What Did Larry Say To Joe?

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Felix Salmon: This Ad Free podcast is part of your Slate Plus membership.

Felix Salmon: Hello and welcome to the. What did Larry say to Joe? Episode of Late Money, Your Guide to the Business and Finance News of the week, much of which is about Larry and Joe. But there’s also other dramatis personae here, not least of which ourselves. I’m Felix Salmon of Axios. Emily Peck is also here.

Host 2: Hello.

Felix Salmon: Elizabeth Spiers is here. Hello. We’re going to be talking about Larry and Joe and the Inflation Reduction Act. We’re going to be talking about the GDP figures that came out, which were negative. We are going to be answering a reader email because we do love your emails about corporate landlords and whether they are evil. We have a sleeper segment on college tuition. It’s fun. It’s all coming up on Slate. Money. Okay. I was shocked. Elizabeth, were you shocked?

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Speaker 3: Sure.

Felix Salmon: I was shocked when when the announcement came out this week that Joe Manchin had changed his mind and suddenly this enormous bill was like moving ahead. And there was a very good chance that the Democrat controlled House and Senate might both pass this huge bill, which has a huge climate component, and it has a huge tax component, and it does all manner of wonderful things. And I was like, Wait, is this like fabulous, unexpected good news?

Speaker 3: Yeah. The amazing thing is that he apparently he changed his mind after talking to Larry Summers, who convinced him the package wasn’t inflationary.

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Felix Salmon: I have a thing in my newsletter this week saying Is Larry Summers now a hero to the left?

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Host 2: I think Larry Summers is now a hero to the left and Joe Manchin to. I think everyone was just as shocked as Felix by this, especially apparently Republicans who passed some other bill, the chips bill.

Felix Salmon: Yeah, we should talk about that, too.

Speaker 3: Yeah, I don’t know that he’s a hero to the left, I would say. Now, cinema is is the bad guy. Well.

Felix Salmon: We will see whether she votes for this bill, but I feel like the Republicans hate it so much that she kind of has to write just to own the GOP somehow.

Speaker 3: Well, there’s some conspiratorial, you know, speculation that she will eventually switch parties. So who knows?

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Felix Salmon: The big picture here is that we have this good old fashioned leftist interventionist government. Again, we did the Chips Act over largely Republican opposition, although a few of them voted for it, which is basically America saying we don’t believe in a global free market for computer chips. We want to spend tens of billions of dollars to onshore the computer chip industry, which I think actually does make sense. You can’t have every single computer chip in the world being made in a small island is about to get invaded by China. That doesn’t make sense. So we had that. And then and apparently I don’t really understand the politics. Elizabeth, you can explain this to me a bit better, but apparently Mitch McConnell only supported that because Joe Manchin said that he opposed this other thing. And then the minute that Mitch McConnell votes for that, Manchin comes out like and then supports this other thing and then supports this other thing.

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Speaker 3: Yeah, this is how Manchin behaves as a matter of course. So it’s shocking and utterly unsurprising. But, you know, that kind of favor trading, I think, or just trying to anticipate what everybody else is going to do and then you have a last minute surprise like that is I think, you know, it’s unusual. I mean, I was I was surprised at what put Manchin over the line.

Felix Salmon: Being Larry Summers.

Host 2: Yeah, yeah, yeah. It was all really surprising. It was kind of delicious that the GOP was like fooled and had the rug kind of pulled out from under them because.

Felix Salmon: Maybe Mitch McConnell is not the evil genius that people make him out to.

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Host 2: Me. Yeah, it was a rare moment of evil genius for the Democrats.

Host 2: Should we talk about what’s in the bill? Should. Yeah. Yes.

Felix Salmon: So. So the main thing that’s in the bill is basically a massive investment in greening the country such that if all goes according to plan, U.S. carbon emissions will be 40% below 2005 levels by the end of this decade. And that’s huge. And Biden has promised 50% below. So that takes us most of the way there, just like this one bill alone.

Host 2: Does that stop warming?

Felix Salmon: It means that the US has basically gone from very near the back of the pack to very near the front of the pack in terms of reducing carbon emissions and getting the world on track to meet the Paris goals. Are we going to meet the Paris goals? Probably not. But every like increment that we can get in that direction, especially if it’s a big increment like this, helps. It’s not a binary thing. It’s not like, will warming be stopped or not? No, it won’t be stopped, but it could be a lot less catastrophic.

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Host 2: Right. Do you think I mean, so this bill has not actually passed yet. Like we said, cinema kind of holds it in our hands right now.

Felix Salmon: Not to mention like various people in the house as well. There’s a bunch of hurdles it needs to get through.

Host 2: Yeah, I think the Democrats can only afford to lose four votes or something for it in the House. But I was wondering if the reason this is so ambitious and it may even get passed in the Senate is because we’re really living through climate change right now. It’s impossible to deny that you see extreme weather events happening. I mean, as I was coming into record today, I was reading about Kentucky having people dying in floods. There’s something every day there’s fires, storms, hurricanes. I mean, you cannot ignore this.

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Felix Salmon: I think I think there’s something to that. There was a time, maybe 1050. Years ago when I thought that a large chunk of the United States would be among the few winners from global warming. The global warming would be terrible for the Ganges River Delta and would be terrible for all of these islands that drown and would make large chunks of sub-Saharan Africa completely uninhabitable. But, you know, the Great Plains and the bunch of the sort of agricultural breadbasket of America and that kind of stuff would actually become more productive. And we all have air conditioning and probably things would be fine. And I no longer believe that.

Felix Salmon: I think there was maybe a handful of places in Canada which, you know, might possibly benefit from global warming. But the number of beneficiaries is tiny, and the United States is clearly not one of them. It’s clearly getting worse. I would like to think the far sighted, noble lawmakers in the deliberative upper body of parliament have done the good thing for the purpose of the long term future of the country. You know, I suspect that Elizabeth is going to tell me that’s incredibly naive.

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Speaker 3: No, it’s always about aligning incentives. You know, you know, the the new bill includes a lot of clean energy tax credits. That’s one way to do it. You know, if you can line up climate incentives with something that, you know, Republicans will get on board with because it’s profitable for them.

Felix Salmon: Although there is going to be zero Republican support for this, I mean, literally zero.

Speaker 3: So, yeah, but they’re not trying to if they know it’s going to pass there. There’s also some politicking around what goes into the bill and what doesn’t, even if they don’t ultimately support it.

Host 2: So I know that car buyers will get tax credits to buy electric vehicles like and big one, 70 $500 tax credits. Big, big tax.

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Felix Salmon: Credits, but only for like the relatively cheap vehicles and not if you’re making $300,000 a year. You know, this is also a really good thing because so much of the EV market right now is concentrated for understandable reasons by the like, given the fact that it’s just physically not possible to make an enormous number of EVs. Right now the manufacturers are making these $100,000 EVs because that’s where they have the biggest profit margins. That isn’t going to move the needle on climate change at all. They’re saying, you know, if you spend less than like $50,000 on the new car, then, you know, or even the used car, then you get the tax credit. I like that law.

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Host 2: And they’ll be also tax credits for clean energy companies. Can one of you explain a little bit more to me how that would work?

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Felix Salmon: There’s a smorgasbord of tax credits and also loans. There’s that doing that thing that we did in the TARP where we leverage $25 billion of government money into $250 billion of loans to clean energy companies and that kind of thing. So that will help. Then we should also talk about the. Great white whale of income tax policy that we’ve been working on. How many decades and this loophole might finally get closed?

Host 2: I don’t believe it’ll ever get close. Felix is talking about the carried interest tax loophole. Although if you work in private equity, they would say it is not a loophole whereby if you work in private equity, you pay a 20% income tax basically.

Felix Salmon: Basically.

Host 2: Instead of a 30, 37% income tax because you count your income as capital gains. So, yeah, so your income is taxes, capital gains, which is totally unfair, I think, although maybe a bunch of private equity people will do me like how a bunch of to.

Felix Salmon: Be honest.

Host 2: CEOs and me last week.

Felix Salmon: When I talk about this to private equity people and hedge fund. Yeah some people this is a common fallacy by the way that this doesn’t benefit hedge funds. It only really benefits private equity and venture capital. But if you talk to those people, like in private, they’ll be like, Yeah, of course it’s in defense, of course. And then in public they’ll say, like, we’re supporting small business and they’re like, Fuck off, you know?

Host 2: But for years, I mean, I remember when I was at HuffPost and Romney was running for president, it became like a big issue.

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Felix Salmon: That’s how he made all of his post-tax money was by paying this low, low capital gains tax.

Host 2: Yeah. And then every few years, I think 2015 or 2016, Democrats tried to pass something. It got killed. I think Trump Trump even was against the carried interest tax loophole, some kind of put it in his thing and somehow it died. Everyone supports this, and yet nothing changes.

Felix Salmon: I always expected that if it were ever to die, it would die the backdoor route, which is by just bringing capital gains taxes up to the level of income taxes and making them the same. And then if you just did that, which there’s a lot of good reasons to do that, then it would be moot and it wouldn’t. No one would care. I didn’t expect them to do it this way.

Speaker 3: Well, I would say they’re not fully closing it. Okay. They’re adding provisions that kind of mitigate the issue. You know, they’re changing the holding period which investors have to hold onto their investments before they can reap the benefits of the loophole from three years to five. I mean, how much is that really going to do? But way overstated is closing the loophole. It’s more like shrinking it maybe. Yeah.

Felix Salmon: Yeah. No. Given the number of billions of dollars in taxes that are at stake here, you can be sure there’s going to be a lot of very highly paid accountants trying to find ways for the private equity executives to continue to save money on their taxes. It remains to be seen how successful this attempted loophole closing will be, although the CBO who scored it, they say it’s going to come up with an extra 14 billion in tax revenue. So that’s not nothing.

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Host 2: Right. And also the other tax provision that people are talking about in this bill is raising the corporate minimum tax to 15%, which is huge.

Felix Salmon: This is like an absolutely massive deal. This was basically agreed a year ago. This is Yellen’s great contribution to international diplomacy. Right. She basically went around the entire world and said, listen, will do it. Can you all do it, too? And everyone said, Yeah, okay, if everyone does it, we’ll do it. And she basically got everyone to agree. The corporations should pay a minimum of 15% of their global profits in income taxes somewhere. And then Manchin killed it and now it’s back.

Host 2: That seems like it’ll be just really hard to enforce.

Felix Salmon: It’s not actually the one. The wonderful thing is that once it’s on the books, let’s say the Amazon has an Irish subsidiary, and let’s say for the sake of argument that Ireland hasn’t signed onto this deal. Right. And Ireland has a 0% income tax and Amazon puts all of its European and African profits into the Irish subsidiary, and then all of their profits wind up not being taxed. And Ireland gets no tax revenue. Right. But then under the law by law, what the United States government has to do, given that Amazon is an American company, is look at Amazon’s global. Profits and say you need to pay 15% of those profits somewhere. If you’re not paying them in Ireland, you have to pay them to us.

Speaker 3: Do you think American companies are going to any of them are going to domicile themselves elsewhere because of this? Does it seem like it?

Felix Salmon: No, it doesn’t. That’s the whole point, right? Is that it doesn’t help. You have to pay wherever you’re domiciled. You have to pay at least 15% of your profits in tax to someone. That’s the whole point. And there are actually provisions in the way that this thing is structured so that if you go completely batshit and try and domicile yourself in some like tax haven somewhere, that doesn’t work either.

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Host 2: So all these new taxes make this bill inflation fighting. I want to talk about well.

Felix Salmon: What did Larry say to Joe?

Host 2: I want to know what Larry said to Joe.

Speaker 3: I also think this is apparently just a rebranding exercise. Changing it from the Build Better Back Act to the Inflation Reduction Act is marketing to some.

Host 2: Extent, but it’s good marketing. I mean, you know, I want to reduce the inflation. Yeah, yeah.

Felix Salmon: You’re really trying to make inflation.

Host 2: Really trying to make inflation happen. But someone told me that I can’t spell it out. It’s impossible. So let’s try and make it happen here on this podcast, the inflation room. But I mean, it’s smart build back better kind of feels out of date now because we’re back. I don’t know if we’re better, but we’re definitely back. Something has been built, so it’s time to turn the page and.

Felix Salmon: And reduce inflation.

Host 2: Reduce inflation. And my question is, does this could this reduce inflation? And I say yes.

Felix Salmon: I’m going to say yes. Like, for instance, there is a very important provision. Another thing that people have been trying to do for as long as I can remember, US politics, which is a long time, which is allow Medicare and Medicaid to negotiate prescription drug prices. That alone will bring down inflation significantly.

Host 2: Yeah, it will lower prices.

Felix Salmon: Yeah, inflation.

Host 2: Is going up. This would be prices going down.

Felix Salmon: Exactly.

Host 2: That does seem like it would do the job. Right. And if you get less, climate change prices will go up less too. Because and Felix will tell me if I’m wrong. I’m sure. But I believe that climate change exacerbates inflation because it makes things more costly. We’re seeing that right now with the price of food. Yes. So there you go. Like you have to fight climate change if you want.

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Felix Salmon: That’s like a multi-decade thing. That’s bring down inflation in the next couple of years. But yeah, I think you could tie me to a torture device and start pulling out my fingernails. And eventually I would say, yeah, Larry Summers is probably right. It will it will bring down inflation.

Speaker 3: I mean, he has to be sometimes statistically even.

Felix Salmon: A stopped glug.

Host 2: What do they say if you leave a monkey in a room with a typewriter for long enough, will eventually do Shakespeare or something. But Larry Summers, I mean, he was he was right about the inflation, too. I mean, it was really bad and everyone was wrong about it, including some people in this room.

Felix Salmon: I am being looked at.

Host 2: I mean.

Felix Salmon: Emily, Emily is giving me the side.

Host 2: I’m just I mean, everyone was wrong about inflation pretty much except for Larry Summers and all the other people.

Felix Salmon: Larry was vague enough about inflation to be almost guaranteed to be right. Because notably what he did is he warned about inflation in early 2021, a year before Putin invaded Ukraine, and he never said when the inflation would arrive and then it arrives, you know, 18 months later after Bhutan invaded Ukraine. And he’s like, you see, I was right. It was this build back in January 2021. It’s like.

Host 2: That.

Speaker 3: Also, when you say that there’s a 50% chance, I mean.

Felix Salmon: Larry always does that even better than the 50% chance thing he does, the one third chance. He’s like, there’s a one third chance there will be inflation and there’s a one third chance that’s going to be a hard landing. And as the one that chance, we’ll be fine. You’re like, thank you, Larry. That’s very helpful.

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Host 2: Three. We do a Segway now.

Felix Salmon: Okay.

Host 2: Okay. Okay. So the other thing we were going to talk about super related to inflation is the GDP numbers that came out earlier this week, which showed that the U.S. economy has contracted for two quarters now. And some people believe that means we’re in a recession and some people say we’re not in a recession. None of that really matters. It just means the economy is kind of doing not so great right now.

Speaker 3: But the economy is doing pretty well. I mean, that’s the thing about recession is that it’s also just a measure of broad based health of the economy. So we have one metric that says we could be in a recession, but not by a lot.

Felix Salmon: Yeah. If you if you take out just the inventories. Right. Like American businesses contributed to their inventories in the second quarter, but they contributed to the inventories at a lower rate at than the rate at which they contributed to the inventories in the first quarter. This is really boring technical stuff, right. But that alone, that decline in the rate at which inventories are growing. Was more than enough to push the GDP number negative. Hmm. So that does not have any actual effect on the day to day lived experience of Americans in America. So people saying like, well, we’re in a recession, so it’s bad luck. It doesn’t affect the labor force. It doesn’t affect prices. You know, it’s just a question of like supply chain management, really. Everyone kind of ran down their inventories during the recession. Now they’re building them up, but they kind of built them up and they’re building them up more slowly.

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Felix Salmon: Now, that’s the business cycle thing. It doesn’t mean recession, but yeah, you’re right. We’ve had to. Quarters of negative GDP growth only. You know, obviously it’s obvious to me, not obvious to everyone. Highly positive nominal GDP growth rate. Nominal GDP was up 9% year on year. It’s only when you try to account for inflation, which is non-trivial, by the way, trying to work out the inflation component of that. They don’t use CPI. They use something else that they do a bunch of sums and work out that it’s negative. But like there’s a lot more money sloshing around the economy in economic activity than there was. It’s just that after accounting for inflation, it feels lower.

Host 2: There are other things that are slowing down. Also, though, Felix It’s not just inventories. The housing market is slowing down. I’ve written about this. And that’s intentional. That’s what the Fed wants to happen. So the housing market is slowing down and some commodities, the prices are well off. Where they used to be, like lumber, for example, is like oil, gas, oil, gas. Like all those commodities that companies buy to make stuff, they’re all a lot lower now.

Felix Salmon: Cheap, I would imagine.

Host 2: Really is lower.

Felix Salmon: Well, not for gas.

Host 2: But yeah, not for gas and consumer spending. Once you account for the inflation ATM, once you account for the inflation is also down because people have less actual real money to spend because of the inflation.

Speaker 3: Also because inflation is such a big factor, it looms so heavy in the minds of consumers. You know, right now, 65% of people think that we’re in a recession. So whether we are or not, you know, that could have an effect of becoming a little bit of a self-fulfilling prophecy if it really affects how people control their spending.

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Host 2: Well, that’s what’s interesting, too, though. Spending is down. Spending on goods is down. Spending on services is up.

Felix Salmon: Oh, my God. Yeah. Marriott and Hilton, all of people are making money hand over fist. All of the airlines that overbooked, in fact. And then if you look overall at spending, if you look at the earnings from Visa and MasterCard and Amex, you know, how much people are spending on their credit cards is going up a lot, like whatever. They’re not spending on widgets and toys and stuff for their homes. They’re spending on services. So people are spending. It’s just the transition from goods to services. Seems like maybe they’re spending. The increase in money that they’re spending on services is smaller than the decrease in money that they’re spending on goods.

Speaker 3: I think everybody has sort of different metrics that they use to decide whether we’re in a recession. You tweeted something about Bill Ackman having a specific what was it?

Felix Salmon: Oh, his corporate audit went up in price yeah he Bill Ackman is this is this billionaire hedge fund guy and he was on the Twitters and he was saying one of my companies because when you’re black, when you own, you know, a portfolio of companies as you do, one of my companies just had its corporate order go up in price. That’s inflation. We need to worry about this. I mean, relatable.

Host 2: Here’s of my my inflation hits home thing that happened to me recently was I was at a pool for my daughter’s swim meet. I went to the snack stand and I got a can of Pepsi and a small package of sour patch kids. Don’t judge me. And it was $5, $5 for a tiny candy and a can of soda. And I was just like, you’re lying. I had like a back and forth with the kid, like 15 year old who was working the stand, but it was 250 for a can of soda, which is.

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Speaker 3: Maybe that was a seller induced inflation.

Host 2: But it was a public pool. It wasn’t like I was at some fancy place or an airport or something. It was just the public pool. I couldn’t believe it. I think it worked out to like $0.35 per sour Patch Kid.

Felix Salmon: I’m glad you did that.

Host 2: Yes. Anyway, I’m sorry, but I guess the bigger question is just, is the economy doing good or bad? Right.

Felix Salmon: That’s really and I think I think the answer to that one is yes. I mean, I’m actually kind of serious about this. I’ve got this in my newsletter this morning is that we’re in this weird time right now where it’s impossible to create a narrative that really explains everything that’s going on. You can’t sort of say, Oh, now I understand it. You know, it is very messy. Everything’s in flux. There’s a bunch of different data points that are pointing in very different directions. And we’re just in a very confusing and chaotic time right now, economically speaking. And trying to sum it up with like, are we in a recession? Yes or no is a mug’s error and.

Host 2: We stopped the economy in 2020 and restarting it. It’s not just like going back to the way it was.

Felix Salmon: You know, like when you when you pull the starter on a lawnmower or chainsaw or something a little bit like that.

Host 2: Yeah, yeah, I guess so.

Felix Salmon: I have no idea what I’m talking about.

Host 2: Having mowed a lawn.

Felix Salmon: I think we should, we should, we should move swiftly on before I have to answer that question and answer someone else’s question. Do you have a better question that you can? Ask me.

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Host 2: I don’t have a better question, but a listener has a better question for you. Felix from Albert, our listener Albert.

Felix Salmon: Hi, Albert.

Host 2: Albert hopes all is well. He was looking into a recent congressional probe of corporate landlords that was just came out this past week and their aggressive eviction practices. I was hoping you could revisit what I have long considered one of Felix’s most controversial opinions, which is that increasing corporate ownership of American housing stock is a good idea. Yes. Felix, I read this report and I don’t see how you can defend your stance, but go ahead.

Host 2: So the report basically lets that it looks at four big companies who are corporate landlords, who own a variety of different kinds of single family houses, two apartment complexes. And it looked at their behavior when the CDCR eviction moratorium was in place. So what happened was these corporate landlords still tried to evict people about three times more than they originally reported, about 15,000 people. And it could be more. And the way they did it was pretty underhanded. In one case, calling Child Protective Services on a family in an apartment to get them out, they hadn’t done anything that would.

Felix Salmon: Did they actually do, though? Did they just write that the list of things that they might do? A bit confused by that in the report. If you.

Host 2: Read, I think, a line in there that says they actually did it and they also they posted notices saying that the eviction moratorium had been thrown out in court when it actually had not been thrown out in court.

Felix Salmon: Had. But it was stayed pending appeal and.

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Host 2: Yeah, yeah. And no one knows how much of the intimidation that these landlords did. Like how many people just left?

Felix Salmon: Well, we do know that that’s the whole point. They said that 6% of the people got evicted, but in fact, it was 26% of the people wound up leaving. And a large chunk of that, one can only assume, was precisely because of these tactics. So they did actually do a pretty good job of quantifying it.

Host 2: It’s a good report.

Felix Salmon: It is a good report.

Host 2: And it looks very bad for your friends, the corporate ladder.

Felix Salmon: Okay. So so the first thing I really wanted to say here is a lot of the behavior that was outlined in this report is genuinely terrible. And I’m very glad that Congress looked into it and what these people were doing was bad and they shouldn’t have done it. Totally agree on that. I think the congressional report does spend a huge amount of time like counting up eviction notices, which is like, yeah, you’ve made your point.

Felix Salmon: What they get around to mentioning like two thirds of the way into the report is that these companies had a policy which I will agree is a very terrible policy, that the minute that you are ten days late on your rent, the first thing you do is you hand over an eviction notice and no one really expect people to go, Oh shit, I’m evicted and then pick up and leave just because they’re ten days late on their rent. But what they had was this policy to have like a zero tolerance attitude towards any kind of rent arrears and to start eviction proceedings immediately, like within ten days of like a single rent missed rent payment.

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Felix Salmon: And this does not make sense to me. Right. I don’t entirely understand why they did this. And I was reading the report and I was trying to get a feel for why they were doing this. And I couldn’t. And I was reading a few of the sort of contemporaneous local press reports about this as well. And again, I couldn’t so I’m unclear why they did this, but I do agree that especially during a pandemic, they should not have been doing.

Speaker 3: I was a renter until last week for my entire life, and I’ve had small landlords and big corporate landlords. And our last landlord had exactly that policy ten days. You know, they also made it sometimes difficult to get in touch with the company. You know, they’ll set up LLC so that you can if there’s something wrong with your place, you have a little bit of trouble finding who can fix it. And, you know, they do have an incentive to do that to some extent. If if you’re in a tight housing market, they think that they can raise the rent of the apartment immediately.

Felix Salmon: Absolutely. And so that was my first hypothesis was the rents are soaring and they reckoned if they kicked the current tenants out, then they could replace them with people paying a lot more. But then I looked at where these places were and when they were doing this in the midst of the pandemic. And I mean, maybe that is true, right?

Speaker 3: But my former boss, erstwhile Democrat Jared Kushner Company, got into big trouble a few years ago for doing this in a suburb of Maryland, I think, where it wasn’t a tight housing market, but it was still there was a documentary about it point of their strategy, and they were using these kind of harassment tactics to get tenants out of their apartments was to slightly upgrade the apartments and then put it in a completely different class of rentals. That would be just much more expensive. So I don’t even think it’s a prerequisite that the housing market has to be tight locally for that to happen.

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Felix Salmon: But in general, you have to expect that the rate you could charge is higher than the rate you are charging. And one of the policies, let’s say, of the people who say that corporate landlords, the worst individual landlords is the corporate landlords are obsessed with. Some rising rents, and that makes this kind of behavior more likely. But the flip side to that is if you are in a place with a corporate landlord who is maximizing rents, then when you rented that place from the corporate landlord, presumptively they were maximizing rents when they rented it to you. And there isn’t a whole bunch of money on the table that they can just collect by kicking you out and putting in a new fridge and renting it to someone else.

Speaker 3: It’s not just that, though. It’s also about how they service the places. If you have a smaller landlord, you’re more likely to have a direct relationship with them. They’re more likely to care about whether, you know, you’re living in a broken place. And I think if your entire objective is profit maximization, there are things like not repairing basic infrastructure, neglecting repairs that need to be done, that happen with corporate landlords, that, in my experience at least are less likely to happen if you have a small landlord and you know them citizenship with them.

Felix Salmon: So that is exactly my answer to the listener question right now, Albert is we don’t know this. Like more likely thing that Elizabeth is talking about is entirely sort of like an equals one anecdote. I will say for basically certain, I will say like with 100% certainty that the very best landlords in America are small individual landlords and that the very worst landlords in America. Small individual landlords.

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Felix Salmon: Right. The small individual landlords really do span the entire spectrum. I will also say with a fairly high degree of certainty in situations like the pandemic, that if you are a small individual landlord and you lose your job and you really need the income, then you are squeezed in a way that corporations aren’t squeezed, right? That you can’t let things slide for a few months because you have as big money issues as your tenants. And that makes things extremely uncomfortable for all concerned. And there were genuine hardship stories during the pandemic of landlords who are like, I can’t live, I can’t feed myself because my tenants aren’t paying rent. I’m not allowed to evict them. Now my reaction to this is not, Oh, you poor thing, I feel sorry for you. My reaction to this is you shouldn’t be a landlord in the first place. You don’t have the risk profile to be a landlord, because if you want to be a landlord, you should be able to cope with people not paying rent for a few months. You should be able to have things empty for a few months, you know, that kind of thing.

Felix Salmon: So what we’re seeing here is presumptively the four worst corporate landlords in America. That’s presumably why Congress picked on them, right? If they were worst ones, then they would have picked on those ones and said, we’re not seeing the BlackRock’s in the big private equity companies. Right. We are seeing like some bad players and we are seeing, as I say, a slightly overegged like there’s definitely anecdotal. There’s definitely this thing was bad is one thing. The other thing that they did was bad across a portfolio of whatever it was, 100,000 houses across all four landlords. Right. Statistically speaking, if you look at 100,000 mom and pop landlords, you could find that number of bad instances of behavior.

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Host 2: But it’s not the bad instances. It’s the eviction rate that we’re talking about.

Felix Salmon: Right. And so during.

Host 2: A moratorium on evictions.

Felix Salmon: The eviction rate actually turned out like the eviction rate. Yes. Was bad. It wasn’t quite as bad as the report was.

Host 2: Over 20%.

Felix Salmon: Who it wasn’t precisely because the eviction notice came out willy nilly. Whenever you are ten days late, a lot of those eviction notices, just like the rate of eviction notices, was very high. And then a lot of these places were relatively low income rentals where there is a natural churn anyway. So that delta between the 6% who are actually evicted and the 26% who left, we don’t know how many of that extra 20% would have left anyway and how many left only because of the harassment and the bad behavior. So, yes, it’s high. Yes, it was too high. Yes. They shouldn’t have done it.

Felix Salmon: Do I think that in general, one can extrapolate from these for corporations to corporate landlords as a whole and say they are all terrible? I am not convinced.

Speaker 3: Well, I don’t think you really have to do that at all. You have to do is look at federal tenant protections in this country and compare it to in comparable developed countries. So in Germany, 55% of the population rents, in Berlin, 82%. And that’s mostly because they have stronger tenant protection laws, which is part of the point of this report, is to try to change that here.

Felix Salmon: Oh, absolutely. And you will find no one more in favor of moving to a German style system of renters than me. Right. This has been the thing that I’ve been saying for literally eight years on Slate. Money is the homeownership rate in America is too high. More people should rent. And in order for more people to rent, you need more stability and permanence in the place that you’re renting. But to my point, if you want to move to that kind of a system, then the risk profile of the landlord and the amount of time you would like tying your money up if you own that property is just not something that lends itself to individuals. You basically need corporate landlords in that situation. If you go to Germany and you talk to anyone who’s renting in Germany and you ask them like, Who’s your landlord? They’ll be, they’ll give you some company. That’s how it works.

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Speaker 3: Yeah. There are also sort of different incentives there. You can only deduct your mortgage interest there if the property you own is it being rented out. So I think that creates different, different incentives.

Felix Salmon: Look, if you’re trying to tell me that Germany has a better system than the US, I couldn’t agree more. But that doesn’t answer the question about in the U.S. Is it better for a landlord to be individual or corporate? And in fact, as I say, like at the margin, it probably militates in favor of corporate landlords because they have the long term time horizons that you need in order to be able to operate that kind of a portfolio.

Host 2: It sounds like you both kind of agree because it’s not about really who owns the building corporate person or mom pop person. It’s about the regulations that dictate how that landlord can and can act. And in the U.S., especially in the states and locations where these four really bad actors operate, the laws really favor landlords and there’s very little protection for renters. You notice that New York isn’t really mentioned, I don’t think, in that report because New York has very.

Felix Salmon: Exactly in its old place.

Host 2: Strict laws.

Felix Salmon: It was like Alabama.

Host 2: Mississippi. Yeah. Where you can really just kick people out of their homes with very little notice and they don’t have a right to an attorney or anything like that. And in fact, there are only a few locations in the country where you have a right to an attorney if you’re going to be evicted and also protections that the federal government put into place for renters. I mean, there was a lot of money, but it was slow getting out to the states. The states were slow to implement it. And a lot of the problems that took place for these companies was was that a renter would be like, my money’s coming because the assistance was on the way, but it wasn’t there yet. And they were like, Well, we don’t have it, so you have to go. If we had efficient regulation, it wouldn’t matter who the landlord was.

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Speaker 3: Yeah, I agree with that.

Felix Salmon: On wage. No, we should probably have a numbers around. Emily, do you have a number?

Host 2: Yes, I have a number. It’s $1.53. That is the wholesale price of a pound of chicken wings in the northeast of the United States, according to data that Bloomberg ran on Friday. And it’s interesting because it’s down from over $3 last year per pound, which sent the price of chicken wings soaring and was a big story for those of us who follow chicken wing stories, which for some reason I do.

Felix Salmon: Know chicken wings.

Host 2: I always will read a good chicken wing story. So yeah, I saw this on Friday and I was like, Oh, I have to tell everybody the price of chicken wings appears to be coming down, which could be a good sign for the inflation. Also, I want to tell listeners that I have never mowed Alan either. So I have heard. Alan, good for.

Felix Salmon: You. You have what? Like I’ve mowed lawns with old fashioned push mowers you have. I just don’t think I’ve mowed loan with something where you have to.

Host 2: Never fill the gas and stuff.

Felix Salmon: Yeah, not the self-powered ones.

Speaker 3: Yeah, I grew up in a rural area, so there’s always things to cut and mow and so on.

Felix Salmon: Elizabeth, what’s your.

Speaker 3: My number? 10%. Which 10% of all McLaren P1 Supercar ever made are registered in Montana? Because if you register your car there, they don’t charge sales tax on personal property. So there are tax advantages. But also.

Felix Salmon: This. You don’t. What does that mean? You don’t charge sales tax.

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Speaker 3: So if you buy a super car that’s titled in Montana, you don’t have to pay sales tax on it.

Felix Salmon: So there’s just no sales tax in Montana, basically.

Speaker 3: Pretty much on personal property. So.

Felix Salmon: Oh, you mean. Oh, you mean as opposed to like buying from a company. If I buy from a store, there might be sales tax. But if I’m buying from a person, I don’t need to pay some tax.

Speaker 3: And also there are no emissions tests for carbon. So you can get away with supercars that do not meet standard climate regulations.

Host 2: What’s a supercar?

Speaker 3: Just an insanely expensive luxury.

Felix Salmon: Like, you know, million dollar cars that go 200 miles an hour for no reason.

Host 2: Like you tap on the accelerator and just, like, boom.

Felix Salmon: Yeah, that’s.

Host 2: What I.

Speaker 3: Think James Bond would drive.

Felix Salmon: My number is 899, which is the number of days, according to the State Department website, that you need to wait if you apply for a visiting visit to the United States in Santiago de Chile.

Host 2: That’s a long.

Felix Salmon: Time. Now, I will hasten to add, if you are a Chilean, you don’t actually need to apply for a visa to be in United States because they’re part of the visa waiver scheme. So it’s not obvious what this actually refers to. But if you look at other countries, the UN, part of the visa waiver scheme like Istanbul, a 477 day wait for visitor visa. The State Department has just basically broken and it doesn’t work and they don’t issue visas and they take years to come through. And it completely defeats the purpose of trying to issue visas. And I don’t understand why Tony Blinken hasn’t fix this. So, yeah, I like that.

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Host 2: Broken. Did Trump break.

Felix Salmon: It? I suspect Trump broke it. I think the drum broke it and his two terrible secretaries of state broke it kind of deliberately. And it’s much harder to build back than you might think. But still, come on, people, get your act together. We are going to have a sleepless segment on college tuition. Yeah, there’s a really good article in Slate about tuition assistance and merit aid and this kind of stuff. And it’s all a sham and a scam and a fake. So we’re going to talk about that in Slate class. Otherwise, thanks so much for listening to Slate Money.

Felix Salmon: Thanks to Jessamine Molli and Seaplane Armada and Merrit here in the studios in Brooklyn and everyone for making this happen. And we’ll be back with you next week with even more sleep money. Okay. Sleep here, folks. Go to sleep dot com because you have your sleep membership by definition. Since you’re listening to this, you don’t need to worry about the paywall and you should read the story saying that.

Host 2: Just say the title.

Felix Salmon: College tuition is a scam. The title is and this is one of those really short, punchy titles. The single most important thing to know about financial aid. It’s a sham, says Kevin Carey. And that more of a thumbs up, right?

Host 2: Yeah. I don’t need to say anything else. Yeah.

Felix Salmon: The idea being that basically for the vast majority of colleges, like the ones that aren’t Harvard or Yale, they just need to fill up and they’re finding it difficult to fill up. And they reckon, like any other retailer, that if they offer discounts, you’re more likely to attend. And so when they send you a letter in the mail saying, congratulations, you’ve been qualified for financial aid because your parents don’t make enough money or you’re good enough at school or whatever. It’s all a sham. It’s not actually that they’re looking at any of that. They just reckon that if they send you that letter, you’re more likely to go to that college.

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Host 2: Yeah, it was a really good piece and I think we talked about Ron Lieber’s book On the pack and.

Felix Salmon: He kind of mentioned this.

Host 2: Yeah, it’s into this. But basically this piece really like goes deep on people have this idea that financial aid is given to people who need financial aid. But in the private college and university sector, that’s not actually how it works, Felix said. Only in the Ivy Leagues you can get genuine tuition assistance if you are needed, if you need financial aid. But for these other private schools, they’re offering financial aid and scholarships to kids from families who probably could pay for school. And they’re doing it to get people to come to their school. They’re basically it’s like any other retail good where things go on sale until someone buys them and colleges now have.

Felix Salmon: Is that a Dutch auction, is it? I think that’s is that something you start the price of high and you just lower the price until someone I mean.

Host 2: That’s how retail I mean, that’s how it all works. And they have colleges and universities have like sophisticated algorithms and marketing departments where they figure out, like.

Felix Salmon: Don’t forget to consult.

Host 2: Consultants where they figure out like, oh, we should send this kid a $35,000 scholarship. And he has a great example at the front of the story where he talks about this one kid from an affluent home who gets offered a $35,000 break on tuition at this one college and then compares to this other girl who gets no offer from this college, but who is genuinely in need of financial assistance. And it is kind of shocking because even though I read Ron’s book still in my head, I had it that, you know, my kids are going to we’re going to fill out a FAFSA form.

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Felix Salmon: Well, you are definitely going to fill out the form, but they.

Host 2: Use the FAFSA form to just market you to different discounts. They don’t use it to actually be like, well, they need financial help.

Speaker 3: I think I went to Duke on a lot of financial aid. The way that they would calculate it had a lot of subjective things in it. You would fill out the FAFSA and they had an algorithm, but they would also tell you, like, this doesn’t work for you. Come back in and we’ll talk about it. And there would just be questions about random things and ideas that I matriculated to Duke. Only 17% of the student body was on any kind of financial aid. So they also had sort of weird rules, like if you had a car on campus, you couldn’t get a parking space. If you were in financial aid, they were trying to dissuade you from spending money on a car that you could give to Duke, which is sort of irrational for those of us who cost way more to get back and forth. If you were flying, you know, there are all these sort of factors that were not necessarily quantitative that they would use to decide. Right.

Felix Salmon: But but that’s like the high end. That’s like explicitly the kind of university that we’re not talking about here where there were many more applicants.

Speaker 3: And I’m saying, yeah, those are the places where it actually is the closest.

Host 2: Yeah, it’s still.

Speaker 3: We’re still weird.

Felix Salmon: Yeah. Yeah, that’s all. It’s always weird. I don’t have a problem with it being subjective. I just have a problem with is to Emily’s point, using all of this incredibly sort of private financial information as a marketing data pool device thing rather than as like a way to calculate need because they present it as a way to calculate need. But really it’s just a way to calculate how much they can extract from you.

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Speaker 3: The cost of education has outpaced the inflation, but, you know, there’s these sort of artificially high prices. They’re kind of dropping the prices in the right grades.

Felix Salmon: Yeah, but they’re the 85,000.

Host 2: Yeah. Yeah.

Felix Salmon: That’s the that again is part of the marketing, right. Yes. The idea is the people are more likely to go to a college if they’re told that it’s $75,000 a year, but they get a $40,000 discount, then if they’re told it cost $35,000 a year because the 35,000 thing they like, that’s like kind of math. Whereas the 70 this is a $75,000 education I’m getting and I’m only having to pay 35,000 for it. Wow. That’s a bargain. They’ll definitely take.

Host 2: That. Yeah. It’s like those rug stores where all the rugs are always on sale. Exactly. Really expensive.

Felix Salmon: Exactly.

Host 2: But I feel like it gives a lot of stress to a lot of.

Felix Salmon: It’s totally stress 100% stressful go go buy runs book and then yeah, it’ll make it less stressful.