Slate Money: The Rebuilding Edition – Summary

September 2, 2017
Host: Felix Salmon
Co-Hosts: Anna Szymanski, Jordan Weissmann

Overview

In this episode, Felix Salmon, Anna Szymanski, and Jordan Weissmann focus on “rebuilding”—in the economic, financial, and literal sense. Covering the fallout from Hurricane Harvey, they explore the US flood insurance system, the economics of post-disaster recovery, and the peculiar stagnation of construction productivity. The show also delves into major potential tax reforms, the nature of corporate tax deductions, and closes with a revealing “numbers round.” The conversation is smart, blunt, and deeply skeptical about both policy efficacy and political will.

Key Discussion Points & Insights

1. Hurricane Harvey & Flood Insurance (02:10–16:39)

• Opening Context: The hosts address Hurricane Harvey’s immediate humanitarian crisis while examining the financial dimensions (“the major story with Harvey is the humanitarian toll... but this being Slate Money, we want to talk about the financial angle of it,” – Jordan, 02:14).
• Federal Flood Insurance Quirks:
  • There’s essentially no private flood insurance market in the US. Flood insurance is available only from the federal government (NFIP), and at subsidized rates, leading to “moral hazard.” (Felix, 03:19–04:09)
  • Only about 20% of Houston homeowners have flood insurance, and eligibility is governed by outdated flood maps. (Anna, 05:01; Anna & Jordan, 05:33–06:00)
  • The system paradoxically encourages people to live in flood-prone areas and forces FEMA into deficit (“FEMA, which runs the flood insurance program, winds up $30 billion in debt. Whole thing is a political clusterfuck, I believe is a technical term.” – Felix, 04:56)
• Problems with the NFIP:
  • Discounted insurance for certain areas and lack of mandatory coverage leave many vulnerable (“On the one hand, it has these really discounted rates for the people who are required to buy it… At the same time… a lot of people don’t end up with the protection they need.” – Jordan, 07:36–08:24)
• Private Sector Role:
  • Some suggest that advances in data and modeling could allow private insurers to better price flood risks—especially for moderate-risk areas—potentially at lower rates than the government for those not in the worst zones. However, real change depends on full reform.
  • Catastrophe bonds and public-private insurance partnerships are briefly discussed, but these have had limited impact so far. (09:47–11:18)
• Key Quote:
  • “My point of view is… the houses getting destroyed and washed away and written off… generally happen to exactly the kind of people who are not going to buy flood insurance unless they have to.” (Felix, 14:00)

Memorable Moment:

• The hosts agree that the current federal approach both fails to offer real risk-based pricing and cannot nudge people out of vulnerable zones; private sector involvement might improve incentives, but only if paired with mandatory coverage and significant market reform.
• The episode’s title theme, “rebuilding,” comes into play as they ask whether some disaster-hit areas should be rebuilt at all, or abandoned due to recurring risk.

2. Construction Productivity Paradox (16:39–25:13)

• Productivity Downturn:
  • Despite huge investments, the US construction sector has not become more efficient over the last half-century—in fact, construction productivity has dropped by half since the 1960s, according to McKinsey. (“We are 50% less efficient… at building homes than we were in the 60s.” – Jordan, 18:03)
• Why?
  • The shift from mass-produced “tract” housing to more customized projects and renovations is cited.
  • Rise of numerous small contractors with little incentive or capacity to invest in technology.
  • Fragmentation of the sector makes large-scale innovation, efficiency, and investment near-impossible.
• Comparison: Even banks are cited as having too much “smallness” and inefficiency due to over-fragmentation.
• Memorable Moments:
  • Jordan shares a personal construction anecdote involving "a potentially, I'm pretty sure, alcoholic Irish guy… sending me to get Budweiser in Chinatown at 10:00am” – (21:06)
  • Felix bemoans his own contractor experience: "We would get the contractors in and we'd be like, okay, we're starting, we're going to do demo. And then it would take them a week just to do the floors. And you're like, this is the least efficient thing I've ever seen in my life.” – (22:42)
• Structural Issues:
  • Cost overruns can make contractors more money, incentivizing inefficiencies.
  • Regulation, insurance, and changing demographics (including immigration in low-skill positions) affect industry structure.
• Solution? The hosts suggest the US might need more large-scale construction businesses, comparing the problem to banking sector fragmentation.
• Notable Quote:
  • “There are five banks which are very big, but then there’s another 50,000 which are just pointless.” (Felix, 25:39)

3. “Vaporware” Policy Segment: Corporate Tax Reform & Interest Deductibility (26:12–40:03)

• Speculative Segment: Felix breaks his “no vaporware” rule to discuss proposals to end the tax deductibility of corporate interest—a key part of Republican tax reform discussions as of late 2017.
• What’s At Stake:
  • Current system incentivizes debt over equity, which amplifies financial fragility in crises (“...there’s this huge incentive for corporates to load up on debt and to not really fund themselves with equity. And what happens… is you get debt crises and… unnecessary bankruptcies…” – Felix, 32:04)
• Host Perspectives:
  • Felix: Strongly in favor; believes ending the deduction could have prevented or mitigated past financial crises and would reduce “tail risk” in the corporate sector.
  • Anna: Warns that the change wouldn’t apply to banks (“banks will probably be exempt… because borrowing and lending is their business.” – 33:38); is wary about linking the repeal to “full expensing,” and doubts the supposed investment boom.
  • Jordan: Explains the mechanics and economic theory: pairing full expensing and ending interest deductibility trends the tax code toward a business consumption tax, a right-wing goal since the 1980s, but may not be as transformative as advertised.
• Debate: Is removing these loopholes and relying on marginal tax rates structurally sound, or will it just disguise rate-cutting for the wealthy with little political will to raise rates again later? Will reform meaningfully shift the economy, or just drain revenues for social spending?
• Memorable Banter:
  • “It’s all Jordan’s fault. We will take him out and shoot him and next week…” (Felix, 40:14)
  • “This entire show has been one long build up to me getting Old Yellered. Felix just been like, finally.” (Jordan, 40:20)

4. Numbers Round (41:18–46:24)

A rapid-fire close with each host sharing a telling or surprising statistic:

• Felix:
  • 60 trillion — the number of minutes iPhones are used globally per year. “That’s how big the iPhone is... even a tiny change just makes an enormous difference.” (41:57)
• Anna:
  • 38,000 — in dollars, the maximum penalty for making, selling, or importing a plastic bag in Kenya, where plastic bags are now strictly banned: "This seems a little extreme...” (43:00)
• Jordan:
  • 90% — the cut to the Obamacare outreach budget under Trump, likely to be disastrous for consumer knowledge and marketplace participation. (44:55)
  • “That’s gonna fuck up the health insurance system a lot. People really, really need to see advertising and have people actually walk them through the steps of signing up online...” (44:59)

Felix and Anna discuss philanthropic interventions that could replace the outreach budget. (“If the Ford foundation or someone decided... it would actually make up all of it and would have an enormous difference on millions of people.” – Felix, 45:18)

Notable Quotes & Memorable Moments

• On Federal Flood Insurance:
  "The whole thing is a political clusterfuck, I believe is a technical term." – Felix Salmon, 04:56

• On Construction Inefficiency:
  "There are all sorts of reasons why contractors want to be bad at their jobs..." – Jordan Weissmann, 23:05

• On Corporate Tax reform:
  "We can make life a hell of a lot easier and better for everyone if we move away from debt financing towards equity financing. And you do that by abolishing the deductible interest." – Felix Salmon, 32:55

• On the Numbers Round:
  "60 trillion is one of those numbers which is so enormous that it’s kind of impossible to conceptualize how big it is. And 60 trillion is the number of minutes that iPhones are used every year." – Felix Salmon, 41:54

Timestamps for Important Segments

• Hurricane Harvey & Flood Insurance: 02:10 – 16:39
• Construction Productivity Decline: 16:39 – 25:13
• Corporate Tax, Interest Deductibility “Vaporware”: 26:12 – 40:03
• Numbers Round: 41:18 – 46:24

Tone & Style

• Conversational, witty, and wonky with moments of sharp skepticism and dark humor.
• The hosts are forthright about ideological divides, and unafraid of policy nuance or occasional vulgarity.
• Audience is expected to have a working knowledge of business news and macroeconomic concepts.

Closing Thought

This episode of Slate Money is particularly rich in timely, practical skepticism about American resilience—fiscal, institutional, and literal. It’s less about rebuilding after disaster, and more about whether the scaffolds of US policy and commerce are fit to keep us out of future harm’s way.