Slate Money — The Powell’s Books Edition (November 4, 2017)

Episode Overview

This episode of Slate Money, hosted by Felix Salmon with co-hosts Jordan Weissmann and Anna Szymanski, dives into three major stories in business and finance:

• A deep dive into the proposed Republican tax bill, focusing on its effects on corporations, the wealthy, and the middle class.
• Discussion of the opioid crisis, the Sackler family, and the marketing of OxyContin.
• The appointment of Jerome “Jay” Powell as the new Chair of the Federal Reserve, and what that signifies for the future of U.S. monetary policy.

The hosts provide sharp analysis, skepticism, and occasional exasperation, especially when discussing measures favoring the wealthy and institutions over the broader public.

Key Discussion Points & Insights

1. The Republican Tax Bill: Winners, Losers, and Missed Opportunities

Segment begins ~[00:14]

• Scope and Focus

  • The hosts break down the nearly 430-page Republican tax bill, which comprises around $1.5 trillion in tax cuts—primarily aimed at corporations ([02:03]).
  • “The big math is…one and a half trillion dollars in extra deficit...comes from corporate tax cuts.” — Felix Salmon ([02:28])
  • Notable estate tax changes: The exemption is raised to $10 million, then phased out altogether by 2024, while maintaining the “step up in basis,” allowing inherited capital gains to go untaxed ([03:35]-[04:33]).

• Distributional Effects

  • Although most cuts benefit corporations and the wealthy, a significant minority of middle-class households would see tax hikes.
  • “About 22 million tax units…make less than $200,000 will get a tax hike under this plan.” — Jordan Weissmann ([06:00])
  • The reduction in mortgage interest deduction cap (from $1,000,000 to $500,000) sets up conflict with the influential real estate industry ([08:39]).

• Criticism of Justification & Economic Models

  • Discussion about the unsubstantiated Republican claim that corporate tax cuts will trickle down to increased wages.
    • “This idea that wages have been low because corporations don't have sufficient profits makes…no sense.” — Anna Szymanski ([14:21])
    • “Corporate profits as a percentage of the economy, they're historically high right now.” — Jordan Weissmann ([14:36])
  • Reference to Kansas as a real-world failure of this tax philosophy ([13:34]), and doubts that tax cuts “pay for themselves.”

• Deeper Concerns

  • Hosts worry about the long-term social and political effects of concentrating more wealth at the top.
    • “You are just money is power and you are handing more money to the most powerful people in society.” — Jordan Weissmann ([16:33])

2. The Opioid Crisis and the Sackler Family

Segment begins ~[17:32]

• Sackler Family and Purdue Pharma

  • The Sacklers’ wealth ($13 billion) was largely built through OxyContin.
  • “Their whole business model is essentially based on finding a very addictive drug that they know is addictive and then trying to convince people it's not, and then just reaping tremendous profits from this.” — Anna Szymanski ([18:57])
  • Their marketing innovation involved targeting doctors via advertising and outright persuasion, fueling prescriptions ([20:15]).

• Manipulation of Medical Institutions

  • The Sacklers funded academic chairs and research, blending philanthropy and aggressive marketing (“You could almost see the philanthropy as being very tied to the business itself…” — Anna, [19:16]).
  • Doctors who prescribed extensively were seen as valuable customers, not flagged to authorities ([21:26]).

• Parallels and Public Health Fallout

  • Historical continuity: Similar patterns with Valium marketing and even the broader U.S. approach to legal vs. illegal narcotics ([22:56]).
  • Shift from OxyContin to heroin use after reformulation of the drug ([21:59]).

• Breakdown in Trust

  • The opioid epidemic has led to a wider crisis of public confidence in medicine and the FDA, exacerbated by revolving-door appointments ([27:50]).
  • “It's created a public health emergency in multiple ways…the opioid epidemic…a crisis of public faith.” — Jordan ([28:44])

3. Jerome "Jay" Powell as the New Fed Chair

Segment begins ~[28:55]

• The Accidental Chair

  • Powell—a Republican and non-economist—was appointed mostly due to internal Trump administration politics ([30:09]).
    • “Apparently, Donald Trump only likes hiring white investment bankers.” — Anna, tongue-in-cheek ([31:58])
  • Powell expected to be a steady hand, continuing Janet Yellen’s approach. However, the norm has been to reappoint sitting chairs unless a strong reason exists to change ([29:03]).

• Background and Potential Benefits/Risks

  • Powell’s background is in private equity, banking, and the Treasury, not academics ([32:50]).
    • “Is there a potential benefit…that he does probably understand financial markets really well…?” — Jordan, on Powell’s practical experience ([33:04]-[33:30])
  • The main concern: As a consensus-builder rather than strong-willed leader, Powell could be vulnerable to pressure from future, possibly more hawkish, board appointees ([36:48]).

• Big Picture Trends

  • The Fed is moving from strong, centralized leadership (Volcker, Greenspan) to more collective, collegial decision-making (Bernanke, Yellen, and likely Powell) ([35:39]).

4. Numbers Round

Segment begins ~[38:15]

• [38:15] Felix Salmon:

  • 5.7% — The unemployment rate for Americans without a high school degree, the lowest ever recorded for this group, illustrating the labor market's strength under Yellen.

• [39:04] Anna Szymanski:

  • $1.2 Billion — The amount paid by Venezuela on its bonds, staving off an even more protracted default. “The world’s slowest train crash.”

• [40:05] Jordan Weissmann:

  • $7,290 — The price of one Bitcoin at the time, boosted by news that major exchanges were planning to launch futures trading.

Notable Quotes & Memorable Moments

• “That's how we end up with a stupid 19th-century style, Belle Epoque aristocracy in this country.” — Jordan Weissmann, on estate tax repeal ([04:20])
• “This is the central claim Republicans have made: If you cut corporate taxes, that will lead to a surge in investment…increase workers' wages. …There are models…but what the Trump administration has done is say, ‘We can guarantee you that in like 8 years, you'll be making $4,000 more…or even $9,000.’” — Jordan ([11:15])
• “What the Sacklers realized…was not so much a medical innovation…but rather a marketing innovation.” — Felix Salmon ([20:15])
• “This is just handing gobs of money to capital…isn't actually necessarily going to do what Greg Mankiw thinks it will.” — Jordan ([15:52])
• “If you have bitcoins, well done, you're rich.” — Felix Salmon ([41:03])

Timestamps for Key Segments

• Introduction & Tax Bill Overview: [00:14]
• Estate Tax & Corporate Tax Cuts: [03:16]
• Distributional Impact Discussion: [05:59], [06:30]
• Housing and Mortgage Deduction Debate: [08:39]
• Corporate Tax Theory: [10:47], [11:24]
• Empirical Skepticism & Kansas Reference: [13:34]
• Big Picture Critique of Bill: [16:33]
• OxyContin/Sackler Segment Begins: [17:32]
• Medical Marketing & Regulatory Capture: [20:15], [27:50]
• Fed Chair Jay Powell Segment Begins: [28:55]
• Numbers Round: [38:15]–[41:03]

Tone and Takeaways

The hosts adopt a critical, at times incredulous, and deeply skeptical tone, especially regarding claims of trickle-down prosperity and corporate benevolence. When discussing the opioid crisis, the mood is somber and outraged, lamenting systemic failures in both business ethics and public regulation.

For listeners wanting a sober, wry, and sharp conversation on pressing business and finance stories—with special attention to who really benefits—this episode provides in-depth analysis, memorable zingers, and a sweeping view of the state of inequality and institutional trust in the U.S.