Private payroll gains totaled 428,000 in August, coming in at less than half consensus economist estimates for 1 million, according to Bloomberg-compiled data. Marcum LLP Chairman & CEO Jeffrey Weiner joins Yahoo Finance’s Zack Guzman to discuss.
ZACK GUZMAN: For more on what all this means for the recovery we're seeing right now, especially considering the fact that we are again moving forward with decreasing benefits here on the unemployment front in regards to the $300 to $400 in additional unemployment benefits, a noted decrease from that $600 a week we saw before under the CARES Act that expired at the end of July. So what does it mean for the broader economy, as consumers continue to grapple with this pandemic and massive job losses stacking up? Here a chat that with us is Jeffrey Weiner, chairman and CEO at Marcum LLP, one of the largest independent public accounting and advisory firms in the US. And Jeff, always good to talk with you.
When we're discussing this issue in particular, though, I guess we'll just start on what you're seeing right now, considering the fact that President Trump's payroll tax deferral-- we talked about that yesterday-- going into effect. But a lot of employers out there not necessarily wanting to move forward with it, still withholding those funds from paychecks, just because it seems uncertain, especially with this being an election year. What's your take on where we sit on September the 2nd, as again, more of this continues, with uncertainty being the main thing lingering over the markets right now?
JEFFREY WEINER: Well, Zack, first of all, good to see you. And it's always great to chat. We're certainly not in a better position than we were last month or the month before. First of all, the payroll tax cut, the devil's in the details on that. And a lot of companies are not doing it because they could get stuck holding the bag. If some of their employees leave, the companies would still have to make up the difference.
The other thing is that helps people who are employed, which goes contrary to what everyone-- what's going on. It's the unemployed people that need the help more than the employed people. So somebody who's unemployed who was getting an extra $600 a week before, who's now not getting that $600, the payroll tax cut doesn't help them, because they're not employed.
They don't have money for the basics. That $600 to an unemployed person could in some cases have been doubling their unemployment benefits. So without their $600, the ripple effect into the economy is whether they can pay their rent, whether they can put food on their table, whether they can make their car payment if they have a car. So while it doesn't seem like enough-- a lot for the average person, $600 a week, if you're unemployed, is the difference between potentially two or three meals a day and not.
So it's a dramatic effect to the economy. And the ripple effects through the-- particularly the retail sector, are going to be catastrophic.
ZACK GUZMAN: Yeah, and we've already seen that play out over the last few months, when we're talking about some of these other initiatives that the Trump administration is trying to put through and kind of going around needing to get through Congress to get some of these things done. One of those would be the additional benefits, that $300 to $400 trying to replace the full $600 that rolled off in the Cares Act. But then there's also moratoriums on evictions that Trump is trying to get through and institute here. But there's a lot of complexities in dealing with executive orders versus acts of Congress, which typically carry a little bit more power and not up to the same scrutiny in terms of judicial review here.
But beyond all of those things, I mean, there's clearly a lot that's going to be changing once the election results are in. And on that front, I believe tax policy is probably one of the most hotly discussed things in your circle. But what kind of advice are you giving clients right now planning around that? What are you hearing from CEOs who might be looking down the pike here and saying, I mean, if we get a Biden presidency, our taxes are most certainly going to be going up?
JEFFREY WEINER: Well, first of all, it's hard to handicap it at this point. I think the election is going to be much closer than anybody thinks at this point. But it's clear that under Biden, certain of the Trump tax cuts are going to be rolled back. But at the same time, some of the things that the Trump tax cuts took away, like itemized deductions, will come back.
Tax policy doesn't necessarily drive the economy. There's always a short-term blip, either up or down, with a change in tax policy. It may affect certain industries, like Biden is rumored to be not a friend of the real estate industry. And real estate professionals are worried about that.
But generally, after a new tax law is passed, there's a blip for maybe 12 months or so while the-- while the ramifications are being sorted out. But the tax code itself doesn't necessarily drop the long-term economy.
ZACK GUZMAN: Well, one of those two things, I guess, too, as we continue to stress the economy and the stock market are two very different things. And we've seen, obviously, the stock market trade near all-term high-- or all-time highs here, despite the underlying economy not doing so well. But on that front, when we talk about capital gains taxes, I mean, you had President Trump talking about rolling those back completely not too long ago.
What could that maybe do in terms of what we're seeing in selling pressure, maybe people getting up out ahead of that if there is question marks around that? And clearly, Joe Biden has a very different take on it. So what would-- what would that maybe do to market sentiment-- maybe not the underlying economy necessarily, but market sentiment here as we approach the latter half of 2020?
JEFFREY WEINER: Well, clearly, if Biden wins, his reported intention is to the raise capital gains tax, while Trump, whether he's going to lower them or not, he's certainly not going to raise them. So I would think if early November, we find out Biden won the election, I would think you're going to see a selloff in some circles of appreciated securities so people can take advantage of the lower tax rates.
The only problem with that is you have to find something else to do with the money. So if you have a large capital gain, first of all, you have to pay the tax. So after you do that, you don't have as much money to invest.
And next, you have to go figure out where you're putting the money. The Fed has certainly signaled that it's going to-- interest rates are going to be depressed at these levels for a very long time. So I don't know. Right now, the market is where it's at, not because of the underlying economy, as you pointed out, Zack, but because there's really no place else to invest money. So people are pouring money into stocks that they think will be good under the current economic situation.
But it's always more complicated than a simple question. If capital gains go up, is somebody going to sell? The answer may be yes, but what do you do with the money after that point?
ZACK GUZMAN: Yeah, no, it's a very important point to bring up in terms of alternative investment options out there. But one last thing I wanted to throw out in front of you was the basic official state of where we sit in terms of the CBO finally coming out and putting out the report here on something that we've discussed months ago, when we think about the size of the economy here after this pandemic and whether or not the gaps in terms of spending and tax revenues here continuously grow. For the first time in that report, we're expected to see that the debt, US debt is set to exceed the size of the economy for the year, which is something we have not seen back since the '40s in World War II here. What does that maybe do to the idea of maybe having to raise taxes eventually, or what that might do over the next, I don't know, five, ten years in what we face moving forward?
JEFFREY WEINER: Well, certainly, the global pandemic has had an effect on our GDP. And that's gone down over the last two quarters. But really, what you're talking about is it's a sum-zero game. So it's going to cost a certain amount of money to run this country, both in social security benefits, defense. The federal government is a big operation. And it takes a lot of money to fund it.
So reducing taxes know requires the government to borrow more money. So these Trump tax cuts have resulted in unprecedented deficits, combining that with the contraction of GDP. Under Biden's tax proposal, obviously, he's going to raise taxes. The theory is that we won't have to borrow as much or could potentially reduce the deficit.
So as with everything, Zack, everything you do on one side, there's a pull on the other side that has an effect, that people don't focus on the entire economics, just focus on whether the particular [AUDIO OUT]
ZACK GUZMAN: Yeah, and I mean, despite all that, we haven't necessarily seen the market reflecting any of those fears as we continue to borrow more. It's a luxury here to be in America when you look at those metrics, not something that a lot of these developing economies around the world can necessarily say for themselves. But Jeff Weiner, appreciate you joining us with that. Be well.