This is Bloomberg Wall Street Week. The global push into infrastructure, breaking the IPO logjam in text, the financial stories that shape our work, cutting inflation without losing jobs. Do we need rate cuts and if so, how many? Investing in the time of geopolitical.
Turmoil Through the eyes of the most influential voices.
Ten Rogueff Economists of Harvard, former FDIC had Shila Bert ge CEO, Larry Kulp, San Francisco fed President Mary Daily.
Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
No summer break for fighting in Ukraine and the Middle East, changes at the top of Japan, Thailand and Starbucks and the US government malls breaking up Google. This is Bloomberg Wall Street Week. I'm David Weston this week. Greg Peters of PGM on how bond etf are transforming the fixed income market.
So I think the growth is just beginning.
Zach Liscow of Yale on the hurdles facing the Biden administration's race to build infrastructure.
Has a longstanding difficulty building infrastructure.
And Jonathan Klein at Hang Media on why legacy media companies are having so much trouble.
It's a problem with the industry that they find themselves in.
We start with the US CPI numbers out this week and welcome Jan Hattias Goldman Sachs chief economists to take us through what they tell us about the economy. So welcome, it's great to have you here. Jan. What did we learn this week about use economy?
It's great to be here. I think the information we've gotten this week has been very encouraging on the growth side, mostly good news, another drop in jobless claims and clearly stronger than expected retail sales number that was very reassuring in light of the weaker employer I'M report for July and the concerns around the consumer at the bottom up
level in some of the earnings reports. In the macro data, we're not seeing the consumer softening sharply, and I think that's the probably number one takeaway as far as economic activity is concerned. There were also some more mixed numbers from industrial production and housing starts, but I would put more weight on the consumption news than on those.
We also are down to a two number starting with the two at least number on the headline CPI. So are we getting inflation and control? Is it going to continue in your opinion.
I am very optimistic that inflation is largely in the rearview mirror. If we look at the July core PCE estimate that we get on the basis of CPI, PPI and import prices, we are at thirteen basis points, which is yet another sign that we're on our way back to two percent. Now in terms of year on year rates for core PC inflation, it's going to be difficult to make a lot of headway in the second half of the year because the year on year comparisons are
becoming more difficult. We have very low sequential inflation rates in twenty twenty three, but I think on a three month annualized basis and a lot of the underlying trend measures are saying we're pretty close to two percent and this is no longer a major.
Issue for monetary policy. Is always the case, there are some ups and downs, some things that are a little better, things that are little work was under the headline numbers, But what about housing? Did I give you any pause? And with respect to how much control we're getting over inflation, well.
I think the rent numbers were a little higher than expected in the in the most recent release but if I look at the trend in rent, we are seeing a deceleration in rent in owner's equivalent rent. There are some alternative indicators from the Cleveland Fed and the Labor Department that look that breakdown rents into new leases and existing leases. Those are showing a clear trend towards improvement.
And I think just based on our modeling of how new lease prices translate into the overall CPI numbers, there is a very high confidence that we'll see ongoing, gradual, gradual improvement. The other point I'd make on inflation is what are we seeing on the labor market. We've seen the labor market rebalance. The unemployment rate is drifted up to four point three percent. We've seen very large declines in job openings and quits. We've seen a very material
deceleration in wage growth. The latest average hourly earnings number was only three point six percent, and that basically says we no longer have a significant labor cost issue. Unit labor costs were up only half a percent on a year on year basis in the second quarter. So all of that is very encouraging.
Where are you right now on the possibility of recession? We started the year, a lot of economists were really almost predicting recession. Larry Summers, for example, this program is saying it's more than fifty percent likely. That's changed over the course of the year. Where are you on there right now?
So we've been at we were at fifteen percent coming into the year. We lifted that from fifteen to twenty five percent on a twelve month forward basis after the employment numbers for July. Not only because of the employment numbers, we also had seen a couple of higher initial jobless claims numbers. We've seen a you know, some week survey evidence, we'd have some negative anecdotal information about the economy and
the consumer in some of the earnings reports. So we lifted it somewhat, but I'd say twenty five basis points is still, of course, well below fifty still somewhat below the consensus. You know, I'd say at the margin, what we've seen over the last two weeks has been encouraging. So I think the likelihood is that that twenty five
percent is going to come down again. I would like to see a little bit more information, especially again the next employment report, just given the predictive value that we've seen historically from labor market information for recession. That's encapsulated in the so called sum rule that if you see a half a percentage point increase on a year on year basis in the unemployment rate, historically, that's been a very strong recession predictor.
I think there are some good.
Reasons why that rule may not hold in problem doesn't hold in the current environment, in particular the fact that we've seen a very large increase in the labor force, very large increase in immigration, and that's really, in our view with the main reason for why we've seen in a higher unemployment rate. Employment is still growing at a
good pace despite this latest somewhat softer number. Overall, still see very strong employment growth, and so it just seems like a different type of increase in the unemployment rate. That's probably not as predictive over a session, but it's hard to be sure. And that's why we are hedgering a little bit more.
Yeah, and it's such a treat to have you on Well Street. We thank you for being here. As Jan Hatzias of Goldman Sachs. The market continued it's rebound, with the S and P five hundred having its best week of the year, adding three point nine percent to end the week at fifty five fifty four, putting it just under the median number the Bloomberg Elves are projected for
the end of the year. The Nantnag did even better, adding five point two nine percent on the week, while the yield on the tenure was down six basis points to end the week at three point eight eight percent. Take us through the week in the market. We welcome back now kristin Bitterly City, head of Wealth at work, So welcome back. Great to have you, always hear Chris, So give us your stance about what happened. We've been through a wild ride over the last two weeks. And
take us inside city. How did your shop react when all of us who are running around saying, oh, emergency rate cut?
Sure, of course.
I think what's interesting is at City Wealth, we've actually been pretty resolute in terms of our views this year. We started out this year thinking that we would get three interest rate cuts of about twenty five basis points, and that those cuts would not begin until the second half.
Of the year.
And so even though we've seen this wild repraising of rates throughout the course of the past couple of months, and we could even say year to date. We just thought that the FED would not get the data that they needed to confidently start cutting rates. And so what happened last week was pretty wild because I think the market once again got ahead of itself in terms of is there going to be an emergency cut?
Are we locking in.
A fifty base point cut? I think we're still at twenty five basis points because of this economic data that we're seeing. We'll get a good piece of economic data and then we'll get one that maybe is a little concerning. Take today, for example, we have the consumer sentiment data that came out better than expected, and then we had the data around construction that was worse than expected. So I think we're going to see this volatility in the data.
But the good news is that inflation is on the trajectory that the FED needs, and that the labor when you look at the labor market, it's cooling, not contracting, And I think that's a sweet spot in terms of the Fed's position to be able to start cutting.
Where are we in earnings because that drives a awful lot of stock prices.
And that was another reason why last week. So just take like August third, for example, that really horrible day in the market, where if you got out on that date you would have actually missed out on a pretty substantial rally of about seven percent in the S and P five hundred since then, But the reason for it is earnings have actually been really resilient. If we go back to last year, last year we had about seven out of the eleven sectors in the S and P
five hundred that we're experiencing in earnings recession. This year, we actually expect ten out of those eleven sectors at city to turn to earnings profitability. So earnings have actually surprised, and what we're seeing is really a broadening out of that story. It is no longer uniquely a magnificent seven story. We're starting to see it come through in earnings across various sectors, which is actually a reason to stay invested.
Well.
So we're going to ask exactly how many people are fully invested still at this point, because, as you point out, if on August third you'd gone to cash, you'd be sad right now to what extends there's still cash on the sidelines.
I think there's still significant cash on the sidelines. You could look to money market funds and the flows that have come into money market funds as an example of that. So the latest numbers that I saw were about six point three trillion dollars in money market funds, and that doesn't include cash held in deposit accounts and other types of bank products. So when we think of other catalysts
for the market, just think about this. If we do start to experience interest rate cuts, what's going to happen is all of that cash that is no longer receiving a five percent five percent plus interest rate is going to look for places to reinvest, and it's going to be a balance across equity markets and fixing come market.
Chris, I don't want to let you go about before we talk about your new positions since we've seen your last You have a new position. Congratulations that, thank you so much. What it is, how is it different? Yeah?
So I'm running our wealth at work business globally for City, and what that is is it's really workplace wealth solutions. This started with an area of our business that we've actually been dominating and had for over five decades, which is our law firm group. So where we bank entry
level associates through to senior partners and institutional capital. And what's unique about it is it really brings the perspective of not only knowing you personally in terms of your wealth journey, but also looking through how is your industry impacted by various trends. So it's knowing your business and how to advise you professionally but also personally. And we've expanded that on a global base, says, but also looking at other segments like asset managers, professional services, and just
other segments and sectors of different types of companies. So really exciting. But thanks for asking about it.
Menaging the choir, We like lawyers here at Walls. We got to tell you. Thank you so much. Chris, great to have you with us. Thank you. Kristin Bitterly of City coming up. The Biden administration is proud of the over one trillion dollars in infrastructure it got enacted. We go through how long it will take before we see the results with Zach Liskau of the Yale Law School.
If you look at government spending, our research and developments, we are behind pure countries, and we're behind where we.
Used to be.
That's next on Wall Street Week on Bloomberg.
This is Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
This is Wall Street Week. I'm David Weston. The Biden administration prides itself on the investment it's making in clean energy and semiconductors, but it is having a little bit of trouble getting the money out the door. And one of the biggest beneficiaries, that's Intel, has announced large job cuts and the need to protect its cash pile. Yale Law Professor Zach Liscow, former Chief Economists at the OMB, has studied infrastructure investment and challenges in making it work,
and we welcome now to a Wall Street Week. So, professor, thank you so much for being here. It's great to have you here. You have studied the question of you know, it's a good thing to have the intention of getting infrastructure investments made, it's a little harder to get it done, at least in the United States of America. What are the some of the impediments to that that the Biden administration may be facing right now.
Yeah, great question, A pleasure to be here. So first I want to say a little bit on what we see on the ground now. So if you're talking about manufacturing, things actually look really good. What we're seeing is investments in manufacturing, building structures. It's the current levels of that are roughly double what they were from the period between twenty twenty nineteen. So we are just blowing out of the water the amount of investment.
That we're making in manufacturing.
This is a real terms adjusting for inflation, so a lot is getting built in terms of manufacturing, but the different kinds of investment. We also are making a big push and infrastructure and in particular things like transportation. And this is not because of this particular administration, but the US just has a long standing difficulty in building infrastructure,
transportation infrastructure and cost effective ways. If you look at urban rail, so you know, within a city and it's on a rail, and you compare the US to other high media income countries on a per mile basis, the US ends.
About two and a half times as much from iile.
You compare to the lowest cost countries in Europe, countries like Spain, we spend about six times as much from ILE.
And you know this is not good, Zach asked, someone who's studied this as an economist as well as a lawyer. I really studied the question of infrastructure. Let's go back to where you started. Is there a big difference between sort of the true public infrastructure if I can talk it that way, highways, rails, you know, water, electrical grid and things like that. On the one hand, and they had some things that the government may get involved in
at least in subsidizing and really encouraging. But that also private corporations do. I mean, when you talk about building semiconductors, that's something typically United States we let private companies do. Is there a different way to approach those two questions.
Yeah, So, you know, roads are public goods, makes a lot of sense for the government to be in charge of building them. Would be very problematic of a private company on the road in front of my street and we're like holding me each time I wanted to enter my house. That that would be a bad way of running things. So it makes a lot of sense to have the government owned the roads, the highways, and then to set contact out to the private sector to actually
have them built. There's a whole different thing going on with manufacturing there makes we do not want the government to be the one actually building the semiconductors. We want the private sector to be doing that. You know, those are not public goods. Those are goods that are exchanged in you know, competitive markets. And for those you know we have in the case of chips, to say a national security reason to onshore those and us to provide
government subsidies to provide them. There are climate reasons to provide subsidies to come to bring about the green economy in terms of energy production. And so I think it's good to take these two different approaches for transportation infrastructure, government designs it and it manages it, and then to have subsidies for these other private sector things which are often in manufacturing.
Let me think, for Zach Liscal of the Yale Law School. Professor Liscow's paper for the Aspen Economic Strategy Group will be out of this fall. Arcley's launched the first ever bond ETF in Canada back in two thousand and what started out as a novelty has grown to be an over two trillion dollar asset class, changing the entire market to take us through fixed income ETFs and why they've grown so big. We're welcome now. Greg Peters, Cocio of PGM Fixed Income. Greg great to have you back with us.
Thanks for being here, Thanks for having me, David, So take us to this world of bond ETFs. So a lot of us think about it in terms of stocks, but it's going to be quite a substantial part of the market.
It is, and I think it's a poised to grow even more. As we talked about earlier, the global fixed income market is one hundred and twenty trillion, and so two trillion seems like a drop in the ocean. So I think the growth is just beginning. But I think the important aspect of ETF for bond investors is that it's changed how the market trades, and it's created more liquidity in the marketplace.
And POSTGFC, it's allowed.
To bond investors, I guess, to reliquify in ways that they didn't imagine prior to.
So why has it grown so big? And you mentioned the Great Financial Crisis? There is that part of the cause, in the sense that there was a lot of regulations that came in after that that really made it a little harder for some of the dealers to keep big balance sheets.
That's precisely right.
The dealer balance sheets were really constrained post GFC. Through you know, the alphabet soup of different kind of regulations, and it really hurt the end investor because you, as a fix income manager, have to go through the dealer in order to transact. The ETF platform I call it the chassis. The infrastructure allows through the redeem and create process trading of individual bonds and ways that were unimaginable before.
And so this, this you know, revolutionary, evolutionary type of process has really allowed fixing them to reliquify and trade much better.
You mentioned one of the effects is increased liquidity. Back during the pandemic March of twenty twenty, we had some problems with liquidity. Do the body taps hold out? Is the possibility that they will be able to take through some of those rough patches.
I hope, So you know, one event doesn't you know, make a declarative statement, of course, But it was really interesting back in March of twenty twenty, voice trading effectively shut down, and what you saw was through ETF and electronic trading, which is still only.
About forty forty five.
Percent, and the entire fixed income universe traded levels that we haven't seen before. So we had record levels of volumes at a time when it was really difficult, almost impossible to transact elsewhere. So I think that is a testament, of course, but each crisis is a little different. You just don't know, but I think the early signs are actually quite positive.
You mentioned voice trading versus electronic trading, which is one of the advents here. As I understand it, stocks are more likely to be traded electronically rather than through voice. Why is the fixed income market behind in that is a matter of timing or are there's some inherent differences in bonds in part because there are so many different kinds of them, but that really keep you from doing more electronic transfer with bonds.
I think it's a little bit of both.
I think historically the fix and come market has been known late adopters. Also at the same time, as you mentioned, you know, unlike a single stock, you have multiple bonds off the name.
So use IBM as an example. There's only one equity security to trade, but.
You could have anywhere from fifty to you know, almost one hundred different cu SIPs of IBM. So it's just the complexity is just much more difficult, and the market is much more segmented as well. So I just think it's about time because if you think about complexity, that's where computers and machinery and algorithms can really.
Add a lot of value. It's just been slow to adopt who.
Are the most likely customers for the ETF. You think they're going to keep growing the bond ETFs, but who are the people are to target customers for.
Yeah, So what's interesting about the bond ETF market is.
That if you look at particularly relative to the.
Equity side, is institutional bond managers like myself and ourselves a PGM that actually utilize that security. So it's much more of an institutional vehicle on the fixed income side, whereas on the equity side is much more retail driven.
So we'll see how that changes over time.
But the way that you know, active money managers like ourselves think.
About these passive ETFs, it's.
A way of kind of modulating your liquidity, modulating your portfolio risk in a more seamless efficient manner.
So that's why it's taken off as a.
Big manager of fixed income here at PGM. Do you tend to trade in individual bonds or is this in whole portfolios that move at the same time.
It's both so so you tie ETFs that infrastructure to what you're seeing through electronic trading, namely portfolio trading, which is not a q SIP driven trade, it's a characteristic driven trade. And so you now can trade you know, up to one hundred some odd names in package form and get liquidity, whereas before David you had to kind of on the phone call individual and trade lock by lot, and that was just grossly inefficient and really difficult to prosecute.
So the packaging has been the key risk transfer piece to it all.
Well, we said it's gone from a couple hundred million up to two trillion dollars. Now, how big can it get? Where's the sky here that could growth?
That's an excellent question.
I'm not sure if you talk to some of the the real ETF advocates, you know, the sky's the limit, of course, but I think there's real scope for it to grow and to continue to grow. The issue around fixed income is the fragmentation of fixed income. Right, so we talked about one hundred and twenty trillion globally.
You have various.
Government securities, you have corporates, you have high yield, you have levered loans, you have all these different products.
You have privates as well.
And so it's not homogeneous, right, and so I think it makes it much more difficult to kind of finally put a number on it.
But I still think growth is upon us.
What are the risks in this growth and bondy ts as you see it? Are there risks out there we should be at least thinking about.
I think there's always risks of what I think. The one risk that I think about is, you know, do you have such an over reliance upon this one aspect? So if you think about kind of the ETF infrastructure and the create redeemed process, it's it's a handful of names that's determined by the provider, and so does that cannibalize other parts of the marketplace over time? And as if that shuts down, does that have an amplifying cascading effect across the system?
So the truth in the matter is we don't know. It hasn't been tested.
We haven't had a credit cycle in a very long time, so there's still a lot of tests that.
We need to kind of go through. So we shall see.
Okay, Greg, it's always great to have you this. Thank you so much for coming back on Wall Street Week. That is Greg Peters of p JIM coming up. It's not easy these days to be running a legacy media company. We talk with Jonathan Klein of Hanging Media about what's broken and what can be done to fix it. That's next on Wall Street Week on Bloomberg.
This is Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
This is Wall Street Week. I'm David Weston. Media companies have been much in the news recently, and not always in a good way, as both Warner Brothers, Discovery and Paramount have taken big write downs on their linear assets, and prospects for streaming services remain at best uncertain. To take us through the ups and the downs, welcome back, Jonathan Klein, co founder of Hanging Media and former president of CNN. Jonathan's always great to have you with us.
But our business, if I can call it that way, the media business, boy, has it changed. But start, for example, with Warner Brothers Discovery, which is really taking it right now. Their stock value is down, They've got a lot of debt, over forty billion dollars in debt. What do you do? There is a problem with the strategy of the execution.
It's a problem with the industry that they find themselves in, is what it is. And this goes way beyond just Warner Brothers Discovery. So you know, in their case, they've got to swim in the same waters as every legacy media company. They've got a lot of brands, they've got a lot of assets. The main driver of their profit has been the cable TV networks T and D, DDS, CNN, etc. And just a raw amount of revenue available to cable TV driven businesses has shrunk considerably.
The other component of their business, the studio business.
Same thing.
Just the pool of money available for them and all of their competitors to make has shrunk. Subscriber fees that the cable distributors are paying have shrunk because viewers have left, so you're monthly income on a per subscriber basis has plummeted. And as a result, also advertising revenues have plummeted.
And so of course you've got to redrench, you've got to make cuts. They're all doing it.
You mentioned, Paramount just began their wave of layoffs, their latest wave of layoffs today, and even Axios, which is a digital only business, they've been through their biggest layoff in the past couple of weeks. So in general, media is really coming to terms with the reality that it's more than ever an industry dominated by the tech giants, the Apples and the Amazons and the certainly Google, which
owns YouTube, which is a monster. The industry is dominated by those players, and there's just less opportunity for content creators.
So what do you do in that environment if you're running with these big media companies. I mean, I think both of our experiences, it's awfully hard to cut yourself a success. You may have to cut, but it's hard to get to success by cutting often. You then start to think about deals, and John Malone, after all, is the force behind the throne there at one of the Discovery. Are there deals that could be done, consolidation deals that might make things better?
Well, you're going to probably look to your left and your right to see who's in the same boat. I think that was their original strategy at Discovery when they did the acquisition of WarnerMedia, was to get bigger, big enough that they can maybe be the biggest kid on the block and dictate the terms of other acquisitions and.
Start doing roll ups of other players. Now they're not the biggest kid on the block.
Now their market cap has taken such a severe hit that the deal numbers themselves are going to be much smaller. But that's what's going to have to happen, is consolidation for all of these guys. You have a new team coming into Paramount, David Ellison and Jeff Shell, who's so sharp. They at least have the benefit of beginner's mind, that is, they can look at that Paramount portfolio of companies in
a fresh way. And they also don't have the legacy relationships inside the company, and they can maybe make some tougher decisions.
But it's tricky moving forward.
One of others, Discovery is going to have to find consolidation partners, merger partners. And just last month in Sun Valley at the Big Media Conference, you know, David Zaslav was bemoaning the excessive government regulation in his mind, you know, that prevents them from making mergers too easily.
So it's one thing to get bigger. People like to get bigger, what about also getting smaller In this respect, Netflix has done pretty well for itself with basically, if I can put it this way, a movie studio hooked down to a streaming service without all those pesky linear ch channels that you and I have worked with through the year. Is that a strategy to say, let's double down on the production and the streaming and let's get rid of the businesses or do something about the business.
They aren't going anywhere, They're not growing.
Netflix has had the advantage always of being a tech first company that applied that technology to media content and distribution. At first just distribution, and now they're in the content business as well.
And their market cap is what twenty times.
That of Warner Brothers Discovery at this point, and so they've got that inherent advantage. The problem is that everything we're seeing today is the result of the impact of technology on content distribution. We went from cable and broadcast to internet distribution of content. What's about to happen now is the massive disruption of content production.
Thanks to a guide.
There's just going to be more and more, less and less expensive content out there, and the legacy companies cannot really play in that space. You can't turn Warner Brothers into YouTube. YouTube is able to sit there and just allow all their users to post whatever they want and in the time that we're talking, they're probably going to be a million new videos posted to YouTube just in this short time frame, and they can just sit back
and present it to everyone. And at the same time, the other power that a YouTube has is all that data collection, all that information about who's hosting, what they post, who's watching, what they watch, when they leave, when they come back. So the YouTube possesses this vast trove of audience insight that they can then re funnel back into their marketing decisions, their programming decisions. What do we buy
Do we buy the NFL Sunday ticket package? Yes we do, they've decided, right, and now they can analyze behaviors around that as they make other decisions about getting into other.
Aspects of sports rights.
Pretty soon you've got these giants now competing for the same content that's been driving the legacy players for the last several decades sports news, right.
And now they're taking all that away.
From the legacy players as well their way out of this to a degree, they can supply programming as they resumed doing with the HBO programming and also of the Max programming. They can start to supply others with that programming as well, and just settle into that niche of being a content supplier.
But the issue is that the.
Kind of content that younger viewers are consuming in droves is not the fancy studio productions. It's mister Beasts on YouTube. It's rudimentary shot on a cell phone and the audience loves that. And you know, that's the history of disruption in all businesses. Cheaper, easier, more accessible tends to win the day it gets a foothold, and then it expands up into more expensive and so you've got your subscription tiers of YouTube as well if you want to watch that.
But that's how the castle laws collapse around the legacy players.
It is a tough business. Jonathan, thank you so much. It's always great to have you here to explain it to us. That is Jonathan Klein of Hang Media. Plato taught that when there is an income tax, the just man will pay more and the unjust less on the same amount of income. But however we feel about justice, let's face it, none of us really looks forward to
paying the income taxes we owe. And so when we're in an election season, our candidates go out of their way to promise they'll cut our taxes if only we'll vote for them. Former President Trump touts the tax cuts he got through back in twenty seventeen, taxes that by their terms, we're supposed to go away for individuals next year, but the mister Trump promises he'll make permanent if he's elected to another term.
Instead of a Biden tax cic, I'll give you a Trump middle class, upper class, lower class, business class, big tax cut.
You're gonna have the.
Biggest tax cut on day one.
We will throw out Biden comics and we will reinstate Meganomics.
Mister Trump's running mate jd Vance proposes even more tax breaks, in the form of a child tax credit. He'd take up to five thousand dollars a year. Jd Vance is calling for a higher minimum age. What is he going to hire Lena con next, I'm not sure when on Sunday morning television to call for an expanded child tax credit.
This urged to cut our taxes and injected a rare moment of by person agreement into the election when the former president said he'd eliminate taxes on tips paid to service staff.
And remember, what I'm going to do is something that nobody has ever even thought about doing no tax on tips for all of you waitresses, for all of you caddies at Darrel.
His opponent, Vice President Harris second of the motion.
When I am president, we will continue our fight for working families of.
America, including to raise the minimum wage and eliminate taxes on tips for service and hospitality workers, leaving mister Trump to cry foul because the Democrats have stolen his idea. But she truly is a radical.
She's flip flopping on everything to get elected. After she gets elected, it all goes right back to where it was.
But let's get back to that justice part of paying our taxes, or at least making sure we're doing our part. It will come as no surprise that we have a deficit problem in the United States, one that puts at risk what our children will inherit from us.
You can't leave your children a negative bequest unless you're doing it through the government, and that's what we're basically doing, because we're leaving our children to negative bequest by running up the debt.
And as much as people like to talk about fixing the deficit through spending cuts alone.
We're already on track to spend more on interest Stavis than we are for national defense, and regrettably, none of these guys appos you anything about it.
Most experts tell us that we're going to need someone to pay more taxes someplace if we're to get our fiscal house in order, which brings us to a possible example of Plato's just man. One of the richest men around, Warren Buffett, has long complained that, if anything, he pays too little in.
Taxes right now because of loo Pauls and shelters in the tax code, a quarter of all millionaires pay lower tax rates than millions of.
Middle class households. Right now, Warren Buffett.
Pays a lower tax rate than a secretary.
This week we learned that mister Buffett has taken concrete action to help us out at least a bit with our national deficit. When he sold off a good portion of Berkshire Hathaway's stake and Apple, he ran up a tax bill of some fifteen billion dollars. That may seem like a high price to pay for a shrewd investment, But as Doug con my baby tax professor back at Michigan, baby tax is what we call tax one, as opposed
to the much more difficult corporate tax course. As Doug taught us all those years ago, the good news about paying income taxes is that they're always less than the money you made. And in the case of Warren Buffett, he owes that fifteen billion dollars on a nice gain of fifteen nine billion dollars, and maybe it will leave a bit of the tax burden on those less able to afford it.
Missus Gilmour owes the irs two hundred and seventy thousand dollars.
We're going to have to sell the house to someone else. But she's an old lady. I mean, look at her, she's old.
That does it. For this episode of Wall Street Week, I'm David Weston. This is Bloomberg. See you next week.