We're on vacation, but that doesn't mean
Speaker 1: we don't have a great show for you today. Michael
Speaker 1: Rohattan on his documentary Drop Dead City. It's an amazing
Speaker 1: portrait of New York City in the seventies when it
Speaker 1: ran out of money. But first we have the Groundwork
Speaker 1: Collective's own Lindsey Owens on the Groundwork Collectives blockbuster reporting
Speaker 1: on Instacart's dynamic pricing scam.
Speaker 2: Welcome to Fast Politics.
Speaker 1: Thanks for having me explain to us what the Groundwork
Speaker 1: Collective is and how you got involved.
Speaker 3: So Groundwork Collaborative is a think tank based in Washington,
Speaker 3: d C. We're focused on building an economy that works
Speaker 3: for all of us. The last five years or so,
Speaker 3: that has meant we have been laser focused on high prices,
Speaker 3: cost of living, affordability. This is the time issue that
Speaker 3: Americans care about, and every poll that we have fielded
Speaker 3: for five years now Americans are laser focused on the
Speaker 3: price of groceries, the price of housing, the price of healthcare,
Speaker 3: the fact that inflation was rising. Now we have Trump's tariffs,
Speaker 3: and so we spend most of our time thinking about
Speaker 3: why our price is high, who is to blame, what
Speaker 3: we can do about it?
Speaker 2: Okay, so this gets us to instacard discuss.
Speaker 3: Yeah, so, look, Americans are really frustrated with grocery prices.
Speaker 3: If you ask Americans which prices vex them the most,
Speaker 3: they say grocery prices. It's not super surprising because you
Speaker 3: buy a lot of groceries, right, You don't buy one grocery,
Speaker 3: you don't buy one card of groceries. You go to
Speaker 3: the grocery store a couple times a week. You go
Speaker 3: to the grocery store all year long. And grocery prices
Speaker 3: have been high, sometimes outpacing inflation for years now.
Speaker 4: And there are a lot of reasons for this.
Speaker 3: There are reasons related to not enough competition in agricultural market.
Speaker 3: There are reasons related to the president's tariffs. You know,
Speaker 3: we did a report at Groundwork looking at why Thanksgiving
Speaker 3: prices were high. To put food on the table for
Speaker 3: Thanksgiving one of the culprits. People buy a lot of
Speaker 3: cans at Thanksgiving. They buy canned pumpkin candy, cranberry sauce,
Speaker 3: cand green beans. Steel tariffs mean that even cheaper items
Speaker 3: like can goods are up. But there's another reason why
Speaker 3: grocery prices are high, and that is because increasingly grocers
Speaker 3: and grocery delivery platforms like Instacart are running tests on
Speaker 3: American shoppers to determine exactly how much they can get
Speaker 3: away with charging them and to squeeze it out of them.
Speaker 3: And we knew Instacart was doing this because this has
Speaker 3: been a part of Instacart's business development and business model
Speaker 3: for years now. In twenty twenty two, then CEO of
Speaker 3: Instacart acquired an AI pricing tech company called Eversite. Eversite Technology,
Speaker 3: the thing that they offer is the ab to build
Speaker 3: out these large scale experiments that shoppers don't realize they're
Speaker 3: in on to help companies fine tune and calibrate their pricing,
Speaker 3: to really figure out the maximum amount you'll pay for
Speaker 3: something before you pull it out of your cart or
Speaker 3: log off Instacart altogether walk into the store and buy
Speaker 3: your groceries another way. And so we knew this was happening.
Speaker 3: It wasn't exactly a secret, it was sort of hiding
Speaker 3: in plain sight from our perspective, and we wanted to
Speaker 3: understand exactly how much it could be costing shoppers and families,
Speaker 3: And so we turned instacarts experiment back around on the company.
Speaker 3: And that's really how this project gets started.
Speaker 1: You turn the experiment background in the company and what
Speaker 1: do you discover.
Speaker 3: Yeah, so we partnered with Consumer Reports and a news
Speaker 3: outlet called more Perfect Union to recruit more than four
Speaker 3: hundred volunteer secret shoppers. We have them log onto the
Speaker 3: instacart app. We have them put the exact same twenty items,
Speaker 3: same twenty grocery items in their carts at the exact
Speaker 3: same time from the exact same pickup location. So these
Speaker 3: were Safe Way stores and Target Stores and North Canton, Ohio,
Speaker 3: and Seattle, Washington, and Washington, d C.
Speaker 4: And Saint Paul, Minnesota. And then once all of.
Speaker 3: The groceries are in their instacarts, we had them take
Speaker 3: screenshots of the prices and we collected all of those screenshots.
Speaker 3: The team at the Groundwork Collaborative entered the data by hand. Right,
Speaker 3: you have to sort of, you know, look at the
Speaker 3: screen shots, look at the prices, enter the data and
Speaker 3: we analyzed the data. And what we found is seventy
Speaker 3: five percent of the items in the carts were offered
Speaker 3: at different prices to different customers, and that one hundred
Speaker 3: percent of the shoppers in our study ended up in
Speaker 3: some condition of the experiment at some point in the study,
Speaker 3: and that the price differences weren't small. This wasn't sort
Speaker 3: of like teeny tiny ab testing where they're trying to
Speaker 3: figure out if you like the blue can or the
Speaker 3: yellow can, or if you're more likely to buy something
Speaker 3: with what we call charm pricing, right, something at three
Speaker 3: ninety nine versus something at four dollars in one cent.
Speaker 3: The price differences in our study were as high as
Speaker 3: twenty three percent. So you and I picking out the
Speaker 3: exact same box of wheat thens from Target and you
Speaker 3: being charged twenty three percent more than me. Now again,
Speaker 3: because you don't buy only one box of wheat THENDS
Speaker 3: when you go grocery shopping, you buy a whole basket
Speaker 3: of groceries. We look at the pricing variation across the
Speaker 3: entire basket, and then we use instacart's own analysis of
Speaker 3: how much a family of four a household of four
Speaker 3: spends on groceries in a given year, and we estimate
Speaker 3: that this experiment, I'm calling it the Instacart tax for
Speaker 3: simplicity could cost a family as much as twelve hundred
Speaker 3: dollars a year. So this is really a significant amount
Speaker 3: coming from this Instacart experiment.
Speaker 2: I shop sometimes on Instacart. It seems really expansive.
Speaker 1: Yeah, but is it really expensive or is it expensive
Speaker 1: for some people and not for other people.
Speaker 4: Yeah, it's a great question.
Speaker 3: So there are certainly aspects of shopping on instacart that
Speaker 3: are expensive for everyone. Right, you pay a premium for
Speaker 3: the convenience of Instacart. You're going to pay a service fee,
Speaker 3: a delivery fee, potentially a tip, right, all of those pieces.
Speaker 3: We also know that instacart prices are sometimes just higher
Speaker 3: than in store prices, right. So that's something that is
Speaker 3: true but can be consistent across all shoppers. We also
Speaker 3: know that there are some additional levees that Instacart charges
Speaker 3: for certain items. Heavy items, it's harder to get those
Speaker 3: delivered to you. Fragile items like a bouquet of fresh flowers.
Speaker 3: Can't stick that in your trunk if you're a delivery driver.
Speaker 3: So there are a whole host of ways in which
Speaker 3: Instacart is expensive. This is a new additional way in
Speaker 3: which instacart can be expensive, which is that on top
Speaker 3: of all of those fees which we call drip pricing, right,
Speaker 3: these little fees that get tacked on at different stages
Speaker 3: of the transaction, on top of all of that, you're
Speaker 3: also effectively a guinea pig in this experiment. And if
Speaker 3: you're unlucky, if you're in the sort of gouge treatment
Speaker 3: condition and not the discount treatment condition, you could also
Speaker 3: be paying a premium as a result. So this piece
Speaker 3: is variable. Some people are lucky, some people are not.
Speaker 3: But for those who aren't, and again, you know, we
Speaker 3: found that seventy five percent of items were offered at
Speaker 3: variable prices. One hundred percent of people in our study
Speaker 3: were subject to some variable pricing. You know, this can
Speaker 3: be a substantial additional amount of pricing that's getting layered
Speaker 3: in to your grocery bill.
Speaker 2: So now explain to us why this is not okay?
Speaker 4: Yeah, I think there are two answers to this question.
Speaker 3: There's sort of morally why this isn't okay, and I
Speaker 3: think there are some good answers to that. And then
Speaker 3: there's legally whether this is okay? Does it pass legal muster?
Speaker 3: And then the intersection of those two presents the question
Speaker 3: that policymakers are asking right now, which is like, to
Speaker 3: the extent that this is legal if we don't feel
Speaker 3: like it should be, because we don't feel like it's fair,
Speaker 3: we don't feel like it's right, should we be pursuing,
Speaker 3: you know, new legislation something like that to curtail this.
Speaker 3: So from the moral perspective, it feels unfair because we're
Speaker 3: used to a public price.
Speaker 4: We're used to a price tag.
Speaker 3: If you and I are standing in line at the
Speaker 3: grocery store check out together and we're both holding the
Speaker 3: same box of cheerios, you and I expect to, say,
Speaker 3: pay the same price for that box of cheerios. And
Speaker 3: it doesn't feel right that if we stepped out of
Speaker 3: line together and fired up our phones and got that
Speaker 3: same box of cheerios on Instacart, that you and I
Speaker 3: might pay different amounts because it's easier for them to
Speaker 3: run these experiments in this online setting where we're atomized.
Speaker 3: You and I were sitting on our couches at home.
Speaker 3: I don't know I don't know you, I don't know
Speaker 3: what you're buying. I don't know that you're getting charged
Speaker 3: more than me, your time's very valuable. They've figured that
Speaker 3: out right, and they're like, this woman doesn't have time
Speaker 3: to go to the grocery store, like we're going to
Speaker 3: go for gold with her, right, And that doesn't feel there.
Speaker 3: I think the other thing that doesn't feel fair is
Speaker 3: how deceptive this is. I think the backbone of a
Speaker 3: healthy economy is fair and honest markets, and the fact
Speaker 3: that we don't know that we're the guinea pigs in
Speaker 3: this grand Instacart eversight AI experiment doesn't feel right. There's
Speaker 3: a sort of transparency problem here. It's opaque, it's arguably deceptive.
Speaker 3: The final thing that I would argue, in addition to
Speaker 3: the fact that it's just costing us more right, these
Speaker 3: companies are extracting all of our consumers surplus and we
Speaker 3: can decide that, yeah, maybe that's okay in a capitalist economy,
Speaker 3: but we don't have.
Speaker 4: To like it.
Speaker 3: The final thing for me that doesn't sit well is predictability.
Speaker 3: It is really hard to budget for things that you
Speaker 3: know you need, like groceries, if you have no idea
Speaker 3: what it's going to cost from one week to the next.
Speaker 3: Part of the reason that people find inflation so uncomfortable.
Speaker 3: Is it adds that element of volatility to essential items
Speaker 3: and we start to wonder where we have enough money
Speaker 3: left when the music finally stops. And I think this
Speaker 3: instacart experiment is adding volatility and uncertainty and unpredictability. So
Speaker 3: I think those are all the reasons why I think
Speaker 3: it doesn't sit well with people, and arguably I think
Speaker 3: some of them, you know, do constitute a sort of
Speaker 3: violation of economic norms of fairness that lawmakers should take
Speaker 3: a look at. Whether or not it's legal, I think
Speaker 3: depends upon a few things. My sense, and we have
Speaker 3: been talking to legal scholars and attorneys general and people
Speaker 3: like that, is, you know, we already have laws protecting
Speaker 3: us against unfair and deceptive acts and practices.
Speaker 4: These are called you'd.
Speaker 3: App laws, and I think there's maybe a case to
Speaker 3: be made here that this particular experimental design violates those
Speaker 3: DApp laws. And so I am actually interested to see
Speaker 3: if we may see some legal action coming down the
Speaker 3: pike here to sort of take this on and say, actually,
Speaker 3: we think this is already something that a company like
Speaker 3: in Stickhardt shouldn't be able to.
Speaker 4: Do to us.
Speaker 3: There have been further legal conversations and conversations with policy
Speaker 3: makers and lawmakers about better understanding whether or not our
Speaker 3: personal data is being used in the experiment. So is
Speaker 3: the experiment random or is this that they've taken a
Speaker 3: look at our shopping history, They've taken a look at
Speaker 3: demographic information that they have about us because they've purchased
Speaker 3: it from third party data sellers, and that's actually being
Speaker 3: used to determine whether we're in the discount condition or
Speaker 3: the guage condition. And I think if that is the case,
Speaker 3: it's something that looks more like personalized pricing, what we
Speaker 3: call surveillance pricing, where pricing is varying based on the
Speaker 3: individual characteristics of the consumer. And there is actually a
Speaker 3: nice kind of movement afoot to curtail the practice of
Speaker 3: surveillance pricing, and New York State actually just took the
Speaker 3: first action, and just last month in November, in New
Speaker 3: York State, there is now a requirement that companies let
Speaker 3: you know through disclosure if they are using your data
Speaker 3: and their algorithm to set your prices. And so in
Speaker 3: New York, now if you're shopping online, you'll get that
Speaker 3: disclosure or if that's indeed happening. But in the US Congress,
Speaker 3: Senator Reuben Diego last week introduced legislation to ban the
Speaker 3: practice of surveillance pricing, and that follows action earlier this
Speaker 3: year in the House of Representatives, Representative Greg Kassar offered
Speaker 3: similar legislation. So there are some thorny questions here about
Speaker 3: is this a deceptive issue?
Speaker 4: Therefore maybe UDAP covers it.
Speaker 3: Is this new terrain of surveillance pricing, therefore we need
Speaker 3: sort of new laws to curtail it.
Speaker 1: Can you talk about what else you guys are working on,
Speaker 1: what other investigations you've done, what other investigations you're doing,
Speaker 1: or what sort of what other focuses you guys have.
Speaker 3: Yeah, So one of the things that we've been interested
Speaker 3: in looking at is pricing around sports.
Speaker 2: Which is also similar. Yeah.
Speaker 3: Yeah, we're in the New York Times this morning and
Speaker 3: the Athletic with some comments about our concerns about how
Speaker 3: FIFA has allocated World Cup tickets, and you know, as
Speaker 3: you know, they've sort of changed their tune a little
Speaker 3: bit and they're making some additional tickets available at some
Speaker 3: you know, firer and lower prices. But you know, when
Speaker 3: you have scarce resources like seats in a stadium or
Speaker 3: plane tickets. You often see dynamic pricing, right. This is
Speaker 3: the idea that as the number of seats shrinks, the
Speaker 3: price goes up. When there's two seats left, Like, the
Speaker 3: price really goes up, right when you need a last
Speaker 3: minute plane ticket, or you want the last seat at
Speaker 3: a concert or a World Cup game, World Cup playoff game.
Speaker 3: And you know what we talk about in the piece
Speaker 3: and what we argue in the piece is there are
Speaker 3: a lot of different ways to allocate scarce resources. You
Speaker 3: can allocate them based on ability to pay, which is
Speaker 3: what many people choose, many companies choose, and what FIFA
Speaker 3: chows initially. But you can also allocate them based on lottery.
Speaker 3: You can allocate based on queuing, first come, first serve.
Speaker 3: I mean, I remember when I lived in Palo Alto
Speaker 3: for a while.
Speaker 4: A long time ago.
Speaker 3: We'd watch these people line up and camp out and
Speaker 3: sleep outside the Apple store, right, like the price of
Speaker 3: the iPhone didn't change, but they wanted to be first
Speaker 3: in line because they wanted to get the next batch.
Speaker 4: Right.
Speaker 3: So, there are a lot of different ways you can
Speaker 3: allocate scarce resources. But what many companies do and what
Speaker 3: FIFA decided to do is prioritize ability to pay, and
Speaker 3: the result is you're going to have passionate fans watching
Speaker 3: from their couch and hedge fund managers watching, you know,
Speaker 3: from the sidelines. We've also been really interested in stadium
Speaker 3: pricing concessions in stadiums. This is something that came up
Speaker 3: with soon to be Mayor's or on Mandami's team recently
Speaker 3: and there was there was a sort of I don't
Speaker 3: know what you would call it. There was a Twitter
Speaker 3: brew haha about to be except that that matters anymore.
Speaker 3: But basically, you know, sort of our argument is that
Speaker 3: you know, it's okay to prioritize the fans and pricing decisions,
Speaker 3: and just because you have a captive audience doesn't mean
Speaker 3: you need to gouge people. And also, our tax dollars
Speaker 3: go to creating these stadiums, our labor goes to making
Speaker 3: sure they're our ancillary businesses developed around the stadiums, and
Speaker 3: it would be okay if there were rules saying you
Speaker 3: got to charge the same amount for a pepsi inside
Speaker 3: the stadium as you charge down the street. There are
Speaker 3: actually places in the country that do that. The Portland
Speaker 3: Airport is one of the only airports in the country
Speaker 3: where you can get a bottle water and you know,
Speaker 3: some p tog at a normal price.
Speaker 5: Right.
Speaker 3: We have something called street pricing, right, which is this
Speaker 3: idea that prices outside and inside can be similar and
Speaker 3: just because they've got you over a barrel doesn't mean
Speaker 3: they get to shoot you. So we've been really focused
Speaker 3: on understanding norms around pricing and thinking about different ways
Speaker 3: in which lawmakers could regulate pricing. And by the way,
Speaker 3: companies can take this on voluntarily. So you know, I
Speaker 3: do think as pricing gets more volatile and more opaque,
Speaker 3: there will be more kind of white hat companies who say, hey,
Speaker 3: you come to Owens's store, like we're not going to
Speaker 3: use electronic shelf label that where the price changes all
Speaker 3: day long, Like if you walk it.
Speaker 4: In the morning, the price will be four dollars.
Speaker 3: If you come back in the afternoon because you forgot
Speaker 3: something or you need another one, the price will still
Speaker 3: be four dollars. And I think we will start seeing
Speaker 3: some of that backlash. And you know we already have
Speaker 3: in sports, we have the Savannah bananas, which is a
Speaker 3: real sensation.
Speaker 4: In the baseball sort of world.
Speaker 3: And you know, Jesse Cole, who runs the Savanna Bananas,
Speaker 3: has said, look like I'm in the business of creating
Speaker 3: a positive experience, a memorable experience for fans and their families,
Speaker 3: not in the business of charging you whatever I can
Speaker 3: get away with charging you. So they use lottery systems,
Speaker 3: they have all in pricing for concessions, all sorts of
Speaker 3: things that they do a little differently.
Speaker 4: I think it'll be great to see more of that.
Speaker 1: So interesting. I hope you will come back with your
Speaker 1: next investigation.
Speaker 4: Yeah, happy too, that would be great.
Speaker 1: We have exciting news over on our YouTube channel. The
Speaker 1: second episode from our Project twenty twenty.
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Speaker 1: It's a reimagining where we examined what went wrong with
Speaker 1: democrats approach to politics and how we can correct it
Speaker 1: and deliver changes to help people's lives. The first episode
Speaker 1: dove into the very sexy topic of campaign finance reform,
Speaker 1: and our second episode deals with an even sexier topic,
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Speaker 1: can protect American citizens and make America thrive in an
Speaker 1: era of rampant corruption and predatory crony capitalism. We talk
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Speaker 1: find it there and help spread the word. Michael Rohantan
Speaker 1: is the director of the documentary Drop Dead City.
Speaker 2: Welcome to Fast Politics.
Speaker 5: Michael, thank you for having me talk.
Speaker 2: To us about this movie.
Speaker 1: You know, as someone who wrote a book about their mother,
Speaker 1: this is a sort of interesting way to process the
Speaker 1: familial connection, So talk to us about how you got here.
Speaker 6: That's interesting that you frame it that way. That I
Speaker 6: made the film with my friend Peter Yost, and I
Speaker 6: sort of pitched it to him as an idea after
Speaker 6: having spent time with my father and that cohort of
Speaker 6: old lions, where I saw how still, you know, vibrant
Speaker 6: they were with the whole energy of their experience. But
Speaker 6: I didn't want to make a film about my father
Speaker 6: that was really like that would have bothered me. There
Speaker 6: are so many puff piece. Not what you did is
Speaker 6: about you and your mother.
Speaker 5: I didn't want to do a movie about me explain
Speaker 5: to listeners who your father is.
Speaker 6: So Felix Rohiton was my father, and he was one
Speaker 6: of the principal architects of the rescue and was sort
Speaker 6: of dropped into the crisis in nineteen seventy five at
Speaker 6: the invitation of the Governor q Carry to sort of
Speaker 6: see if he could sort out what was happening in
Speaker 6: New York City.
Speaker 1: The financial crisis. So New York City, just talk us
Speaker 1: through the financial crisis. Where How did New York City
Speaker 1: get to this moment in nineteen seventy five where it
Speaker 1: went bankrupt.
Speaker 6: In nineteen seventy five, New York had been spending past
Speaker 6: its ability to earn. The combination of things drove New
Speaker 6: York City to a sort of sudden bankruptcy, a sudden
Speaker 6: brush with bankruptcy.
Speaker 5: One was white flight rich New Yorkers leaving New York,
Speaker 5: which had been years happening.
Speaker 6: One was the arrival of poor people to New York
Speaker 6: who needed services, also years happening.
Speaker 5: One was terrible accounting at city Hall, also years happening.
Speaker 5: One was interest rates that had gone up.
Speaker 6: Sharply because of the oil crisis, not so long happening,
Speaker 6: And one day the governor of New York at the time,
Speaker 6: a Republican, Nelson Rockefeller, had been very generous in spending
Speaker 6: money on public programs at the state level and also
Speaker 6: in approving city budgets sent to him by John Lindsay,
Speaker 6: who was the mayor before our period, before our story.
Speaker 6: And so when Lindsay wanted to spend money on housing,
Speaker 6: when he wanted to spend money on social services, the
Speaker 6: governor would approve it, and the legislature would design bond
Speaker 6: issuances that would kind of accommodate whatever the needs were.
Speaker 6: And these were more and more far fetched bonds that
Speaker 6: required other bonds to pay them off, bonds that were
Speaker 6: in anticipation of taxes that hadn't been levied yet. And literally,
Speaker 6: one day it's like the Emperor's clothes. A young banker
Speaker 6: went to one of the issuingomists for the City of
Speaker 6: New York and said, you're issuing a bond in anticipation
Speaker 6: of attacks. What tax are you anticipating collecting? And he
Speaker 6: couldn't answer it. He wrote something down on a piece
Speaker 6: of paper, and at that moment, this young lawyer working
Speaker 6: for the banks realized that there was nothing holding up
Speaker 6: these issuances.
Speaker 5: As we've heard before, you know, in two.
Speaker 6: Thousand and eight and whatever, the banks were selling bonds
Speaker 6: that had not been carefully vetted and where the risk
Speaker 6: was not accurately priced.
Speaker 5: So and since that was a short term borrowing pattern.
Speaker 6: That the city at that point was on such hard
Speaker 6: times that they were borrowing short term just to pay
Speaker 6: their payrolls. The moment that the marketplace saw that there
Speaker 6: was some problems with the accounting and there was a
Speaker 6: young controller, Harrison Golden, who was at odds with the
Speaker 6: mayor publicly about the books. Also something that had never happened,
Speaker 6: the banks just got cold feet. The marketplace dried up,
Speaker 6: and there was no ability for the city to borrow
Speaker 6: short term. Literally overnight, they made a bond sale and
Speaker 6: they had no bids. So at that moment, now the
Speaker 6: city is on a three month you know horizon, or
Speaker 6: a one month horizon. There are there are obligations coming
Speaker 6: due and they're chasing these obligations.
Speaker 1: If you had a bond sale where no one bought
Speaker 1: the bond, even today, you would be on the precipice
Speaker 1: of disaster.
Speaker 6: And maybe blundering. And you have a very educated audience.
Speaker 6: I would say this was worse. I don't think this
Speaker 6: can happen much worse. No, But because now this was
Speaker 6: for short term borrowing to just get through next month.
Speaker 6: Right now, the next month is pretty well audited and managed.
Speaker 6: If you had a bond for an airport reconstruction finance
Speaker 6: or a you know, and you had no bids, that's
Speaker 6: a crisis.
Speaker 5: But this is existential in a different way.
Speaker 6: That is literally, what are we going to do next
Speaker 6: month when we have to pay off those other bonds
Speaker 6: and we have payroll to meet.
Speaker 5: So that's kind of.
Speaker 6: Where they found themselves, and I think where there have
Speaker 6: been reforms since then, very important ones that now the
Speaker 6: city will never face those particular variables again.
Speaker 2: For sure. The city finds himself on the precipice of disaster.
Speaker 6: Right and the mayor goes to Albany to get some funding,
Speaker 6: and he goes to Albanie to present his problem, which
Speaker 6: is that they have in their own audits at the
Speaker 6: Mayor's Budget Bureau, they have found that they are short
Speaker 6: billions of dollars. They thought they had a deficit of
Speaker 6: two billion, but they had a deficit.
Speaker 5: Of six billion.
Speaker 6: And they go to Albany with this kind of half
Speaker 6: assed presentation to the governor and to the lawmakers there
Speaker 6: with just weeks to go before their next obligation is
Speaker 6: coming due. So it's total Keystone cops at city Hall.
Speaker 6: The sort of farce and tragedy of it is that
Speaker 6: the mayor had been controller.
Speaker 5: Was this dignified, kindly guy, career.
Speaker 6: Politician, had worked his way up through as precinct captain
Speaker 6: and was part of the machine. You know, but our
Speaker 6: film is really agnostic on a lot of these things.
Speaker 6: You know, he was part of a machine that in
Speaker 6: some ways worked, and you know there was a real
Speaker 6: connection between the politics and the community when you know
Speaker 6: when they were that connected, this guy, it all fell
Speaker 6: on his lap a beam. He was sort of the
Speaker 6: goat because he should have known. He was in charge
Speaker 6: of the books, not immediately prior but earlier, and was
Speaker 6: the mayor, and it sort of all fell on him.
Speaker 6: But as our film really has tried to navigate carefully,
Speaker 6: the mayor's malfeasance was playing.
Speaker 5: The auditing was terrible, The books were a joke.
Speaker 6: But the banks failed their clients and failed the system
Speaker 6: by selling bonds that they should not have been selling.
Speaker 5: A lot of other factors came into play.
Speaker 6: One of the legacies is that the unions were overpaid,
Speaker 6: and I think that's kind of the lasting narrative here
Speaker 6: is that New York in nineteen seventy five is an
Speaker 6: example of what happens when unions are doing too well.
Speaker 5: We really wanted to kind of go into that. You know,
Speaker 5: they were paid well.
Speaker 6: Your average worker union worker lived in the city, could
Speaker 6: raise his kids, could buy a house.
Speaker 5: Were they the problem. Absolutely not.
Speaker 6: Yes, there was too much money was being spent proportionally
Speaker 6: to the other parts of the system. But they were
Speaker 6: not the cause of this problem. Had the other teams
Speaker 6: in this game, the banks, the city's budget process, the
Speaker 6: state's budget process, had they worked correctly as well as
Speaker 6: the unions did. Frankly, the unions did what you're supposed
Speaker 6: to do. They fought for the best contracts for their membership.
Speaker 6: If the city had fought back with its best team
Speaker 6: to negotiate a contract that was equitable on both sides
Speaker 6: and that was you know, I don't think this crisis
Speaker 6: would have happened. But the legacy narrative is, this is
Speaker 6: the folly of liberalism.
Speaker 5: You're going to pay unions too much, you're going to
Speaker 5: go bankrupt.
Speaker 6: So what happens next the governor, who both the governor
Speaker 6: and the mayor were rookies. The governor had just started
Speaker 6: his term, he had been a longstanding member of Congress.
Speaker 6: They were both from Brooklyn, and they were both dropped
Speaker 6: into this. The governor arrives in Albany and he learns
Speaker 6: that there's this crisis in New York City and then
Speaker 6: New York City is looking at like the possibility of
Speaker 6: default within months, and he organizes a response. He builds
Speaker 6: a team around, you know, my father and a few
Speaker 6: others who kind of created an administration that was an
Speaker 6: emergency finance administration without a doubt, the failure of democracy,
Speaker 6: there should not be an emergency group of elders or no.
Speaker 2: Well, but it worked, So tell us how well it worked.
Speaker 5: And it worked partly I think because my father.
Speaker 6: Really revered government and revered FDR and was pro government.
Speaker 5: So he was not there to sort of just you.
Speaker 1: Know, he was not there to elon musk the government
Speaker 1: that was there to make it work.
Speaker 2: So explain to us how they did it.
Speaker 6: It was a disaster for the city. I mean there
Speaker 6: were you know, thousands upon thousands of layoffs. People were
Speaker 6: their lives were completely upended. Arguably the city got worse.
Speaker 6: Part of the challenge for our film was, like we
Speaker 6: framed around nineteen seventy five, well, nineteen seventy six was
Speaker 6: arguably worse than seventy five. But you know, for the
Speaker 6: purpose of our study of what we wanted to talk about,
Speaker 6: which was this kind of process around this default, this
Speaker 6: near bankruptcy, it worked to end there. But the consequence
Speaker 6: of all of the layoffs in fire and in police
Speaker 6: was rampant crime and arson. And so you you go
Speaker 6: into the eighties and you go into crack, and you
Speaker 6: go into you know, the consequences for the city were
Speaker 6: far reaching across the board and not good. In a way,
Speaker 6: you could say that this was one of the better
Speaker 6: moments in the story, was where people came together that
Speaker 6: the unions, the banks, the you know, antagonists.
Speaker 5: The press was unbelievable. They were incredible.
Speaker 6: They were reporting the story, you know, several times a day,
Speaker 6: and everyone in the city knew what was going on.
Speaker 5: It was quite an amazing feature of this story.
Speaker 2: But you also had nighttime papers then too.
Speaker 5: Absolutely, and they knew they knew what was going on.
Speaker 6: You know, Victor Gotbam, these guys, Alice Schnanker, they were
Speaker 6: known to the city.
Speaker 5: They were characters in the city. Kind of a story.
Speaker 6: I think it meant something to be a public person
Speaker 6: in nineteen seventy five.
Speaker 5: That's different from what it is today.
Speaker 2: Ooh, tell me more. You know, these are the kind
Speaker 2: of things I think about a lot.
Speaker 6: To explain, well, I just think that in those days,
Speaker 6: it was a matter of some p that you were
Speaker 6: going to participate in civic life. And you know, my
Speaker 6: father loved it. You know, he completely took to it.
Speaker 6: He liked the attention, he liked the press, he liked
Speaker 6: the game of it. But he did it because he
Speaker 6: wanted to help and loved New York. And I think
Speaker 6: now public first of all, politics has been so degraded
Speaker 6: that nobody really goes into politics to play a role.
Speaker 2: I mean, I would argue that that maybe.
Speaker 6: Mondami absolutely, that's an example of a sort of a
Speaker 6: new chapter.
Speaker 5: And I think what we had was Trump. We had people.
Speaker 6: You could become a public person through reality television. You
Speaker 6: could become if you're wealthy, you're Mark Cuban, You're going
Speaker 6: to own a team, You're gonna be on TV, on.
Speaker 5: Shark Tank or whatever.
Speaker 6: There's so many other ways for a wealthy person now
Speaker 6: to become a sort of a public person. And I
Speaker 6: love that, Momdami, that there's this idea of a celebrity
Speaker 6: who's going to be the mayor and who has talent,
Speaker 6: and that his talent is being put there.
Speaker 5: So I wish him well and I hope he's going
Speaker 5: to be a rock.
Speaker 2: So you have some interesting cameos. I don't know how
Speaker 2: you do it. It's a terrible job in your movie.
Speaker 1: And I want to talk about them.
Speaker 2: Dick Cheney and Ronny.
Speaker 5: Rubby and Cheney. Right, So, Okay, when you're making a movie,
Speaker 5: you want a villain.
Speaker 6: And you need celebrities too, and you need celebrities and
Speaker 6: especially now.
Speaker 5: And we really thought we were going to be working
Speaker 5: around the mayor as the villain.
Speaker 6: Who ultimately is I think I've made clear It became
Speaker 6: a little bit of our sort of tragic hero, not
Speaker 6: hero in the sense of saving the day, but just
Speaker 6: the person you follow and you sympathize with. But long Behold,
Speaker 6: we came across Dick Cheney and Donald Rumsfeld's who were
Speaker 6: highly placed in Ford's white House, and Rumsfield was the
Speaker 6: chief of staff, and they hated New York. They hated
Speaker 6: first of all, they were Midwesterners, and there's an antipathy
Speaker 6: from there.
Speaker 5: That is a known fact.
Speaker 6: We actually there is a story that's not in our
Speaker 6: film around the fact that they actually were plotting against
Speaker 6: New York in some real way in Congress to sort
Speaker 6: of precipitate New York's demise so that Chicago might rise.
Speaker 6: But yeah, there they were young at the beginning of
Speaker 6: their careers, and this was the beginning of the demonizing
Speaker 6: of the coastal elites. Maybe not the beginning, I know
Speaker 6: Nixon did it, and they went after New York as
Speaker 6: a as the profligate cautionary tale, and they hated Nelson Rockefeller,
Speaker 6: who was a high spending Republican. In the nineteen seventy
Speaker 6: six campaign for they pushed Rockfeller off the ticket and.
Speaker 5: They went for Bob Dole, who was from Kansas.
Speaker 6: The convention was in Kansas, and that was sort of
Speaker 6: the beginning to my mind of the Republican you know,
Speaker 6: veering into the flyover states, into the middle and pushing
Speaker 6: out the coastal elites as the kind of the enemy
Speaker 6: they were chasing.
Speaker 5: Ronald Reagan to the.
Speaker 2: Right created no fault divorce.
Speaker 5: Well there's that.
Speaker 6: There's that these two guys were young activist and very
Speaker 6: very energized young conservatives in Ford's White House, and they
Speaker 6: set the policy on New York. They and William Simon
Speaker 6: and a few others to really hang New York out
Speaker 6: to dry.
Speaker 5: And there was a political side to that.
Speaker 6: Which was as I said, they were they were worried
Speaker 6: about the right wing threat from Reagan, and there was
Speaker 6: also a sort of ideological moralist side. And Ford was
Speaker 6: a Midwesterner and had you know, was a kind of
Speaker 6: a sober minded guy, and New York just defended him
Speaker 6: on some basic level. And they kind of used New
Speaker 6: York as a you know, as a device and let
Speaker 6: it let New York hang out to dry.
Speaker 5: And then it backfired.
Speaker 6: And you know, David Gergan wrote a speech for Ford
Speaker 6: which was what the famous headline New York Ford to
Speaker 6: city drop dead is derived from. Gergan wrote this speech
Speaker 6: and in our film we have him talking about that.
Speaker 6: He wrote a speech that was that he got a
Speaker 6: call from Cheney asking for a very tough speech, and
Speaker 6: he wrote one, but he didn't think it would actually
Speaker 6: get you know, he thought it would get watered down,
Speaker 6: this is where we would start here and soften it.
Speaker 5: And the President read it and it was a really
Speaker 5: tough speech.
Speaker 6: I mean it was very, very blunt, and it totally
Speaker 6: backfired on Ford and arguably cost him the election. Because
Speaker 6: New York had been a Republican and was not a
Speaker 6: it wasn't a given that New York would go Democrat
Speaker 6: in nineteen seventy six those forty one in those days,
Speaker 6: it was forty one electoral votes went to Jimmy Carter,
Speaker 6: and a lot of that came from his New York
Speaker 6: City policy. Arguably one of the worst blunders of a
Speaker 6: presidential advisor that you could have you know, you could have.
Speaker 1: Designed everything is so unbelievably stupid. Though, this is fascinating.
Speaker 1: The fact that these people keep coming back again and
Speaker 1: again is pretty incredible, right.
Speaker 6: And you know the fact that like this antipathy, now
Speaker 6: we have Trump. Arguably in those days, the war against
Speaker 6: New York was political, like it had there was some
Speaker 6: political gain. With Trump, it's sort of vindictive. It's you know,
Speaker 6: he's not running for reelection.
Speaker 2: Well I think he thinks he is, but sure he might.
Speaker 5: Right, Well, you're right, right.
Speaker 6: I shouldn't say that, but on some level, the animus
Speaker 6: is just from his own gut. You know, nothing he
Speaker 6: does seems all that. It's much more intuitive and much
Speaker 6: more of a you know, off of the bad vibe
Speaker 6: of it. Anyway, So and now amazing to watch him
Speaker 6: and Mamdami start their romance, start their romance.
Speaker 5: Yeah, where do you think that's going to go?
Speaker 2: I don't know. Mayor is such a terrible job. I
Speaker 2: don't know. I can't begin to hope. I hope that
Speaker 2: he can do it.
Speaker 6: It always amazed me that Bloomberg, with all his money,
Speaker 6: that he wanted to be mayor of New York.
Speaker 5: To mean, there's a certain sweetness in that is like, no,
Speaker 5: I want to drive a locomotive to Yeah, that's what
Speaker 5: it is. But I always wanted to do because why
Speaker 5: else would you do that?
Speaker 2: It's crazy, It doesn't make any sense.
Speaker 5: Thank you, Michael, thank you so much. Thanks for having us.
Speaker 5: We're streaming on Amazon and Apple.
Speaker 6: And that's some film that I made with Peter Yost,
Speaker 6: who could not be here.
Speaker 1: That's it for this episode of Fast Politics. Tune in
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