Simone Del Rosario: It’s a 1-in-1,000-year rainfall event. Wind gusts around 100 miles per hour near Tampa. The roof blew off the Tampa Bay Rays’ Tropicana Field, which was supposed to house hurricane workers. Hurricane Milton has torn through Florida, and now comes the recovery. 

A Morningstar analysis ahead of the storm estimated Milton’s damage could cause between $60 to $100 billion dollars in insured losses. For reference, Hurricane Katrina’s insured losses totaled $100 billion in today’s dollars. 

I want to bring in Nadja Dreff, Senior Vice President and sector lead for global insurance and pension ratings at Morningstar. And Nadja, I know that you have to update your analysis over there at Morningstar, but so far, with the way that Milton has come through Florida, are you expecting things to be on the higher or lower end of your previous estimates?

Nadja Dreff: So at this point in time, given what we already know about where the landfall happened, luckily, we are expecting the range to be lower than we had previously anticipated. So instead of the hurricane hitting head on to Tampa, we know that it actually hit slightly below which does make a difference to what our insured loss estimates are going to be and does lower them.

Simone Del Rosario: Is it still something that will be in the 10s of billions of dollars, though?

Nadja Dreff: Exactly, unfortunately, the the impact is still devastating on the communities and the insured losses. At this point, we think they may reach even something like $60 billion now, of course, knowing what we know about the type of damage that has happened, given the very forceful winds and a lot of flooding that the hurricane brought through, through water storm surge and various kinds of water damage, we also expect damages from Flooding to be substantial, so probably something in the neighborhood of about 10 billion to be covered by the state back, sorry, the federal program, which is the National Flood Insurance Program.

Simone Del Rosario: and that would be money on top of what you’re calculating, correct. What you calculate, are the insured losses, or does that include federal insurance?

Nadja Dreff: Yeah, at this point, when we talk about insured losses, it does include the federal program for flood insurance. A lot of private insurers will not have extensive flood damage payouts just because they don’t provide flood coverage, but it is like where it’s provided it’s through this federal program. So altogether, we think, unfortunately, it may approach $60 billion

Simone Del Rosario: How do these losses compare to other notable hurricanes?

Nadja Dreff: Well, very good question. That’s something we would look at as we do our analysis, because clearly, we’re not there assessing damage as it happens. But what we do is we look at the various cat modeling scenarios, but we also primarily also focus on the past historical losses based on other similar hurricanes. Unfortunately, we have a number of these hurricanes that have happened. The more most recent one just a couple of weeks ago, Hurricane Helene. Similar path. That one was smaller. We we think it was substantially smaller, probably close to 10 billion, kind of at the higher end of the range. And then we’ve also seen hurricane Ian, which was the second largest catastrophe in the US, and that cost insurers in the neighborhood of $55 billion which is what we think is kind of on par with Hurricane Milton.

Simone Del Rosario: So what makes Milton so much more damaging from an insurance perspective than Helene did when we saw the devastation that Helene brought. I mean, it was so widespread so many states. What was it about this Tampa region that makes Milton more damaging financially?

Nadja Dreff: Very good question. What we look at more closely is the actual path of the hurricane and what is located and how low laying those areas are. And unfortunately, that tends to be the case in the area where it hit that a lot of flood damage is going to be incurred, a lot of storm surge from from the ocean because of the properties that lie close to the coast. And then we look at how built up, what is the population density of the area being affected, and all those things. You know, the closer we approach the Tampa Bay area, which is a major urban center, the more the higher these damages tend to go, unfortunately.

Simone Del Rosario: With these two back to back storms like this, how does the. Insurance industry respond, surely they’re going to have some major underwriting losses on their books.

Nadja Dreff: Well, yes, we do expect these events to affect profitability, affect their earnings, especially given the hurricane season, where we’ve seen at least these two major storms, and that’s something you know, to keep in mind. But at the same time, insurance companies set aside money for exactly these kinds of events. This is why they are there, to protect and to pay out on policies. They also tend to purchase a reinsurance so it’s kind of insurance for insurance companies, and when losses reach a certain dollar value, then reinsurers take on a portion of these losses. And so when it comes to the global reinsurance industry that provides this product, we think they will not see a major impact, but everything has to be kind of kept in the perspective and the accumulation of losses over the year, and especially during this hurricane season, we think, unfortunately, will lead to some reinsurance price increases.

Simone Del Rosario: That’s what I was going to ask you next. Is how this is going to affect homeowners in Florida, they already experienced the highest insurance rates in the country by a long shot. So can they anticipate even higher rates after a hurricane season like this? 

Nadja Dreff: Well, unfortunately, that can’t be ruled out. I mean, the way the industry works based on their underwriting profitability, which again, is based on the prices that they charge and the prices that they pay on reinsurance. Unfortunately, the the events of the of late kind of point to prices being higher, not lower. In the earlier part of the year, we saw reinsurance prices kind of stabilizing, even potentially declining. Unfortunately, experience tells us, following a major hurricane, those prices usually tend to harden or they go up, and so therefore we think the stabilization decrease is going to stop, and instead we’re going to see the reinsurance price going back up, potentially, not a huge spike, because 2023 alone saw a very sharp increase in reinsurance prices, but then to see them go up again, it is a concern when it comes to what it does to insurance prices for households and policyholders.

Simone Del Rosario

We’re hoping for safety for everyone who is there in Florida right now, and of course, for our first responders as well who are helping people in those areas. And we’re going to be talking about how these back-to-back hurricanes that have hit this region might be impacting the economy. Atlanta Fed President Rafael Bostic said that this one two punch, this, you know, back to back, hurricane, could actually affect the economy for at least six months, especially in the supply chain. Factor, what sort of things could be, you know, immediately impacted in the economy as Florida and, you know, especially other states as well. I’m just thinking Florida, because they have the double hurricane right now. So what, how can that be affected, and what is specific about the region there that was impacted, and how that might impact trade?

Chris Konstantinos: Sure, I’ll definitely address that. I just want to take a moment to also recognize a huge human toll. I have a lot of friends in the western part of North Carolina. And I think the situation there is worse than many people in the nation realize, in terms of how much infrastructure has been destroyed. And of course, unfortunately, now the same thing is happening in Florida. So will this? Will this have impacts in the US economy? Undoubtedly, I think Raphael Bostic is right. I think what’s interesting is that there’s a lot of gives and takes. When we think about a huge, you know, horrific natural disaster with a huge human toll, we tend to focus solely on the negative sides of the economic impact. And for obvious reasons. The cold, hard economic facts is that the gives and takes of what happens after a catastrophe like this are often, there’s often two sides of it, because, yes, I think the supply chain, the supply chains already struggling, right? We’ve had the, you know, we had the strike that was recently and probably only temporarily ended. We’ve had, we have increasing geopolitical issues across the world that are certainly going to affect commodity prices. All of those things are going to complicate the supply chain, I believe, and that’s going to have negative economic impacts. The flip side to that, as it relates to recovering from a natural disaster, is there’s going to be a lot of infrastructure spend in those regions, in western North Carolina, obviously, in Florida, we don’t know that, you know, we don’t know the overall toll yet in either of those places, but we know it’s going to be grave. So there’s gonna be a huge amount of infrastructure spend. And so for companies, industry sectors that are construction related, that some of sometimes, these things can actually be a huge stimulus of sorts in those in those areas, and that may, at least regionally, you know, actually increase some of the manufacturing data that we’re seeing. So there’s a lot of like, push and pull, when, when a, you know, a shocking natural disaster happens for insurance companies. I get this question a lot, so I was actually talking to our our portfolio manager yesterday, who’s an expert in the insurance space. She used to work in the insurance space, and she said that what often happens is it actually creates a hardening price cycle for insurers which which, they take a huge hit on their balance sheet and income statement early on, but then, because they’re able to successfully raise prices, it leads to higher cash flows going forward. So understanding the pushes and pulls economically when something like this happens is often more complex than it, than it. You know, seems that just at first blush.

Simone Del Rosario

Policies by former President Donald Trump would add more than twice as much to the national debt as policies by Vice President Kamala Harris. That’s according to a bipartisan analysis by the Committee for a Responsible Federal Budget. 

The middle estimate for Harris’ plans increases the debt by $3.5 trillion through 2035, whereas Trump’s middle estimate adds $7.5 trillion. 

On the low end of the range, Harris adds nothing while Trump adds $1.45 trillion. 

And on the high end, both candidates deliver an enormous hit to the national debt, which is at about $35.7 trillion. Also, it costs more than a trillion dollars in interest payments to maintain the current debt load.

I want to bring in Mark Goldwein, Senior Vice President and senior policy director at the Committee for a Responsible Federal Budget. Mark, I just want to start off, if you could give me the top-line takeaway from this massive analysis.

Marc Goldwein: Sure. Well, the bottom line is that we are already adding tremendously to the national debt under current law, and both candidates would make that even worse, especially President Trump. We find that President Trump would add seven and a half trillion to the debt in our base case analysis, and vice president Harris would add 3.5 trillion to the debt.

Simone Del Rosario: Why should voters care about the debt? 

Marc Goldwein: Look, debt is eating our our income growth. Debt is what causes inflation, what causes high interest rates, and what causes interest payments to now be the second largest government program, larger than defense, larger than Medicare, and leaving less room for us to invest in just about anything else.

Simone Del Rosario: So your your middle estimates for both candidates show that Harris would add about three and a half trillion to the debt over the next decade. Trump would add seven and a half trillion in debt. What are the policies that are specifically adding to the debt for these two different candidates?

Marc Goldwein: Yeah, so for vice president Harris, it it’s extension of some parts of the tax cuts from 2017 it’s a very big child tax credit, and then it’s a bunch of spending on everything from paid leave to childcare to long term care to preschool, partially paid for with taxes on the rich and on corporations. For President Trump. It’s mostly just a lot of tax cuts. We have a full extension of that tax cuts and Jobs Act, getting rid of the cap on the stall deduction, no taxes on tips, no taxes on overtime, no taxes on Social Security benefits. And then on top of that, deportations and higher spending on defense, again, partially offset, mainly with tariffs, but in neither case are those offsets covering the costs. 

Simone Del Rosario: Do your tariff estimates also include that 60% tariff on China?

Marc Goldwein: We do. Our central estimate assumes that there’s a 10% universal tariff. It’s 60% on China, and in addition, there’s some retaliatory tariffs on a one off basis. But the important thing with these tariffs is, if they work as intended, they will reduce trade, and so they don’t raise as much revenue as you might think. You know, just taking 10% of all of our imports, for example, yeah,

Simone Del Rosario: Although Trump on the campaign trail and at the Economic Club in New York, he has said that his tariffs are going to be paying for all of these tax cuts. So your analysis clearly points to something different. 

Marc Goldwein: That’s right, the tariffs could pay for some of the tax cuts, but they’ll barely cut. They’ll barely cover the no taxes on tips and no taxes on overtime. They aren’t going to cover, you know, the 8 trillion plus of tax cuts that President Trump is proposing.

Simone Del Rosario: And then, on the other hand, Marc, there is no guarantee that a potential president Harris would get those tax hikes on the rich that she’s looking for. 

Marc Goldwein: That’s right. Look, in both the cases, these are highly speculative, because we’re analyzing what they’re calling for, not what will actually happen in the real world. These offsets are hard. It’s hard to get taxes on the rich, taxes on corporations, tariffs, lower drug prices. It’s also hard to get some of the spending. So these are not predictions of what will happen. These are estimates of what would happen if the candidate’s plans were enacted in full.

Simone Del Rosario: So what should voters do with this information?

Marc Goldwein: They should demand offsets. Look, a debt is just tax on future generations. It’s a huge burden in terms of slower income growth, higher interest rates, higher inflation. And we need the candidates to be paying for their promises, and if they can’t, we need those promises to be scaled way back.

Simone Del Rosario: What aren’t you hearing from the candidates that you wish you were hearing at this point in the race?

Marc Goldwein: Social Security is nine years from insolvency. I’m not hearing a plan from either candidate to prevent that 21% across the board, cut that’s scheduled to happen under current law. 

Simone Del Rosario: And peel back the curtain for me a little bit and just explain how you guys went about this analysis. I assume it took you a very long time to do so.

Marc Goldwein: Right. So look, we went through painstakingly for both candidates websites, through their platforms, through their speeches, we talked to the campaign staff, we looked at news articles, and we tried to discern what are official campaign policies, how do we interpret them, and how much do they cost? And each step of the way, we need to make a lot of choices, which is why we have a low cost estimate and a high cost estimate reflecting the range of possibilities, along with our central estimate. This was, you know, I have to give credit to I have an amazing staff that put many, many, many hours into this over the last year, estimating every last policy, including policies that didn’t even make it to the finish line because they were rejected or because they were the. Policies from the Biden campaign that didn’t make it over to the Harris campaign, but it’s an incredible amount of work, and I recommend you checking out the report@crfb.org it’s it’s pretty lengthy, but we have a short summary at the front that I think gives all the most important details.

Simone Del Rosario: And here at straight arrow news. We’re about unbiased, straight facts. We like to bring nonpartisan information to people so that they can decide for themselves as they get ready to vote in this upcoming election. Talk to me whether you know. How should people interpret these findings? Are they at all partisan?

Marc Goldwein: Look, we don’t endorse a particular candidate, and we didn’t go in this trying to come up with a particular outcome. This is just the math. We looked at the candidate’s plans, and this is what we think they would add to the debt. You then need to weigh that against the benefits of whatever the tech candidates are offering. So one voter might say, sure they add a trillion dollars to the debt, but it’s for this very important policy, or sure they balance the budget. Neither of them do, but let’s say they did, but they do in this awful way. So fiscal policy, how much they add to the debt should be just one consideration among many. I happen to think it’s a pretty darn important one, because our debt is headed to the largest share of the economy it’s ever bid. We’re head to record levels of debt. And I do fear we have a debt crisis on the on the horizon if we don’t do something. But you need to vote based on on what matters most to you, and this information is just meant to inform your decision, not to dictate it. 

Simone Del Rosario: Well, I want to thank you and your team for your analysis. Mark goldwein, Senior Vice President and senior policy director at the Committee for a Responsible Federal Budget, we rely on you guys often to get the straight facts when it comes to how these policies impact our debt and impact our country. So thank you so much Mark.

Marc Goldwein: Thanks for having me. 

Simone Del Rosario

Boeing and machinists are back at the negotiating table Monday morning after more than a week at a stalemate. The International Association of Machinists said Boeing’s last offer disrespected the entire union after the company released the terms to the public before the union had responded. 

Even then, 80% of machinists rejected the offer that included 30% raises and doubling the ratification bonus to $6,000. 

IAM says Monday’s meeting is another critical opportunity to push for the priorities of their membership, while Boeing’s new CEO told employees getting to a resolution is a priority. 

Non-striking employees are also taking hits. Tens of thousands are facing rolling furloughs as Boeing bleeds cash from the strike and lack of production. 

The 737 MAX is a big revenue driver for the company. Deliveries are already behind schedule and the strike is halting all progress. 

On the fourth week of this strike, I want to bring back top aviation analyst and Managing Director of aerodynamic advisory, Richard Aboulafia. Richard, we spoke when the strike had pretty much just started, and you know, maybe I do want to put you on the spot here, but you thought that it would be pretty quick, obviously, entering our fourth week now, are you surprised at the length of the strike?

Richard Aboulafia: Yeah, I really am, and I feel a little embarrassed because I did indeed say this would be brief. I thought the arrival of new management, new management with a lot of experience and understanding in the industry, would make things different, but that doesn’t appear to be the case at all, I’m afraid.

Simone Del Rosario: Yeah, I guess understanding in the industry doesn’t necessarily equate to being very good at labor relations. I’m curious your opinion on this, based on your comments and other people’s comments about Kelly Ortberg, really thought that this would be someone who would be able to bring these two groups together, but it appears that the company made a huge misstep in the last offer after they, you know, sent it out to the public before hearing back from the negotiating team. Do you think that that was something that was ortberg’s decision, or do you think that he was influenced by the long standing culture that we’ve seen at Boeing.

Richard Aboulafia: You know, I wish I knew for sure the first time around. Of course, it was perfectly understandable, because they did have an agreement with the I am 751, management, and it appeared everybody kind of underestimated the level of grievance and and hostility in in the rank and file, the understandable grievances that have built up over a decade and a half or more of mistreatment. But the second time was a complete Baffler. It really was. It’s possible that, you know, Ortberg just comes from a very different culture, or just doesn’t quite understand what’s going on here? Or it’s possible that he was blindsided by the institutional, confrontational approach that Boeing management has taken, maybe even the board. You know, it’s just impossible to say at this point, I’m afraid.

Simone Del Rosario: But what happened really did feel like Boeing culture of old, when I know that they’re trying to move into a different direction now that both parties are back at the negotiating table after more than a week at a stalemate, and they’ve got federal negotiators there in the middle of it, do you think that the next contract that we see, the next contract offer, will be the winner? 

Richard Aboulafia: I sure hope so. I mean, that’s the thing this. This is absolutely not something that should be stuck. You look at the role of what we call touch labor in the manufacturing process, it’s maybe five 6% of the cost of an aircraft. And not only that, but there are various inflationary pass through provisions in sales contracts. So even if they did boost wages by 40% or so, this wouldn’t really show up in terms of commercial competitiveness. The only possible area of the only possible sticking point is if Boeing absolutely doesn’t want to provide a structured pension program, and the workers insist upon it, that’s about the only thing I could think of that would prevent two sincere parties from reaching a relatively quick agreement.

Simone Del Rosario: But that demand is one on the labor side that they haven’t had success in in other industries. You know, Boeing employees lost their pension a decade ago to be able to get it back when pensions are, you know, largely a thing of the past. Less than 10% of workers have one today. Do you do envision that Boeing would come to the table with some sort of pension agreement?

Richard Aboulafia: No, you know. I think you know. The problem, of course, with a pension is that in the cyclical industry, you have all these big costs you have to keep paying. And as the car companies found out, that can be disastrous. On the other hand, if you really do believe, as I hope Boeing management would, that there is a pretty strong long term future for this industry without maybe some of the crazy cycles we’ve seen in the past. And you also believe that good labor relations and talent retention are a strategic priority. You might even regard a structured pension program as a form of competitive enhancement for the company, but that would require a big leap of faith, if you will.

Simone Del Rosario: How much longer can Boeing withstand this strike?

Richard Aboulafia: You know, they’re burning through a lot of cash, right? Yeah. The talk right now is whether or not they’ll do a ten billion equity raise, as some people have posited they should. It. They probably could do that. It might not be the easiest sell for investors, but Well, Boeing is, Boeing is a blue chip, so they could probably pull it off. Other than that, you know, I can’t imagine any thing that would prevent the company from going the full, I don’t know, two months that you’ve seen for the maximum duration of a strike at this time. But then again, given all the cash that’s not coming in and all the pain they’re causing their suppliers, you have to ask, Why? Why can’t this be settled? 

Simone Del Rosario: And you’re talking about the financial situation you mentioned, the possibility of a stock sale. And, you know, I think the company would want to have a resolution to the strike before raising that type of capital. Um, you know, what about their credit rating? What about what else is going on behind the scenes? I mean, this is there’s a lot at stake here with Boeing as it continues to bleed cash and 10s of 1000s of workers not affiliated with the striker also being furloughed.

Richard Aboulafia: Yes, that’s right, because, of course, when they stop ordering things and halt the production ramp that somebody at their suppliers had been facilitating for and taking out, you know, loans for and hiring people for, it’s extremely damaging to an awful lot of companies and jobs in the industry, you know, it’s, it’s not a it’s, it’s not a happy story, I think, you know, from Boeing’s standpoint, just looking at their own concerns, you know, the cost of any increase in wages and whatever else, nothing like the damage in cash that’s not coming in from from deliveries.

Simone Del Rosario: Yeah, well, we’ll continue to watch this closely. It doesn’t sound like we have enough of a resolution or confidence right now, Richard, that you know an agreement will be reached soon, but certainly hope that there will be one, right? 

Richard Aboulafia: Yeah, we certainly do, you know, and the mistakes made with the last offer were so obvious. Yeah, you know that hopefully, if they do things different this time, that can all be avoided and maybe get to a quicker a quicker resolution.

Simone Del Rosario: Yeah, it is strange, the timeline we’ve gone through right now, from a negotiated offer being put to the workers that the union agreed upon to that turning into a strike, to turning into, you know, a lot of animosity toward the next offer and what happens there. So now they’re back at the table, and we’ll just have to follow it really closely. Managing Director of aerodynamic advisory, Richard Abu Lafia, thank you so much for your expertise. 

Richard Aboulafia: My pleasure. Thank you. 

Simone Del Rosario: California Governor Gavin Newsom made headlines Sunday after he vetoed a sweeping artificial intelligence safety bill. So what comes next for regulating AI in the country and how do America’s efforts match up against other governments? 

The proposed California law would have required safety testing of large AI systems. It would have also given the state’s Attorney General power to sue companies over serious harm caused by their tech. And it would have required some sort of kill switch that would turn off AI models in case of emergency.

Newsom explained his opposition in a statement, saying: 

“I do not believe this is the best approach to protecting the public from real threats posed by the technology. Instead, the bill applies stringent standards to even the most basic functions — so long as a large system deploys it.” 

Newsom’s decision comes just a few months after the European Union implemented its AI Act in August. 

That law implements a tiered system of perceived risk. 

For instance, minimal risk systems like OpenAI’s Chat GPT would just have to adhere to transparency provisions and EU copyright laws. 

But higher risk systems, like AI models that try to predict whether a person might commit a crime, will be fully banned as of February 2025. 

For how to regulate AI across state and nation borders, let’s bring in Patrick Hall, Assistant Professor of Decision Sciences at George Washington University.

Patrick, what was it in this bill that the governor of California vetoed or sent back, and how would it have changed the AI landscape in the state?

Patrick Hall: Well, I think that there are a lot of good things on the table for this California bill, in particular, sort of mandatory testing before systems were released, the ability for the government to take in and take enforcement actions when, when harms do occur related to AI systems, the notion of a kill switch or the ability to turn a system off quickly. Whistleblower protections there. There were good things there. I think that the the issue was that the the focus of the law was on so called frontier models. And these are, you know, sort of the largest AI models developed by the largest AI companies. And so it’s a very narrow scope. And then also it really only focused on a sort of small aspect of the performance of AI systems that has come to be known, sort of confusingly, as AI safety and and AI safety really concentrates on things like preventing systems from being used to make bio weapons, preventing catastrophic risk, and I think that that was where the bill went wrong. AI can be a dangerous technology, but I think that it’s very clear that the harms of AI today are towards consumers and towards our democratic institutions, not sort of pie in the sky sci fi fantasies about, you know, computers making super viruses. So I think that’s where the bill went wrong. Its focus on on catastrophic risk.

Simone Del Rosario: Do you agree with the tech companies that said that this bill would have stifled innovation because of the things that you would have to do before developing or is that just an excuse that they make?

Patrick Hall: Well, my, my opinion, there is that it is an excuse, but it would have, it would certainly have cut into their revenues in terms of these AI systems, which are probably already under a great deal of stress. I try to explain to people that these generative AI systems require, you know, industrial scale investments in computation, 10s, hundreds of millions of dollars or more. So they’ve already spent a lot of money on these systems whenever you have a sort of regulatory burden, that, of course, increases the amount of money that you have to spend. But since we talking about the biggest, richest companies in the world, I do think it’s a little bit of an excuse.

Simone Del Rosario: I am curious, had this bill passed, or if California decides to move forward with different but similar legislation regulating AI, when the rest of the country hasn’t. Could this change how tech companies operate in the state of California? 

Patrick Hall: Certainly you could see tech companies leave the state of California. I’m not sure how realistic that is, though. What tends to. Happen is, is almost a different scenario where most of the larger firms would apply the California regulation, or any large state regulation, you know, California, New York, Illinois, Texas, you know, apply the apply the sort of obligations to meet that regulation across, you know, across the entire United States, I’d say that’s actually a more likely outcome and and perhaps another reason why the some of the tech firms did not like this bill is because they knew it, it it would not only affect their behavior and their revenues in California, but It was likely to affect their behavior and revenues throughout the country. So I would take kind of a different I’d take kind of a different path in describing what might have happened there. Not that the changes in California would have been important, but I think it was more likely that it would have affected their behavior outside of California as well. 

Simone Del Rosario: Okay, let’s extrapolate that out even more, because the EU has passed AI regulation, the AI act over there. These are multinational companies who have to adhere to rules in the A in the EU. So how does that affect business in America, and how is it different from, you know, what was turned down in California. The regulation that we do see in the EU, what’s different there?

Patrick Hall: One thing that I would like to emphasize is that EU citizens and citizens of other countries with with strong data privacy laws or AI regulations, really have a different experience online than Americans and and have many more protections from predatory behaviors by tech companies than we as Americans Do and and what it boils down to is the tech companies make a lot more money in the United States, or able to, maybe a more accurate way to say it is, tech companies are able to extract a lot more data and sort of conduct a lot more experiments on Americans than they are able to on EU citizens and and citizens of other countries in the world that have strong data privacy or AI regulations. So it’s, it, I think it’s a fully different online experience in Europe these days than it is in the US that EU AI Act is a fairly different kind of law. So it’s, it’s a much broader law. For me, it’s a much broader law, and it’s a law that that doesn’t focus only on on so called frontier models or only on large models. It doesn’t focus only on safety, it focuses on all types of uses of AI, and it has several different risk tiers, where models in different risk tiers or systems in different risk tiers have different compliance burdens. So it’s a much more holistic law.

Simone Del Rosario: Do we need to have an AI act of our own for a federal response to this?

Patrick Hall: It’s a very good question. I think the answer is yes. Eventually. AI in 2024 is very data driven, so it’s very hard to have good AI regulation without good data privacy regulation and and so the EU is is quite far ahead of us in that they have a strong overarching data privacy regulation, the GDPR, and you know, after they passed that, they were able to pass an AI Act. Now it doesn’t have to be done in that order. I’m not saying that the Europeans have done everything right. I’m not saying that they won’t stifle innovation. Certainly, they will, to a certain degree, but, but we have a lot of catching up to do as well. We need to start thinking about data privacy and broader regulation of AI certainly, and those two may have to be done together. Or, you know, we it’s just hard to do AI regulation without data privacy regulation because 2024 AI is so data driven. We as voters need to make it clear to our representatives that these types of regulations are important, and we need to make it clear you know, the harms we’re experiencing, anything from privacy violations to inconveniences, to to more serious outcomes, more serious negative outcomes. So these algorithms are becoming a bigger and bigger part of our lives, and I do think it’s time to regulate them. And I’d also make it clear that we have good models for regulating algorithms on the books in consumer finance and employment decision making in medical devices, and any of these would be a better model to start out from then than the sort of quote, unquote AI safety direction.

Simone Del Rosario: Patrick Hall, Assistant Professor of the Department of Decision Sciences George Washington University. Thank you so much. Thank you

Simone Del Rosario: We’re talking about this rate cutting cycle and how much the Fed may cut in the first week of November in two days following the election. And I mentioned that I was tracking CME fed watch, so they look at probabilities of how much the Fed will cut its interest rates by looking at interest rate traders and their activity. And right before these numbers came out, about 68% were saying that they expected the Fed to cut by 25 basis points in November. And I just refreshed my page, and it’s already up to 87% so from 68% to 87% I mean, they’re really locking in a 25 basis point cut right here. There’s no zero, so there’s that, you know, no one’s betting that the Fed. 

Seth Harris: There’s an important input that you didn’t take into account, and that is that you and I just predicted a 25 basis point and said, We’re market we’re moving markets here on straight arrow news with our predictions about what the Fed is going to do. But I just think 25 basis points makes a lot of sense. You know, with this jobs report, which is saying to the Fed, there’s some volatility in the labor market. I mean that that is the big story here, is we thought things weren’t going so well. They were actually going moderately, not great. This is. A, I would say, a very, very good number. So the Fed is going to be cautious. This is a, this is a very cautious group of people by nature. That’s almost who they hire. Is people who are quite cautious, who are data driven, and they’re going to look very closely at their Beige Book. But at the end of the day, they’re also trying to set a tone for the economy, as I was just saying. And 25 basis points is a gentle nudge that we’re moving towards growth. Everybody loosen up a little bit. Start spending, start hiring, start moving a little bit more, not too fast, but a little bit more. 

Get ready for price shocks if dockworkers and the companies they work for can’t come to terms on a contract before Tuesday.

The labor standoff is between 85,000 longshore workers and the United States Maritime Alliance, which negotiates on behalf of the port operators. A strike would shut down 36 ports from Maine to Texas that handle around half the goods shipped to the U.S. It would be the first such strike for maritime workers in nearly 50 years.

The longshore workers are calling for significantly higher wages and a ban on automating cranes, grates and moving containers as part of the loading and unloading process.

Neither side has made proposals public, but a trade publication reports the union is seeking a $5 per hour raise for each year of the contract, while operators offered half that. The union president called the offer insulting.

President Biden has the power to force longshore workers back on the job. But with about a month before Election Day, Biden said he was not planning to do so. The administration is calling on both sides to negotiate a solution.

Congress did stop a rail workers strike in 2022 at the urging of the White House.

The National Retail Federation has called on the administration to keep engaging both sides. NRF Vice President of Supply Chain and Customs Policy Jonathan Gold said in an email to Straight Arrow News:

“Many retailers have already taken steps to mitigate the potential impact of a strike by bringing in products earlier or shifting products to the West Coast. The global supply chain is a complex system and even a minor disruption would have a negative impact and cause delays at a critical time for both retailers and consumers.”

If the two sides fail to reach a deal, a strike will have a huge impact on the economy. JP Morgan transportation analysts say it could cost as much as $5 billion per day. Meanwhile, for each day ports are shuttered, it takes around 5 days to clear those extra containers.

Simone Del Rosario:
Joining us now to discuss is Patrick Penfield, Professor of supply chain practice at Syracuse University. Patrick, thank you for joining us as we’re you know, hours away from a potential strike, and I’m wondering, the holidays aren’t too far around the corner, either, would this strike have an impact on people shopping?

Hey, Simone, great to join you. And no, not right now, it won’t. So a lot of the retailers have brought in all their holiday goods they’re stocked or at the stores. In fact, you know, we’re starting to see more stuff on the stores sooner than later, right? So you’re seeing some of that Christmas and holiday stuff out right now.

Simone Del Rosario:

let’s talk about the impact of this strike, as we’ve talked about, it’s, you know, the East Coast and the Gulf Coast. About half of the products coming into the United States and coming out of the United States, coming from these ports. What sort of impact would this have?

Patrick Penfield
Yeah, so at first it’ll be minimal, but as it progresses, it’ll get worse. So every day there’s a strike that’s about five days of supply chain disruptions. So again, the beginning won’t be felt much, but I’d say after a week, then we’re going to start to feel some issues and problems, you know, for companies, specifically who, you know, get parts. I think the other thing is, just people trying to ship stuff through the East Coast also, and there’s going to be some issues there, obviously.

Simone Del Rosario
What equates that backlog? What? Why does it take multiple days for every one day?

Patrick Penfield
That’s a giant queue, so what happens is once a strike happens then you’ll start to see all these ships that will queue off the port. And then once the strike finishes then you have to process all these, you know, these ships, right? So you’re talking all these ships have been building up. And so that’s the bottleneck, the ports themselves. And then, you know, you’re talking about drayage, you’re trying to get stuff to the warehouses, and then it’s just a complete mess. And then a lot of times, you’ll see bigger customers will kind of demand that their stuff gets pushed, you know, it gets, you know, shipped first. And then, you know, the smaller companies, they don’t have that advantage or that luxury, and then they get impacted adversely. So it’s, it’s just basically, again, just a mess within the supply chain. When, when strikes

Simone Del Rosario
happen? And do you think that this strike will happen?

Patrick Penfield
Absolutely, yeah, it’s going to happen. I think the reason being is that you can see that the Daggett, who is the president of the International longshoremen on the East Coast, again, very focused on and getting what he can for his membership, and he’s also retiring. So I think this is kind of a statement for him. This might be a legacy move where you know he wants to get as much as he possibly can for his union members.

Simone Del Rosario
And the East Coast and the West Coast are different groups negotiating separately. There’s no risk of a strike on the West Coast. They already resolved their labor issues earlier this year. Are they trying to get some, you know, equality in those two agreements? Yeah, I

Patrick Penfield
think. And this is the nice thing, thankfully, that, you know, each of the coasts, they’re usually a year apart, so that way the whole country doesn’t shut down in case there’s a strike. But the West Coast longshoremen seem to have always a better contract than the East Coast longshoremen. And I think from a negotiation standpoint, I think Daggett is trying to to, you know, get some type of, you know, get some to a point where they’re both equal. And I think that is the dilemma is trying to make that happen, you know, with, you know, the maritime Association. And so I think this is, this is the issue. Another issue is automation. And so, you know, the union is against, steadfast, against automating, and that’s just because it takes away from jobs. And so sadly, the United States has some of the, the worst ports in regards to automation. You could even consider some of our ports of Thor, you know, as good as the third world countries ports, just because really not a lot of automation there. Yeah, okay,

Simone Del Rosario
let’s talk a little bit more about that automation, because that was going to be a question of mine. I mean, Wouldn’t this make things better at the ports? Wouldn’t this streamline it? And if so, like, how do you balance those two things between needing to progress from what sounds like not very advanced ports that you’re describing and balancing labor needs?

Patrick Penfield
Yeah, I think that the dilemma that we have is that the Longshoremen, they’ve always been a strong union, and so they realize that if you automate, you’re going to take away their jobs. And so, you know, this is kind of the conundrum that we’re in. You know, ideally we should be automating to streamline operations, to be able to move things in and out. But unfortunately, automation does come at a price from a job standpoint, and there will be less jobs on the ports if you automate. And so this is kind of the sticking point.

Simone Del Rosario
What do you make of the Biden administration staying out of this? I

Patrick Penfield
I think it’s a smart move. I think ideally it’s always good to try to have labor and management kind of work out these issues, if you can. That being said, eventually, if it goes on too long, I think they have to step in, just because this would cause some major issues and problems within the whole country. So I give it at least five days. I think after five days, then I think the government really needs to step in. Well,

Simone Del Rosario
five days, it’s not a very long time.

Patrick Penfield
I think that’s really all we can afford, to be quite honest with you. And I think again, if you’re the Biden administration, this is probably a worry because of the it’s an election year, right? So again, if the constituents see that there’s issues and problems here and you don’t resolve them, then that could be bad for, you know, whoever’s you know, are running for office.

Simone Del Rosario
And how do these effects ripple out to other industries? I’m thinking about trucking. And what are the ripple down effects if they go on strike?

Patrick Penfield
Yeah, so you’re going to see an increase in pricing rates, trucking rates. So you’ll see congestion again. So rates will go up. You’re going to see issues with food, because there’s a lot of food that goes through the East Coast ports, so in order to get that food, you’re going to have to air it in. And so if you air anything these days, it’s going to cost a lot more money. And so that’s kind of what you’ll see, is you’ll see prices go up. At first you’ll start to see stuff. There’ll be some availability issues, where you won’t see as much food as you do, like bananas and seafood. And then eventually, you know, the food retailers will bring that stuff in via air, and then you’ll start to see significant price increases just because you have to pay for you know how you brought that food in? Back

Simone Del Rosario
to the supply chain crunch, we go. Patrick Penfield, Professor of supply chain practice at Syracuse University. Thank you so much for weighing in today. Yeah.

Patrick Penfield
Thank you, Simone,

MERRICK GARLAND:

We allege Visa is a monopolist in the debit transaction markets that is violating federal antitrust law and inflicting often hidden but significant harm on American consumers and businesses.

Simone Del Rosario

The Department of Justice announced a lawsuit against Visa Tuesday, accusing the payments giant of anticompetitive practices in the debit card market.

MERRICK GARLAND:
Visa deploys a web of unlawful anti-competitive agreements to penalize merchants and banks for using competing payment networks. At the same time, it coerces would-be market entrants into unlawful agreements not to compete by threatening high fees if they do not cooperate, and promising big payoffs if they do.

Simone Del Rosario

The crux of the complaint is that Visa makes deals with vendors to prevent them from using other payment processors. This, in turn, hinders other processors from scaling up their business. If a merchant doesn’t adhere to Visa’s “volume commitments” to use it for most of their transactions, they can reportedly rack up big-time fees.

The DOJ pointed to a situation where they claim Visa had a contract with Square, the operator of CashApp, to stop it from competing.

MERRICK GARLAND:
or as a visa executive stated quote, we’ve got square on a short leash

Simone Del Rosario

Meanwhile, the DOJ claims Visa’s anticompetitive practices forced merchants to pass on fees to consumers.

MERRICK GARLAND:
As a result, Visa’s unlawful conduct affects not just the price of one thing, but the price of nearly everything.

Simone Del Rosario

The Justice Department says more than 60% of debit transactions in the U.S. are done on Visa’s network, allowing it to take in more than $7 billion in fees every year.

It’s unclear at this time what the remedies would be if Visa were to come out on the losing side of a ruling.

The probe did not come as a surprise to the company. It disclosed the investigation in a 2021 filing with the SEC. But still, Visa plans to vigorously fight the charge.

“Today’s lawsuit ignores the reality that Visa is just one of many competitors in a debit space that is growing, with entrants who are thriving,” Visa’s General Counsel Julie Rottenberg said in a statement emailed to Straight Arrow News.

For more specifics on what Visa’s being accused of and how it might impact the card in your wallet, we’re tapping antitrust expert and former FTC Chair and Commissioner Bill Kovacic.

Simone Del Rosario
Thanks for joining us and letting us lean on your expertise here. I’m wondering if we can, first off, if you can explain in layman’s terms what visa did wrong in the eyes of the government.

BILL KOVACIC | FORMER FTC COMMISSIONER
The case focuses on the debit card market. And the allegation is that Visa has achieved a position of monopoly power in debit cards in North America. Attaining a monopoly by itself is not illegal under the antitrust laws. It’s not enough to be big. You have to be bad as well. And the bad behavior that’s alleged is that they essentially did two things. One is that they signed contracts that had the tendency to bind users to their network to the exclusion of other networks, a condition often appearing in these contracts was one that skewed users decisively to their own network and imposed penalties on merchants and other networks when users deviated from that. The second is that they forestalled innovation in the debit card market by making substantial payments to enterprises, some of them, such as Apple, PayPal, that might have been entrance into the issuance of debit cards and the development of debit card networks, made payments to them to stay on the sidelines and not engage directly in that market, to convert them from in the ones that one at one words of one executive quoted in the DOJ complaint, from being competitors to being partners, and that had the effect of diminishing entry into the market and competition that would have taken the form of innovation. So those two are the bad acts that are said to have solidified Visa’s position and enabled visa to charge much higher fees than they would have otherwise.

Simone Del Rosario
And it would make sense for merchants to obviously not want to get shut out of Visa’s market share and thereby agreeing to their terms. In your opinion, has the government laid out a strong case?

William Kovacic
If the government can prove the case and if Visa’s justifications are not impressive. This is a formula that the Department of Justice is using effectively to build cases going back a number of decades, but especially over the past decade. The essential argument is that you buy off rivals to stay out of the way, and that you Impose exclusivity arrangements in your own contracts that make it harder for existing rivals to gain broader scale. Those arguments have been arguments that the DOJ has used with considerable success. The real question is, Visa gets a chance, of course, to contest whether or not it is so powerful. But second, to present evidence that saying everything we do is good for our users, we give users a better experience. It’s good for the merchants in our network. It’s good for the end users, the consumers. So to the extent that we’ve succeeded, we have only succeeded by doing things that make our Merchant partners and our consumers better off.

Simone Del Rosario
We’ve been hearing that in antitrust cases, this argument that we’re just better visa is also saying that the market is competitive enough. Do you think that is true?

William Kovacic
That depends a lot on evidence that’s going to be brought into the courtroom. The DOJ story suggests that visa has a market position of unusual significance, and that position is being protected effectively by a variety of practices. It’s visa that will come into the courtroom with its own empirical evidence and with its experts to say that this misapprehends The nature of rivalry in the market, both with respect to the number of participants, but the significance of each of the participants as you mentioned a moment ago, Simone, we have one side of the story here, but It is visa that will come forward and say, as they’re already suggesting, in some ways, this is a somewhat fractured view of the way the market works.

Simone Del Rosario
It’s interesting too the timing of this case, because at the same time we have Discover and Capital One trying to join together to be a better competitor to Visa. How might this case impact the scrutiny the government puts on that merger?

William Kovacic
It’s a really interesting tension here, because a starting position for the government’s analysis, and we don’t know how that will unfold in that case, but a starting position is we don’t want any further consolidation in financial services. We do not want well established players to be able to grow by means of acquisition, we hold out a great deal of confidence that they can grow and expand on their own without the benefit of acquisition. So that’s going to push the government in the direction of opposing that transaction. But at the same time, I suppose they would say in the Visa case, we want to make sure. That if firms are sustained as independent participants, that they will have the ability to grow effectively without artificial restrictions being imposed by other firms. So I suppose that the DOJ might say, we have a two part strategy here. One is not to allow additional consolidation in the marketplace, but second, to preserve a set of market conditions that make markets permeable, make them porous so that firms are able to grow and expand, especially if they have lesser significance right now, yeah, a bit of a tug of war. There is a tug of war. And I can imagine a judge. I can imagine Visa saying, well, which story is right here. That is, if we’re so awful, then we would assume you would encourage the other consolidation event to take place.

Simone Del Rosario
The DOJ didn’t offer any possible remedies. What would be the right course of action if…

William Kovacic
The logical step would be in the direction first to prohibit the specific conduct that they’re complaining about, which would be to dissolve contractual provisions that create exclusivity that tends to dampen the competitive significance of rivals, and the second might be to challenge or forbid the payments that are being made to other potential significant market players, to say the partnerships that you are pointing to are partnerships to suppress rivalry, rather than to increase it. You can’t do that anymore. So those are natural starting points here. Those are injunctive remedies that would flow naturally from the theory of the case.

Simone Del Rosario
Would that have any impact on people who are carrying visa around in their wallet?

William Kovacic
To the extent that it makes access to other debit card providers or other debit networks more readily available, would mean that, in principle, they would have the benefit of greater rivalry, more choice to turn to another debit card network and seek them out because that network is offering better terms and allows that network to grow. So the short answer is, a key theory in the DOJ case is that unmistakably, Visa Card network participants get better deals in the future.

Simone Del Rosario
We always appreciate your thoughts on these antitrust cases and breaking them down so that we can all understand it. Bill Kovacic, former FTC commissioner and the George Washington global competition Professor of Law and Policy. Thank you so much, Bill.

William Kovacic
My pleasure. Thanks for having me on.

Simone Del Rosario: Falling interest rates may pique the interest of prospective homebuyers but experts don’t necessarily think it is going to “loosen” the market that remains tight.

The rate for a 30-year fixed mortgage averaged 6.09% for the week according to Freddie Mac. The dip comes as the Federal Reserve cut its benchmark interest rate 50 basis points Wednesday.

Mortgage rates have been slowly declining since hitting a 23-year high of 7.79% in October of last year.

I get it. Rates still seem like they are pretty high. But remember, for every 1 percentage point mortgage rates increase, that lowers buying power by 10 percent. And that’s a big deal when you look at the average price of homes sold in the U.S. since the Fed had its rates near zero starting in April 2020. See… they went way up!

But… I digress. The fact is, the housing market is so tight. Existing home sales fell 2.5% in August according to a release from the National Association of Realtors. And that’s with rates slowly falling throughout the month as pretty much everyone knew the Fed was going to start its rate-cutting campaign soon.

Will further rate cutting have the impact buyers are looking for. Let’s bring in Selma Hepp, Chief Economist at CoreLogic. Selma, thank you for being here, and you know, I’ll start there. Homeowner hopefuls have been putting off plans to buy for years. Are these lower rates going to be the entrance point they’re looking for?

Selma Hepp: I think the lower mortgage rates are certainly helping. Every time we saw mortgage rates come down, it did help spur some buyer demand. So for example, when you think about what happened after the Fed meeting last December, mortgage rates came down that certainly spurred housing market demand, same thing the year prior. So whenever we move closer to 6% and further away from 7% and even come down to 5% range, it does help with affordability. It helps with buyers budget, and it brings back that demand that we desperately have been needing in the housing market.

Simone Del Rosario: So here’s my question, then, is it possible that more affordable mortgage rates could actually drive up housing prices, since more buyers would be trying to enter the market?

Selma Hepp: Yeah, that’s that’s a question that keeps coming up because everybody’s worried that there’s so much pent up demand and not enough supply, meaning that as soon as mortgage rates come down, you’ll see more buyers coming in and pushing those prices higher. That’s certainly a possibility, but what we did see over the course of this year is more inventory of existing homes for sale, and that has helped put a lid on home price appreciation. And the other thing is, when you think about mortgage rates further coming down, it’s going to unlock, unlock some of that inventory that’s been locked in because mortgage rates were the difference was so high between where people locked in where mortgage rates were. So with that spread coming lower, I think we’re going to see unlocking of some of that inventory, so the balance between buyers and sellers is going to be better, and it’s going to keep the lid again on a rate of home price appreciation. So we certainly hope for that going forward.

Simone Del Rosario: Yeah, for sellers looking at the market right now, when would be a good time, an optimal time for sellers to enter the market?

Selma Hepp: Well, you know, that’s usually very individual decision. You know, depends how long you own the home depends. Are you moving to another place where home prices are more affordable or not? You’re staying in the area. And depends also, you know, what your family situation is a lot of time sales. Sellers are driven by change in family status. So they are either selling because they need a bigger home on there is a divorce situation, or maybe somebody is no longer around, and so that’s usually what drives sell. That’s the most frequent reason for for sales, but sometimes lower mortgage rates are helping. They do help sellers sort of feel better about their next purchase because it’s more affordable again. And I think definitely with mortgage rates coming down, it’s going to help with that. You know that that sense of like, How much am I giving up to buy my new home. So yeah, I think will help seller demand seller number of sellers in the market as well.

Simone Del Rosario: Yeah, because, you know, yes, selling a home is an individual decision and has to do with your personal life. But what we’ve seen over the years is people really holding on to their low interest mortgage rates and not moving on to the next home when they typically would. If they, you know, are adding to their family, they’re staying in those homes. So this could unleash, but at the same time, I believe the sellers would want to have at this, okay, at the same time, I believe sellers would want to have, you know, the best price they can get for their house since they’ve waited so long to be able to sell it. Yeah,

Selma Hepp: Yeah. That’s that’s often an interesting dilemma, because you want the more most you can get for your home. But then also think about of next home that you’re purchasing, that next seller is gonna want for the most for their home as well. So you know, that’s always a dilemma that sellers find themselves in, but you’re absolutely right in terms of length of tenure for sellers. Over the course of the last couple of decades, we’ve seen people staying in their home longer and longer because homes have become increasingly more unaffordable and there are fewer homes available for sale. So oftentimes what I hear sellers say is, you know, I do want to sell. I do want to move, but where am I going to move? There’s not inventory. There’s not something that fits my, my, my, what I’m looking for. And so they just end up staying put.

Simone Del Rosario: Yeah, and looking at what we’ve seen, we’ve seen such a huge range in what happened with interest rates since the Fed started hiking. Now we’re looking at these rate cuts. So obviously, these mortgage rates have been, you know, a large part of people’s decision making process here. But as you just pointed out to that’s not the only thing that is stalling the housing market. What are the things that are, you know, making the housing market more sticky, unable to really move as well. Why people are not able to get those first homes? What is it beyond the mortgage rates? Yeah,

Selma Hepp: Yeah. I mean, absolutely affordable. Affordability is the biggest one. But affordability, the lack of affordability, comes from the fact that we’ve under built for so long, particularly first time or entry level homes. So when people are, you know, trying to think about their first home or thinking about moving to another home, there’s fewer homes to choose from. So that’s holding people back a lot. And we definitely saw that. For example, in 2023 mortgage rates came down in early spring of 2023 and we saw a burst of buyers coming into the market, but there were not enough homes for sale. And that’s when home prices surged again, and we saw significantly more appreciation in the market because that imbalance.

Simone Del Rosario: And here’s the thing, with the Fed cutting rates, it’s not just the mortgage rates that are going to come down for prospective buyers, but it’s also people who are building, you know, construction loans. These things are going to be easier to get, they’re going to be cheaper to get, and hopefully that would spur some of this movement in new inventory. So we’ll see what happens. But thank you so much for bringing that down for us. Selma Hepp, Chief Economist at CoreLogic, thank you.

I’m Ray Bogan with Straight Arrow News, and I’m here with Jaime Lopera and Marcelo Perez, who are the CEO and managing partner of Elite Protection Solutions Corp based in Miami. We’re here to talk about protecting politicians and the challenges for the Secret Service. We’re speaking, of course, because there was a second assassination attempt against Republican presidential nominee Donald Trump at a golf course. 

Now, gentlemen, according to reporting, the acting director of the Secret Service told former President Trump that significant additional security arrangements and planning would be needed if he wanted to continue safely playing golf. Acting Director Ronald Rowe discussed the difficulties of securing sprawling golf courses near public roads and said that some of Mr. Trump’s courses were easier to protect than others. So what makes some golf courses easier to protect than others?

Marcelo Perez:

It depends on location, obviously. And that particular golf course where former President Trump plays, there are a lot of roadways there and there are a lot of open areas. And it’s accessible not just to the ground, but also up above via drones, helicopters, or airplanes. So that’s a definite consideration when you’re trying to secure somebody, the area in and of itself. If it was a more isolated golf course where there’s less foot traffic or vehicles that are allowed, then it would be a lot easier to secure.

Ray: 

We spoke the other day and you said protecting someone is about manpower and resources. Of course, resources require funding. So as business owners, when a client gives you a budget for a big project, what do you prioritize spending that budget on?

Jaime Lopera

The number one goal is to be able to plan and prevent anything from happening. We spend most of our resources and most of the money should go to planning and preventing. Because ultimately if you take care of that, then mitigating and responding should not take place. Most of our resources or the money should be allocated to the pre-phase. And this is where you’re planning. It’s your planning phase because the ultimate goal is to prevent any of these issues happening. 

Ray: 

The Secret Service is a government agency. Their budget is set by Congress and they have to make that money last for the entire year. Are there alternative ways of getting the job done for less? Let me give you an example. We know from the assassination attempt in Pennsylvania that the Secret Service uses drones for surveillance. What if there’s a scenario where they needed a drone but there wasn’t money in the budget for it – is there another way to get that same type of surveillance?

Jaime Lopera:

I just read an article in the news the other day that they’re talking about Congress actually augmenting the resources and emergency funding just for this. Because again, remember, depending on the location and depending where you are, the resources that you’re talking about are massive, especially for a golf course. Just to give you an example, the key components to protecting somebody, you’re going to need an advance team. That’s somebody who goes in and has to physically and visually inspect the location. They have to do all the preplanning –  making sure that they’re checking out all the entry points, they’re checking out all the personnel. So that’s just one aspect of it. 

Then you’re going to have a protection team. That’s the team that’s actually just making the movements and making sure that the person is where they need to be. Or they need to evacuate him or shelter in place, put him in a place where they can secure them while somebody else can get to them.

Then you’re also going to need a reaction team. Because remember the protection team is taking them away from danger, so the reaction team is dealing with whatever threat they have in front of them. 

And then on top of that, you’re to have a massive support team. That accounts for intelligence, your medical personnel, all that stuff. So when people think of this, the only thing that you see, or we see on the screens is just the couple bodyguards or the couple secret service people that are around the principal. We call them the principal that in this case it will be the president or the presidential nominee. So that’s all you see. But we don’t see the entire picture. The entire picture is a massive undertaking. And especially like Marcelo mentioned earlier for a place like a golf course, because now you’re in open space. So now accounting for all that stuff, now you gotta account for possible intrusions, right? Helicopters, drones or planes or just mere objects being tossed over a wall. Just again, I think when we speak on this topic, one of the main things that we have to do is open up the scope and look at everything that needs to happen in order for someone like that to be protected.

Ray 

iNews in the UK reported that law enforcement sources on both sides of the Atlantic warned that aggressive social media rhetoric and the ease of buying firearms has created a threat for both presidential candidates too large for the Secret Service to deal with alone. If the Secret Service can’t do it alone, who’s qualified to help them?

Marcelo Perez

They’re going to have to open up the scope and bring other resources. There are a lot of retired military personnel, law enforcement, retired law enforcement officers that are highly trained and highly skilled. I’ve been doing this for 37 years. I have a vast array of retired detective, law enforcement personnel who are more than happy and more than capable of assisting. They’re going to have to allow the public, the private sector to come in and at least augment them when it comes to the outside perimeter. I’m not talking about absolutely close quarter protection for the president, but what I am saying, who’s going to guard the parking lot that’s a half a mile away? Who’s going to guard the fence that could be 1500 to 200 yards away? That’s where the public sector can come into play and be able to assist them because there’s no way that they’re going to be able to allocate three, four, or five hundred, law enforcement personnel, Secret Service personnel to guard the president while he’s playing golf. But he can get security companies, investigative companies like ours to assist and to augment them and it’s cost effective.

Ray

It’s hard to protect against a lone wolf in part because they don’t communicate with collaborators. If someone hired you and said, have a potential threat detected from a lone wolf, what would you do to ensure their safety?

Jaime Lopera

Let’s talk about lone wolves. So if you look at the analysis, the data, most of these incidents are not just from a lone wolf. We just had a shooting in a school, right? And we learned that prior to that, the law enforcement knew about it. There were some issues. They talked to them. it’s you’re talking about the intelligence using the intelligence. Prior to these things happening. So I know we sensualize the word lone wolf. It does happen, but most of it, there’s already a history, there’s already a pattern. So we need to pay particular attention to that. But to answer your question, if we have intel that there’s somebody that’s gonna harm our principle, right? The idea again is always to prevent. So if we know that they’re gonna be at a location, if at all possible, switch the location, go somewhere else, or how you make an entry. If the public gets in front of the building and you know that that’s more dangerous, that’s why you have an advance team to make sure that you have different routes, different locations, to make sure that you are able to provide the most coverage for your principal.

Ray:

What would you do if someone hired you and said, were just attacked and now we’re concerned about a copycat?

Marcelo Perez: 

Well, absolutely, you take that absolutely serious. And once again, budget plays a big part in this because the more personal you have, the easier it is to secure someone. So depending on the budget and the time you have to prepare, that’s what’s really going to determine and dictate how safe you can keep your principle. Your principal also has to be educated. You have to speak to the principal and let him or her know that under certain circumstances, you may not be able to give that speech, or that lecture, or go play golf because your life is at risk. And sometimes you have to make tough decisions for them. And as long as they’re willing to understand that, then yes, you can keep them safe because ultimately that is the goal to keep them safe.