Business Report: NCAA Reversal On Student-Athlete Pay
Friday, November 1, 2019
Credit: Associated Press
Q: I want to jump right into the NCAA and our Fair Pay to Play Act here in California. The NCAA did all that barking when that legislation came out. Here we are a few weeks after it being signed and there's a reversal. Why?
A: They've got a lot of pressure on them and it's not just California. There's a dozen other states looking at legislation similar to California's. California's legislation doesn't enact until 2023. Florida, for example, is looking to potentially pass a law very similar to the California one, but by this summer, so athletes actually can start selling their likenesses in the fall of 2020. Even Congress is getting into the act. So with that pending on them, they needed to act. They've been working on this since May and they have the next 12 months to get it done.
Q: And speaking of those two pieces of legislation, do you think it's possible that scholarships could be taxed?
A: That's a great question. Still likely not. But that's where the rule comes in. The income of those players will likely be taxed if they sell their likeness or their name. But scholarships maybe not. But it might change the whole scholarship equation when it's all said and done.
Q: Things in California got a bit more complicated in efforts to set fuel standards. A few motor companies are siding with the Trump administration. Tell me a bit more about that.
A: We talked about this in August when four of the largest companies in the world - Ford, Volkswagen, BMW and Honda — all sided with the state of California for emission and fuel economy standards at about 50 miles per gallon, which is very similar to the Obama era standards. The Trump administration has wanted to take those down substantially. The other auto players didn't really commit until this week. So General Motors, Fiat Chrysler and Toyota all signed on to support the government standard. They're not necessarily claiming that it's the standard itself, but the fact that there should be one regulation across the country for all auto manufacturers.
There's going to be a handful of winners and losers in this one. The losers are going to be General Motors and Fiat Chrysler. The reason is they both took big government bailouts. They are not doing very well. General Motors has endured a huge strike in the last month and by siding with the administration on this one, it shows that they don't seem to care about fuel economy standards. If consumers get the 50 mpg they're going to save well over a $1,000 a year in fuel costs. If they get the lower standards, they're going to be still paying a lot more at the pump for the privilege of having a lower mpg rating.
Q: Finally, speaking of paying more at the pump, this week we got a big indicator on the health of our economy. What did the GDP numbers mean?
A: There's been a lot of numbers this week, so we'll kind of break them down. We'll start with the GDP number released earlier this week. The economy grew in the third quarter 1.9%, which is a little bit above expectations but well below the average growth rate in the U.S., which is above 2%. Secondly, it was announced that the deficit will cross a $1 trillion later this year. That's a major issue because the tax cut is a big factor of that deficit growing that quickly.
The goal was to grow the U.S. economy 3% or more in the last several years. It only grew over 3% one time. The Fed then had to reduce the interest rates by a quarter of a point to keep the economic growth going. We've had 109 straight months of job growth. So a lot of numbers are coming together. And what it boils down to is at the end of the day the negative business sentiment and relatively positive consumer sentiment have to be reconciled. Either consumers are going to convince businesses to start investing again and increase production, or businesses are going to start cutting jobs, which will change consumer sentiment. This is what we have to watch as we head into the holiday season.
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