A different kind of spring break

Summary

Marketplace Morning Report: "A Different Kind of Spring Break" Release Date: March 13, 2025

In this episode of Marketplace Morning Report, hosted by Sabri Benishour, listeners are guided through a comprehensive exploration of current economic and environmental issues shaping the United States and beyond. The episode delves into the Environmental Protection Agency's (EPA) proposed regulatory rollbacks, rising corporate bond yields amidst market uncertainty, the impact of climate risks on real estate, and Miami Beach's stringent measures to manage spring break festivities. Each segment is enriched with expert insights and firsthand accounts, providing a nuanced understanding of these pressing topics.

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EPA's Regulatory Rollback and Its Implications

[00:32 – 02:01]

The episode opens with Benishour addressing the EPA's initiative to ease environmental regulations in an attempt to foster a more business-friendly environment. The agency plans to roll back numerous regulations related to carbon emissions and air and water quality, significantly impacting sectors such as agriculture and energy. This shift marks a potential turning point in the EPA's capacity to address climate change.

Nova Safo, reporting for Marketplace, elaborates on the EPA Administrator Lee Zeldin's decision to revisit the "endangerment finding" established in 2009. This finding previously empowered the EPA to implement rules limiting greenhouse gas emissions under the Clean Air Act. Zeldin contends that the original finding was flawed, citing the agency's failure to account for future costs. This rationale aligns with former President Trump's directive to reassess the endangerment finding, despite opposition from environmental groups like the Center for Biological Diversity, which argue that reversing the finding undermines climate change mitigation efforts.

Quote:

"The EPA’s move is not necessarily a surprise. President Trump in an executive order had directed the agency to re-examine its endangerment finding." — Nova Safo, [01:00]

The EPA remains committed to moving forward with the rollback, inviting public commentary to shape the outcome of this significant policy shift.

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Rising Corporate Bond Yields Amid Market Uncertainty

[02:01 – 05:13]

Transitioning to financial markets, Benishour highlights growing concerns among investors regarding tariffs and unpredictable economic policies. This anxiety is reflected in the increasing yields on corporate bonds—the interest rates that businesses must pay to borrow money through bond issuance. Unlike government bonds, corporate bonds typically carry higher interest rates due to the inherent risk of default.

Diane Swonk, Chief Economist at KPMG, explains that the widening gap between corporate and government bond yields signals heightened fears of economic downturns, such as recessions or stagflation. The current surge in tariffs not only affects consumer prices but also pressures businesses, leading to fears that companies may struggle to service their debts. This uncertainty compels lenders to demand higher risk premiums, making borrowing more expensive for corporations.

Quote:

"We're seeing a resurgence of fears of recession and margin compression and even stagflation. ... fear is making it more expensive for businesses to borrow." — Diane Swonk, [03:16]

Swonk likens the tightening credit environment to a "broken stoplight," where economic agents slow down or halt their activities due to uncertainty. This tightening acts as a brake on economic growth, as businesses become more cautious in their investment and expansion plans amidst the volatile market conditions.

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Climate Risks and Real Estate Valuation

[06:04 – 07:32]

Benishour then shifts focus to the intersection of climate risks and the real estate market. A new analysis by Zillow reveals that approximately $9 trillion in U.S. real estate is susceptible to wildfire risks, while $7 trillion faces flood threats. These environmental hazards are particularly pronounced in California, where half of the top ten cities with the highest fire-prone real estate values are located.

Judson Boomhauer, an environmental economist at UC San Diego, discusses how the housing shortage in California exacerbates property prices, even for high-risk homes. Despite the increasing dangers, high-risk properties often fetch up to 49% more than their lower-risk counterparts due to the area's desirability and limited housing supply.

Quote:

"Housing shortage makes homes more expensive. The high fire risk homes ... sold for 49% more than low fire risk homes." — Judson Boomhauer, [06:35]

Kara Ng, Senior Economist with Zillow, notes that while insurance companies are beginning to drop policies in high-risk areas, real estate markets have not fully adjusted to these heightened risks. Homes in extreme fire or flood zones are now less likely to sell or go pending, and higher flood risks correlate with increased mortgage application denials.

Quote:

"These risks have been around for a long time. They're getting worse. It seems like real estate markets haven't fully priced them in." — Kara Ng, [06:48]

This disconnect between rising environmental risks and real estate prices underscores the complex relationship between climate change and economic valuation in the housing market.

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Miami Beach’s Spring Break Regulations

[07:11 – 10:34]

The episode also covers Miami Beach's proactive measures to manage spring break activities, which have historically been marred by chaos and safety concerns. In response to incidents involving stampedes, stabbings, and shootings, the city has implemented strict regulations aimed at ensuring both tourist and resident safety while still capitalizing on spring break's economic benefits.

Veronica Zaragovia, reporting for Marketplace, details the new rules set to enforce throughout March. These include DUI checkpoints, heightened security at beach entrances, increased parking fees, and restrictions on sidewalk seating for local restaurants. Additionally, businesses are prohibited from renting out electric scooters and mopeds, pushing companies like Fly Ebike Miami to shift from rentals to sales.

Quote:

"The strict rules in Miami Beach will be in place through March. ... higher fees for weekend parking." — Veronica Zaragovia, [08:21]

Kyle Grossman, supervisor at Fat Tuesday, a popular South Beach bar, expresses concern that the regulations may deter not only rowdy tourists but also families seeking a safe environment.

Quote:

"Too many restrictions make good people also weary." — Sabri Benishour, [09:53]

Despite apprehensions from business owners about potential declines in tourist numbers, Veronica Zaragovia reports a positive outlook with increased hotel occupancy rates, suggesting that the regulations have not significantly deterred visitors.

Quote:

"The strict rules don't seem to have turned visitors off. Hotel occupancy rates went up last year, even with restrictions." — Veronica Zaragovia, [10:34]

The balanced approach aims to maintain Miami Beach's reputation as a vibrant spring break destination while mitigating the negative impacts of unruly crowds.

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Closing Remarks

The episode concludes by reinforcing the importance of staying informed amid economic and environmental uncertainties. Listeners are encouraged to engage with ongoing analyses and reports to navigate the complexities of the modern economic landscape effectively.

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Notable Quotes Summary:

• Nova Safo: "The EPA’s move is not necessarily a surprise. President Trump in an executive order had directed the agency to re-examine its endangerment finding." [01:00]
• Diane Swonk: "We're seeing a resurgence of fears of recession and margin compression and even stagflation. ... fear is making it more expensive for businesses to borrow." [03:16]
• Judson Boomhauer: "Housing shortage makes homes more expensive. The high fire risk homes ... sold for 49% more than low fire risk homes." [06:35]
• Kara Ng: "These risks have been around for a long time. They're getting worse. It seems like real estate markets haven't fully priced them in." [06:48]
• Veronica Zaragovia: "The strict rules in Miami Beach will be in place through March. ... higher fees for weekend parking." [08:21]
• Sabri Benishour: "Too many restrictions make good people also weary." [09:53]

This episode of Marketplace Morning Report provides listeners with a multifaceted analysis of critical issues affecting the economy and society, blended with expert opinions and real-world examples to foster a deeper understanding of the current landscape.

Transcript

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[Sabri Benishour]

What less environmental regulation could mean From Marketplace I'm Sabri Benishour in for David Brancaccio. In an effort to create a more business friendly environment, the Environmental Protection Agency plans to roll back dozens of regulations around carbon emissions and air and water quality. These would affect industries including agriculture and energy. The shift has the potential to fundamentally change what the EPA can do to combat climate change. Marketplace's Nova Saffo has more.

[Nova Safo]

EPA Administrator Lee Zeldin says his agency will reconsider its so called endangerment finding made back in 2009. That finding that greenhouse gas emissions impact public health empowered the agency under the Clean Air act to set up rules to limit carbon emissions which contribute to climate change. Those rules limited emissions from power plants and vehicles, but but the agency now says it arrived at its finding improperly, in part because it did not consider future costs. In the past, the EPA has also pointed to savings such as in benefits from emissions reductions. The EPA's move is not necessarily a surprise. President Trump in an executive order had directed the agency to re examine its endangerment finding. The environmental group center for Biological Diversity promised to fight the effort, saying that reversing the finding would would jeopardize multiple rules aimed at fighting climate change. The EPA says it will move forward. In seeking public comment, I'm Nova Safo for Marketplace.

[Sabri Benishour]

Markets have been sending signals that they are worried about tariffs and erratic economic policy. And the latest place we're seeing it is in the market for credit. The yield on corporate bonds. That's the interest corporations and businesses have to pay on bonds that they issue to raise money. Those rates are rising, and not just rising, but rising faster than the baseline interest rate in the economy, which is the yield on government bonds. Bottom line, fear is making it more expensive for businesses to borrow. Diane Swonk is here to talk us through this. She's chief economist at audit tax and advisory firm kpmg. Good morning, Diane.

[Diane Swonk]

Good morning.

[Sabri Benishour]

First off, let's just remind everyone there's interest rates on Government bonds and then there's interest rates on business bonds and the business bonds are usually higher. Why is that normally?

[Diane Swonk]

Well, that's because we consider the treasury bond a risk free asset. And of course, when you are issuing debt to a corporation, there's always some risk that they could default. And so that's why there's a difference between the two.

[Sabri Benishour]

So what we're seeing now is that that difference which is always there, has suddenly got a lot bigger. The biggest it's been in around six months. Why is that happening?

[Diane Swonk]

Well, what we're seeing is a resurgence of fears of recession and margin compression and even stagflation. And that's because tariffs we're seeing out right now and coming in the pipeline, they not only are passed on to consumers, they're also absorbed by businesses. And so there's getting growing concern that businesses will not be able to pay back all of their loans, so they've got to pay a higher risk premium for getting debt. We actually measure this because it's something that's just part of human behavior during periods of heightened uncertainty, which has soared globally past the pandemic levels. And it means that all else equal, if you're really uncertain about the future, you're just not as willing to lend at as low as rates as you were when you were more certain about what the future looked like. Especially when you're talking about multinational firms that have 40% of the S and P is dependent on their ability to get profits abroad.

[Sabri Benishour]

So that means even without the tariffs, simply the fear of uncertainty creating a tighter credit environment, making it harder to borrow, that in and of itself is a way of putting brakes on economic growth, isn't it?

[Diane Swonk]

Exactly. I often liken it to a broken stoplight. When you see a broken stoplight at a busy intersection, everybody slows down and hesitates to cross. Some even do a U turn and opt out entirely. We're seeing that in real time in the US Economy and in the global economy. Given how uncertain these times are, with escalating trade wars, cuts to government spending, contracts, nonprofits rippling through the economy, all of that is having this sort of freezing effect and and also chilling effect on credit markets overall.

[Sabri Benishour]

Diane Swonk is chief economist at kpmg. Thank you so much.

[Diane Swonk]

Thank you.

[Unknown]

Foreign.

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[Sabri Benishour]

In the United States $9 trillion worth of real estate that is exposed to major wildfire risk. There's $7 trillion worth of property exposed to flood risk. These numbers are from a new climate risk analysis from Zillow. Half of the top 10 cities with the most fire prone real estate value are in California marketplaces. Kaylee Wells has more.

[Judson Boomhauer]

California is well represented in this analysis because even though there's a lot of.

[Kara Ng]

Climate risk, there's a housing crisis here. There's just more people that want to live in California than there are homes to put them in right now.

[Judson Boomhauer]

Environmental economist Judson Boomhauer with UC San Diego says that housing shortage makes homes more expensive. The high fire risk homes in Zillow's report sold for 49% more than low fire risk homes.

[Kara Ng]

These risks have have been around for a long time. They're getting worse. It seems like real estate markets haven't fully priced them in.

[Judson Boomhauer]

Historically, home insurance companies have already started to react. That's why they're dropping home policies. In California, home prices lag behind. That's because climate risk is one factor in a home's value. But it's not the only factor.

[Intuit Sponsor]

Many high risk areas are desirable places to live for other reasons, like being near an ocean.

[Judson Boomhauer]

Senior economist Kara Ng with Zillow says that's already started to change. Homes with extreme fire or flood risk in the study are less likely to sell or go pending.

[Intuit Sponsor]

These fire and flood homes do simply sell, but at a greater discount than.

[Judson Boomhauer]

Compared to the initial list price, Ng says. Higher flood risk homes also see more mortgage application denials and withdrawals. I'm Kaylee Wells for Marketplace.

[Sabri Benishour]

Miami beach is one of the most famous, most wild destinations for spring break partygoers, and the city is starting to be over it. The party seen in March these past few years has devolved into stampedes, stabbings, even fatal shootings. It's created bad publicity and drawn outcry from angry residents. So the city has drawn up rules to keep tourists and residents safe. Over the next two weekends, for example, police will put up DUI checkpoints. They'll run license plates to screen for previous criminal offenders. But as much as the city is exasperated by the chaos that party tourists bring, it also could use their money. Local businesses count on spring break profits. Reporter Veronica Zaragovia has more.

[Veronica Zaragovia]

The strict rules in Miami beach will be in place through March. The idea is to deter large, rowdy crowds with security checkpoints at popular beach entrances and high fees for weekend parking. Two city garages will charge up to $100 a day. The restaurants of the art Deco hotels have to shut down their sidewalk seating on the main drag in South Beach. And the rules forbid businesses from renting out vehicles like electric bike scooters or mopeds.

[Kara Ng]

We just gotta work with what we got.

[Veronica Zaragovia]

Antonio Prades manages a store called Fly Ebike Miami in South Beach. He says he's hoping to sell scooters since he can't rent them out. A low end scooter can cost about $300. Renting a scooter for, say, a week would be more expensive.

[Kara Ng]

So it wouldn't make sense just to rent something when you can just buy a scooter, a bike and then resell it and just you can even make a profit on it.

[Veronica Zaragovia]

That is, if the tourists can sell it before they go home. Brades and other business managers are generally not thrilled, but are trying to work with the city. Kyle Grossman is a supervisor at Fat Tuesday, a frozen cocktail bar in South Beach.

[Kara Ng]

It's also the business owner's responsibilities to not overserve.

[Sabri Benishour]

Greed breeds some of those disastrous situations.

[Veronica Zaragovia]

He feels like some of the city's measures are just too much like barricades to block street parking. Grossman says even families could feel unwelcome.

[Sabri Benishour]

They're going, what am I getting myself into? Too many restrictions make good people also weary.

[Veronica Zaragovia]

The city is going full stop on the rules. It put out a video on social media to let visitors know police will be enforcing them.

[Unknown]

What's going on?

[Veronica Zaragovia]

You're drinking in public. That's not allowed.

[Unknown]

This speaker. That's not allowed.

[Judson Boomhauer]

Rule after rule after rule.

[Veronica Zaragovia]

But Jelani Massey is fine with the rules. He's here on spring break from College in Washington, D.C. and was expecting to find the unruliness of past years.

[Unknown]

People would be like dancing on top.

[Diane Swonk]

Of cars and the streets to be full.

[Veronica Zaragovia]

Instead, south beach was pretty quiet when he arrived, and he's happy with that.

[Diane Swonk]

This isn't my first time being on spring break, but it seems really safe, really fun. A lot of people just having a good time.

[Veronica Zaragovia]

The strict rules don't seem to have turned visitors off. Hotel occupancy rates went up last year, even with restrictions. That's according to the Greater Miami Convention and Visitors Bureau. And so far, March this year looks about the same. In Miami Beach, I'm Veronica Zaragovia for Marketplace.

[Sabri Benishour]

And I'm Sabri Benishour with the Marketplace.

[Unknown]

Morning report.

[Sabri Benishour]

From APM American Public media.

[Unknown]

Consumer confidence had its sharpest monthly decline since 2021, which means we're all in our feels about money. And while uncertainty is the only constant these days, it's also a great reason to get serious about understanding personal finance. I'm Janelia Espinal, host of Financially Inclined, a podcast from Marketplace that makes learning about money simple. Learn about practical skills like negotiating job offers, dealing with money and friendship and love, entrepreneurship and student loans. Get serious about your money and build a life you've always dreamed of. Listen to Financially Inclined wherever you get your podcasts.