Trump Government Muddies Economics With Politics: Alan Blinder

the Federal Reserve. He is currently the Gordon Renschler Memorial Professor of Economics at Princeton University, and he is the author of a new book is that It is entitled Advice and Dissent Why America's Suffers When Economics and Politics Collide. Alan Blinder, thank you very much for being with us. I want to jump right into which you describe. You

have an interesting phrase in the book. I believe it's it's a new world have you And I'm wondering if you could sort of describe where you came up with that, and maybe just also tell us how do you define political logic? All right, let me try to do those uh, The phrase was at the end of an anecdote that I was relating from when I, way back in the nineties migrated temporarily from the academic world to the political world and experienced at the table with Bill Clinton, who

was then President elect, my first photo op. If you're an academic, you don't do a lot of photo ops. In fact, you don't do any But if you're a politician, you do. And Bill Clinton, as the photographers rushed in, said to me, um Alan, You're now supposed to say nothing and look profound. And I retorted, as funny, because of my previous jobs, I was supposed to say profound things that look like nothing. Uh So it was indeed

a new world for me. Um Your question about political logic goes to a number of things that informal logic, or what I call in the book Aristotelian logic, kind of things we teach in universities are very different. I'll give you an example that's really arithmetic, which is a form of logic. If you take a policy, and by the way, many details of trade policies and tax policies

are like this. That gives a very large um gift to a relatively small number of people and uh and also disadvantages, but by small amounts, many, many millions of people. Economic logic would likely say that's a bad idea. You added up over the millions of people, and that's a

bad idea. Political logic says, this is a great idea because the millions of people that lose, you know, I make up a number two dollars a year are not going to notice it that I won't understand that even if they do, two dollars does not move them to political action. But if other people are gaining millions, that will. Professor Blinder, I'm struck by an implicit assumption in this idea that you shouldn't mix economics and politics. Um, are

we really worse than we ever have been before? Because this has always been the issue, from the foundation of the Federal Reserve, in the U. S. Treasury Department, it has always been the issue. I think we're worse than ever before, and presumably this is a temporary condition because of Donald Trump's general rejection of expertise in every domain.

This is not just the economics that he does this and I can't remember another I don't think we ever had another president that had that kind of atitude towards expertise, which is not to say, and this is your point, really, that they've always followed the advice of expert technicians. No, they haven't. In fact, more often than not they rejected it. And that's okay, because, um, we live in a democracy and we elect politicians, not technocrats to make decisions. Yeah,

Professor Blinder. One area of the government that typically has tried to remain at least the veneer of being somewhat independent from the sort of political regime is the Federal Reserve. There are a lot of vacancies on the Federal Reserve. One that has got garnered some attention is the rumor that John Williams will be the next New York Fed president selection. I'm wondering what is your feeling about that, and just generally about sort of the composition of the

Fed right now. Yeah. So, uh, you know, there there has been a clamor for some time for diversity, and I'm very sympathetic to that. I think other things that well, it's better to have diversity. Um, we had a woman chairman of the Faith, which was great, and she was a great chair of the Fed, Janet Ellen. I think John Williams is an excellent selection for the presidency of the New York Fed. That's not, by the way, a political appointment, unlike the governor. Know you mentioned the vacancies.

There lots of vacancies exists on the Board of Governors, and for that we need nominees from President Trump that get confirmed by the Senate. John Williams at the New York Fed or any of the bank presidents of the twelve federal reserve banks are not political appointees. Why do you what do you want people to take away from the book Advice and dissent. Yeah, it's a good question.

I'd like people to take away the stark contrast between the advice that's given by a lot of economists, and of course it's not all the same, although I do emphasize in the book there's a lot more agreement among economists and people commonly think, and the way that it is ignored or distorted or so on by politicians. I don't want people thinking that I believe that technocrats should

be making all these decisions. I don't. But what I think we could do a better job of is, like I used the phrase in the book, moving the needle a little bit away from where it is now, where decisions are just so so political with very little technocratic input that actually matters, and just move it a bit away from that. I think we could get better economic

policies if we did that. Do you get the sense that sort of career government workers are still head down doing their job making the country run, or do you think that the current administration has changed that aspect of government. I think they are there with their heads found. Who have there john some of them hiding under their dead waiting for the storm to pass. But here's the thing. Uh, let's druk sharp contrast between our system and say, the

British system. In the British system, a new government comes in, the minister gets replaced, everybody else stays on the job. In our system, the political appointees come in and they take about the five top levels of the bureaucracy over and then the technocrats start below that. The these uh people that Steve Mannon called the deep state. Uh, except that the State Department, which has been almost denuded, it seems a lot of the deep state people are still

there and they're trying to ride out this storm. The e p A is another place where they're having a very very hard uh, very very hard time. But so it's not just the cabinet member that changes. It's quite a few people, uh, in any in any cabinet department. Alan Blinder, thank you so much for being with us. He is the Gordon Renchler Memorial Professor of Economics at Princeton University, also former FED Vice chair uh and he has a new book, Advice and Dissent, Why America Suffers

when Economics and Politics collide. Sinclair Broadcast Group is the biggest US broadcaster. It is trying to tie up loose ends as the FEC decides whether it can buy Tribune Media, and now it's generating a new controversy. Here to tell us more about that, I'm so happy to bring in Jordan's Holman, who covers all things related to wages, salaries, compensation, personnel issues. Jordan's just, first of all, can you set

the stage. What is the controversy here with Sinclair? So over the weekend, uh, the Sinclair anchors across the country they were giving, you know, a blanket speech. I was saying, we decry false news and dead spend put together a video of all these anchors saying the same words, and some people in the media and people watching felt like it was a shot at the integrity of the news media. Okay, so why is this now causing some angst among the

nearly two hundred stations that Sinclair runs. So a lot of the journalists I spoke to who work at Sinclair, they didn't like that their company was in the spotlight in that negative way, that it looked like they were talking negatively about other media companies. And so the question started to come up, well, why don't you just quit?

Why don't you leave and go somewhere else? And people said that in their contract they would have to pay up to their annual compensate shin if they wanted to leave before their contract was over, which is a steep price if they broke their contracts. Yeah, so that's that's my question. I mean, is this normal to have, say, a two year contract, especially in broadcast, uh, that has a penalty should you choose to quit. So on broadcast, is normal to have a contract that you ask someone

to stay two or three years. But what's not normal that some lawyers said who I spoke to, is that you have the steep penalty that you have to give your compensation if you leave beforehand, and that if it usually applies to orang air talent, but at Sinclair, some people who never appeared on TV had to sign that clause and maybe just also offer up what the response was from Sinclair and the various UH maybe TV stations or broadcast networks that you were able to contact in

regards to the story. So Sinclair's vice president of news he sent out a memo to all the employees UH yesterday on Monday, saying that critics were ubsite at their just is and to have the anchors read this false news statement but that context was missing and perspective was missing missing, and that employees would be proud of where they work. Sinclair hasn't directly um spoken to Bloomberg about it,

but some employees still didn't feel like that was enough. Okay, to be very clear, the lines that we're talking about here are the sharing of biased and false news has become all too common on social media. Some members of the media use their platforms to push their own personal bias. I have to say, you know, there are a lot of people who probably believe this, and you know, you might even have some journalists who do feel like this

is the case who work for Sinclair. Why is this different, right, Why is this different from just a number of people saying something sort of decrying and ambiguous, uh sort of concept. Well, when you go back to the idea of what's the context around Sinclair, they are the largest broadcaster in the US. They reached about thirty eight percent of households in the US. So when they're you know, broadcasting this to all markets across the country, some people don't agree with that, you know,

they it seems like you're taking shots within the industry. Well, but this is this is the key question. Is it the content of what that said? Or is it the fact that journalists who are supposed to be coming at something from a sort of impartial perspective or given a script to read. I mean, how unusual is that aspect of this, Right, It's definitely something you don't see every day. That's why I think that video really resonated when it was like all these journalists from all these differ cities

are saying the exact same thing. So it kind of seems like, well, we're Sinclair saying we're being impartial and we're the real journalists. But they're still providing a script which doesn't always add up. And so you know, the journalist I spoke to at Sinclair said that that rubbed them wrong. They did not like that, and that they even if they wanted away out, it just seemed too expensive. Um, there's a case right now, former employee who works in Florida who suit the or who got sued by the

company for leaving early, for breaking his contract act. And now he's facing that in court and he has a lawyer and assistant. Expensive process to want to leave if you want to. And and also just to add to this, uh, Sinclair is described as the country's largest broadcaster right it has about it has a hundred and ninety three television stations, and it is seeking to purchase Tribune Media for three point nine billion dollars and regulators are looking over that

potential acquisition because of any trust concerns. Right, Yeah, it would make it even huger broadcaster, reaching even more Americans. But President Trump supports that. Yes, So yesterday, um, he tweeted that Sinclair was a far superior network compared to NBC or CNN, and so he did definitely you know, throw his hat behind like them as a broadcast institution. Well, I guess this is a story that's going to keep on developing, and we thank you very much for sharing

it with us and giving us this detail. Jordan's Holman of Bloomberg News about Sinclair employees uh AS, saying that contracts make it too expensive for them to quit the company. One area that we really need to address is in Britain. We are dealing with less than a year now before Brexit day countdown has begun. There are some crucial issues to be decided. It's unclear whether there is much progress

being made on them. Here to join us is Baroness Helena Kennedy, a Labor Party member of the House of Lords, coming to us here in our eleven three studios in New York, even though she's normally based in London. Thank you so much for being here. I want to want I want to ask about momentum, because I think in the US, for example, a lot of times when you mentioned Brexit, people's eyes glaze over. Oh, that's still going

on again. Aren't they just going to come to some kind of resolution and everything's going to move on the way it was. Do you think that people are not paying enough attention to the potential ramifications of what's going to have to happen in the next year. It's taken a long time to get to this point. I mean, we've wasted such a lot of time, um really dealing

with the complexity which people hadn't fully understood. And so I think that slowly there is a realization actually economically in terms of peace and Ireland, in terms of the immigration issues, that actually this is not going to be the solution to many of the problems that people felt very strongly about. And so I think that that's slowly filtering through, but it's getting late in the day further to be any kind of real comeback on that. I mean,

we've the deadline now is October. We've been told by our the negotiators in Europe. Um I met with Barnier, who is leading the European Union negotiations. Um I met with him a month ago and he said October is the deadline because it has to go in front of all the European and the European Parliament has to go in front of our parliament. To October is a deadline

for exactly what this Brexit deal would look like. What the deal would look like and so and so we've really got a very small window of time in which to nail this down. And that's the real anxiety, because already there's been an agreement which is causing a lot of unhappiness, which is the transition deal, a recognition that by March of next year, a year from now exactly, we will not be in a place to actually say it's done and dusted. There has to be we will not.

There's going to be a period of transition which will not end until December two thousand and twenty. And during that period things will carry on much the same as they are as a lot of people who are saying, but we voted to leave, we thought it was going to be a pretty swift deal and we'd get out and start treading with the rest of the world on our own, not with the rest of Europe and uh,

and that's not going to be happening. And it's become clear because for example, business does not want to drop off a cliff cliff age, and so they want to transition. And there was a lot of pressure being put on government, by by business and by the city to say, look, we need to have serious transition, slow, slowly, safely surely, rather than somehow dropping off the edge and not knowing

where we're going. Uncertainty, of course is bad for business, but it's bad for everybody and bad for individuals inside our society too. Baroness Kennedy, if if Brexit and the referendum process, uh, we're to have appeared before blind justice. And you know why I'm mentioning this because maybe you can offer people a little bit of your personal background.

What do you think would be revealed about the actual referendum process and what people knew at the time of the referendum and what we are learning now about potential foreign interference uh in the referendum to leave or stay inside the European Union. Well, it is interesting. I mean, the problem with with a referendum is always that the question is simple, do you want to stay in Europe? What do you want to get out? And for many

people the answer to that is actually more complicated. I'd like to leave these aspects of it and I don't want to leave those aspects of it or um. And so for many people it was the answer was much

more nuanced than just saying out or in um. And so that's the problem always with our referendum um the fact that we now know that there's a real likelihood, a real possibility that there was interference, and that Cambridge Analytica that possibly the Russian Russian money, that there was interference in different ways in the outcomes and the ways

in which people were influenced to making that decision. I'm not sure that if you said to many of the people now, would you have changed your vote, that they would say that they would have done. The people like to imagine that they made it on their own beliefs and they were not deeply influenced by the opinions of others or the ways in which they were receiving information. So I don't know whether that would make the difference.

But what people are realizing is that economically it's not going to be it's not going to be the day in the country that they were given to understand the story, the lie in fact, and it was a lie was told where where buses traveled through our cities with the message on the side saying in every week, fifty million pounds more will be spent on the national health service if we're out of Europe, because instead of paying money into the contributory schemes of Europe. We will have this

money available to spend on the national health service. In fact, when it was hammered down, it wasn't true that that that piece of information was a completely phony and if we're talking about fake news, where that was seriously fake news. So and people are realizing that the economic story is not going to be so good. And already people are feeling the pinch. They're feeling that the pound in their pocket is not worth as much. There's been a devaluation.

There's a sense in which they're they're realizing that food is going to become much more expensive. Um. There's also there's a worry that a certainly food coming from Europe because of we won't have the benefits of the of the Single market or of the Customs Union where we

don't pay customs duties. There's also the an issue I have to see it about the United States is that we had imagined that there would be great deals to be done with the United States for us alone, because we are special, we have a special relationship with you guys, you're our cousins and so and people are now suddenly getting a bit worried because they're hearing your president talking about in much more protectionist terms and about the possibility

of tarrifsms on. So they're much more worried about what will that look like and will we get the deals with you or China or India that we imagined, and will they follow fast on our leaving Europe or will it take a hell of a long time before it happens with Within Parliament, when you have private conversations with, say, Brexit hardliners, do you get the sense that any of them are softening their position at all? Not at all.

The hardliners are not shifting one jot, but a lot of the people that the room mainers are very on the Conservative ventures. The remainders have the problem that they there's a loyalty they feel settling in the House of Lords. Many of the people who were appointed huge numbers are appointed by David Cameron, many of them remainers like David

Cameron himself. UM, But they do feel a loyalty to party and I think that the it would only be if they really feel that the deal, the ultimate deal is is catastrophic UM, that they will they will vote against because there will be a debate in Parliament in October when the crunge comes, and then there's the issue of Labor and what will Labor's position be, which has

also been constructive. Ambiguity was how it was being described, you know, saying that they're not happy with the way that the negotiations are going, that they would want to have much greater and closer connection to Europe in the in the you know, as we go forward. Um but but Corbin has been very clear in saying that he's not in favor of staying in the Single Market. So may and of course that the vast majority of politicians in Labor do to stay. So it's all rather macy

at the moment. So where we're going, I still don't know. All right, Well, we look to you to help us understand what's come back and give you the inside skinny. We appreciate it and we look forward to it. Baroness Helena Kennedy, Labor Party member of the House of Lords, are joining us here in our eleven three oh studios. You're listening to Bloomberg Markets. I'm pim Fox my co

host Lisa abram Witz. This is Bloomberg. In other news, Astronomers using the Hubble space telescope found the farthest star ever observed, a bright dot nine billion light years away. I can't wait to go home and talk about this with Anyone who owns a home in Manhattan should be watching this figure. The number of sales plunged the most since the recession. What does this mean for the road forward? Joining us now? Jonathan Miller, President and chief executive officer

of Miller Samuel in New York. Jonathan explained, how concern should people be about this? Well, I think it's less about concern and more just about awareness. The reason why we saw the sales volume drop, there's really twofold one is we've seen a real drop in UM the closings of what I call legacy contracts UH New Development. That's all those super luxury buildings that contracts are signed several years ago that UH had could close until the buildings

are completed, and those have largely UM. The buildings have largely been completed, so we've seen a real fall off in their closing volume. And that's skewed top level prices down for the market. And also UH contributed to part of this decline in sales. The other big part UH, and I think probably two thirds of that UH is really related to the uncertainty. And you know the word location three times is the trite real estate uh phrase

of our lives. Uh. Really, now, it's uncertainty and and and it's really has to do with the federal tax law and its impact on high cost housing markets. It's not that the actual items in the tax law are impacting the market, to call the slow slowdown, it's essentially the uncertainty of it is causing participants to take a little bit longer to make decisions. So you know, overall prices actually trended up, uh if you remove UM the

new development component to it. So it's really a market where uh, you know, I think we're looking at over the next year, buyers and sellers are going to dance around what the new equilibrium is between them and UM,

and we're probably going to see some software prices going forward. Jonathan, Then what do you say whenever you hear people respond to the question about state and local tax deductions for property tax in that cap of ten thousand and basically it gets waved off as not relevant to the actual transaction in a high cost area such as New York or even in places like California. Do you believe it. Oh no, not at all. I think it absolutely has

an impact. I think the reason why it was waved off is there was this idea that that those additional costs would be offset by a tax cut. Um. But I don't think people, when they have a collection of assets, are going to be willing to overpay for one asset

while saving on another. Um. They really look at each asset individually, and I think, um, you know, there's also a lot of hyperbole about this, but I think the general rule of thumb is the higher the property rice generally, the higher the impact of the new tax all will be on the property. But it really comes down to the individual tax situations of the of you know, of the homeowner more than ever before. Well, this you raise

a really good point. I think a lot of people dismissed the effects of the tax law on sort of the mortgage deduction being kepped at rather than a million dollars as not having that big of an effect. What about that piece of it? Does that have an effect? Or is this mostly just the overlap between state and federal taxes? I think sault Satan local taxes is the deduction is much more important to focus on than the

mortgage interest deduction. Uh that I think is has less of much less of an impact, if any, It's much more about all the deductions. The way to look at this is the way I look at it, is that this is really the process of the federal government extracting itself them the home ownership promotion business. And they're hoping that by doubling standard deductions for single and married will provide um, you know, some offset to this and and

and that is certainly true. It just becomes more problematic as you shift into higher cross housing markets, which are generally on the East and West coast. Jonathan, give you about thirty seconds. Maintenance fees and the percentage of taxes that are included in maintenance fees. Is that going to go up? I think. I think the reduction of of the lack of ability to deduct those um is going to make maintenance feel a lot more expensive than it

currently is. I want to thank you very much, Jonathan Millery, President and the chief executive officer of Miller Samuel, offering some insight into the Manhattan home market. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo wits one. Before the podcast, you can always catch us worldwide on Bloomberg Radio