The Optimists Have Questions…

Fourteen questions. Zero softballs. Listeners from Tacoma to Montreal wrote in to ask about retirement savings, taxing capital gains, home-buyer assistance programs, corporate profits in the tariffs era, what one state employee can or cannot accomplish, and whether meaningful economic reform will arrive before Millennials drop dead. And more. The inbox did not disappoint. 00:00 Announcements 01:59 Is a retirement savings crisis brewing? 04:32 Tax credits for first-time home buyers… good idea? 08:10 What if tax breaks for capital gains only applied to new investments? 13:39 Explain the $1,700 tax credit scholarship program in OBBA? 16:23 Are institutional investors wrecking the housing market? 21:37 What quick policy moves could reverse worsening inequality? 27:32 Will meaningful reform arrive before Millennials retire? 30:56 Is a hotel tax the right way to fund a stadium? 33:05 Can I move the needle on labor policy from inside the system? 35:08 Why has the responsibility and risk for employment shifted onto workers? 37:50 Is fixing the care economy easier than we think? 40:47 Do rent caps work? 44:50 Can we prevent price gouging by companies? 47:53 If states roll out good policies, does the federal government need to do it too? Still have questions, concerns, or worries? Send them to [email protected] mailto:[email protected] Keep Optimist Economy podcasting: https://optimisteconomy.com See our faces on the Optimist Economy YouTube channel⁠⁠ https://www.youtube.com/@optimist_economy. Commune with fellow Optimists on our Substack https://optimisteconomy.substack.com/ chat https://substack.com/chat/4604257?utm_source=pub-nav-bar. We’re on Instagram at ⁠⁠@optimist_economy https://www.instagram.com/optimist_economy or TikTok at ⁠⁠@optimist_economy https://www.tiktok.com/@optimist_economy. There’s a t-shirt in your size here. https://merch.ambientinks.com/collections/optimisteconomy

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  Mitt Romney and Ted Kennedy were about as different as two politicians could be. The lanky businessman and the stout old senator, the conservative darling and the liberal icon. But did you know they once teamed up to tackle an elusive challenge: universal healthcare?

• 0:16Speaker 01

  This is a politician's dream.

• 0:18Speaker 00

  In season four of the Big Dig podcast, we tell the story of Romney Care and the odd couple alliance behind it. Find Mitt and Ted wherever you listen.

• 0:35Speaker 01

  Hello and welcome to Optimist Economy. I'm Catherine Ann Edwards, economist.

• 0:39Robin Rauzi?

  I'm editor Robyn Rousey.

• 0:40Speaker 01

  On this show, we believe the US economy can be better, and we talk about how to get there, one problem and solution at a time.

• 0:52Robin Rauzi?

  This week, we're going to talk about 14 problems.

• 0:56Speaker 01

  I mean, something like that. We're going to get to a lot.

• 0:58Robin Rauzi?

  We'll see what we can get to. It's our first Q and A episode of season two. And thank you, everybody, for sending all of the questions in that we got and for replying to my follow-up questions. It takes some time, but it's really nice to correspond with everybody and see who the listeners are. And what I can tell you is that you range from retirees to 20-somethings, and you're writing from literally all over the country.

• 1:28Speaker 01

  It's so affirming. We want to get straight to the questions, so we typically don't do a lot of our front matter, but I do have to give a critical update, which is that I had, I think you could tell from the last few episodes, I've been a little bit salty about some of the negative feedback we've gotten, and it had been crushing my spirit to like a not-good degree. But many of you wrote in and just said, "We love the show." And it was so affirming to hear from y'all, and it was a reminder of why we do this in the first place, which is to connect with fellow optimists. And that always runs the risk of interacting with the non-optimist, whoever those people are. But that's OK, because we have y'all.

• 2:10Robin Rauzi?

  Especially on social media.

• 2:11Speaker 01

  Especially on social media. But we have y'all. And so that's, we're no longer Chippy, Mercury. We're going forward. Rusher grade V Dan, let's answer some questions.

• 2:26Robin Rauzi?

  Okay, are you ready?

• 2:28Speaker 01

  Ready.

• 2:29Robin Rauzi?

  Okay, this is from Max Dakin in Portland, Maine. I saw Catherine quoted in the New York Times in a newsletter about retirement savings. How dire is this situation in your estimation? I'm curious whether inadequate retirement savings has been an issue for a while? Or if there's something generational about it? Has poverty already been rising for seniors? Or is it expected to rise? And these are early warning signs.

• 2:56Speaker 01

  Oh, okay, great question.

• 3:00Speaker 01

  Where to start? Okay, so the social security side, we're great. We're gonna be great, we're gonna stay great. Because it's social security. The private savings side, I'm really, really deeply optimistic here as well. Private pensions were great, but not that many workers had them, and even fewer do now. And I see very little indication that they'll come back. However, defined contributions plans, like a 401k, we know how to get those right. You just enroll people automatically and make contributions for them. And I don't mean that employers contribute to retirement. I mean that your employer sets it up so that you are enrolled in a retirement plan, and they withdraw some of your paycheck to put money into it.

• 3:44Speaker 01

  That is how we have successful retirement savings. And for people who are in those plans, they do really well. That doesn't mean it's perfect. It doesn't mean they don't have other risks, that they don't dip into them before they retire. But we do know how to get people to save for retirement. We simply do not offer that to all people. And we make it brokered by your employer. So auto IRAs, automatic IRAs, government IRAs, Trump savings plans, the Thrift Savings Plan, this has been in the works for 20 years now. To have a government account that is in fact an auto, like a 401k that the government sets up and auto enrolls you in, that is coming.

• 4:25Speaker 01

  So I, I don't think the situation is dire. I think retirement security is something that we're so close on in terms of policy because we know exactly what to do. There is almost no refutation of the idea that everyone in the US needs an auto enrolled plan. There is small bickering over how it should be set up, who should set it up, how auto enrollment works, and if the government contributes directly for poor people. But there is almost no question that this is what we need to do. We will get there.

• 4:55Robin Rauzi?

  Ready for the next question?

• 4:57Speaker 01

  I'm ready. I'm sorry, I'm starting slow, but I feel like I'm gonna cook by the end.

• 5:01Robin Rauzi?

  It's all right. Question from Amber Edmondson in Tacoma, Washington. "One of the programs out of the Great Recession was a short-lived $8,000 federal tax credit for first-time homebuyers. I used it. My spouse used another similar program in the early 2000s. Similar tax credits have been proposed in the last few years, too. Would something like this be helpful to first-time homebuyers now?"

• 5:25Speaker 01

  Unclear. Leaning towards no. It's certainly a popular policy. I think Biden had proposed a $15,000 first-time homebuyer tax credit. I think Harris proposed like $25,000 homebuyer tax credit. So the reason why people want this is because the biggest barrier to buying a house is the down payment. Being able to afford a regular monthly payment for your living expenses is something that everyone knows how to do once they start renting. It doesn't mean it's easy, but if you've rented for a long time, you can afford a monthly payment. It's, do you have the down payment is by far the biggest barrier. And it's a barrier that a lot of people get help with from their family. When they get, part of the down payment comes from a family member. And so this, this almost seems like a, well, let's make it a little bit fairer.

• 6:11Speaker 01

  And have everybody have help with the down payment since it moves people into housing and we think that's good. The argument against it is that it will raise home prices. And that even though it's targeted to first-time homebuyers of here's eight grand, here's 10, 20, 50 grand for you, it just makes housing more expensive. So it's really just a subsidy for existing homeowners because it's giving their equity a boost. Now, the, the reason why it was popular, or the reason why I think... They went for it and the Great Recession was because the home prices had collapsed.

• 6:44Robin Rauzi?

  Right.

• 6:44Speaker 01

  And there was a total freeze of the home purchasing market. And so the thought was, we need people to buy houses. And if it has an upward effect on prices, all the better.

• 6:54Robin Rauzi?

  Who cares?

• 6:54Speaker 01

  Because we need to get prices back up. People are underwater on their mortgages. And so it was a very appropriate for where the housing market was at the time. And for the most part, people who studied the policy found that there was an effect on prices. It was somewhat muted and there was an effect on purchasing somewhat muted. So it wasn't a silver bullet. It didn't grease the wheels as much as it could have or possibly should have. But it did help and it didn't hurt too much. I think the worry now is that it would just add fuel to the fire of home prices that are already going up.

• 7:28Speaker 01

  And so it's not an appropriate policy because of how high home prices are.

• 7:33Robin Rauzi?

  Yeah. You know, there's an interesting program here in Los Angeles for low income home buyers. It's done on a lottery basis. I don't really know how many people get it. But they will give you up to 20%, up to $100,000 for a down payment on a house. And then you pay it back when you sell the house. And they also get, like, say you buy a $500,000 house and you get $100,000. That would be sort of the maximum situation. And say the house appreciated 20% by the time you sold it. You would give 20% of the appreciation also back into the program.

• 8:09Speaker 01

  Interesting.

• 8:10Robin Rauzi?

  Yeah, I don't know how long it's been around, but I was just reading about that.

• 8:14Speaker 01

  Yeah, tax credits, if they're obvious and they're big and people know they have them, they'll jack up the price of certain houses, especially starter homes. Like this is a classic starter home. I'm going to make it $8,000 more expensive. So I think other ways to get money to people would be preferred. That's not so obvious for the pricing purposes.

• 8:32Robin Rauzi?

  Great.

• 8:32Speaker 01

  But I am glad that it helps people know the houses. It was good at the time. I mean, should we have another collapse in home prices? This would probably be something we pursue.

• 8:41Robin Rauzi?

  Okay, Bob Martin in Oak Park, Illinois.

• 8:45Robin Rauzi?

  As I understand it, the reason for the tax breaks on capital gains is to encourage investment to generate growth, which can benefit the economy as a whole. But the great bulk of securities that are bought and sold are not new investments, but deals between investors, which wouldn't seem to me to provide the same kind of benefit. If the tax break for long-term capital gains was restricted to new investment only, what kind of outcomes would you expect?

• 9:10Speaker 01

  All right, so capital gains.

• 9:13Robin Rauzi?

  Mm-hmm.

• 9:13Speaker 01

  This is a safe space. What is a capital gain?

• 9:16Robin Rauzi?

  What is a capital gain?

• 9:18Speaker 01

  So you have income that you earn from selling your labor. You also make money from selling stuff that you own, and that is referred to as a capital gain. It's any money you make on assets that appreciate, so stocks, bonds, houses, other property, big valuable assets.

• 9:38Robin Rauzi?

  Artwork.

• 9:39Speaker 01

  Jewelry, artwork, collections. I think maybe the easiest thing would be selling a car, except for cars never appreciated value, or rarely appreciated value.

• 9:49Robin Rauzi?

  Very rarely.

• 9:50Speaker 01

  So I mean, like, you make money when you sell a car, but you don't pay capital gains on it because...

• 9:53Robin Rauzi?

  So because you took a loss.

• 9:54Speaker 01

  Yeah, because you took a loss on that. Like, I bought a new car for $25,000. 10 years later, I sold it for...

• 10:02Robin Rauzi?

  Three.

• 10:03Speaker 01

  $10,000, $5,000. Even though I made money from the sale, I didn't actually have an appreciated asset because I sold the car for less than what I bought it for. That's not true for a lot of things like stocks or houses. They appreciate in value, and so when you sell them, you're supposed to pay taxes on it. It has so many exclusions. One of them, which is probably close to what Bob is talking about, there is a small business stock exclusion. Some government bonds are excluded. Your primary residence is excluded up to a cap if you've lived there two of the last five years. We've now added inherited investments to this exclusion because we have something called the step-up basis that changes the way the asset is valued, so that you're not taxed

• 10:48Speaker 01

  on it. Actually, for you housing people out there, I find it incredible that all of the, like...

• 10:57Speaker 01

  Ier and irritation that gets leveled towards the boomers about holding on to houses never manifest as we need to get rid of the step up basis. So I it's 1980, I buy a house for $50,000. And 46 years later, in 2026, that house is worth a million. The lowest tax burden I face for that house leaving my hands is dying with it. If I sell it now, I'll have to pay capital gains on whatever is above the capital gains tax cap for primary residence, which is $500,000 for a married couple. If I give it to one of my kids, they'll have to pay taxes on it.

• 11:41Speaker 01

  But if I hold on to it until I die, that value resets with my kid's inheritance through what we call the step up basis. So if my kid inherits a house, it's worth a million dollars and sells it, they only pay taxes on the capital gains that is accrued since my death. So they pay taxes on whatever they get over a million and not the $950,000 of appreciation that I had through my lifetime. It is such a massive incentive not to sell your house but die in it because of how the step up basis treats this one type of appreciation. I mean, but it's it works for any type of appreciation. It works for stocks, it works for bonds, it works for art, whatever.

• 12:22Speaker 01

  It's a tax treatment of inheritance that greatly favors holding on to assets, including the primary home. So for you housing people out there who want to have more movement in the housing market, yeah, you need to be attacking the step up basis with all of your might. Anyway, the argument I've heard against a capital gains tax in the United States is that it's a double tax. So I earn $100 in income, I pay $15 in federal income taxes as part of that. What do I do with the 85 that's left? Well, if I spend it, I pay a sales tax, and if I save it, I'm going to pay either a dividend tax or the capital gains tax.

• 13:05Speaker 01

  And so the the idea is that if I make money from saving, I have to pay taxes on it again, and this is like the double tax. This was really, really popular during Bush two. In the early 2000s that like we're taxing savers.

• 13:19Robin Rauzi?

  It sounds like conservative branding.

• 13:20Speaker 01

  Uh huh.

• 13:21Robin Rauzi?

  You're not paying taxes on the money you saved. You're paying taxes on the income generated by the money you saved.

• 13:26Speaker 01

  Yes, that's not how they put it. They put it as you're taxing savings.

• 13:29Robin Rauzi?

  Like death taxes, yeah. They always have a good way to put it.

• 13:32Speaker 01

  Yeah, but that is the conservative argument is that you reduce the incentive for savings because you're taxing the gains from savings. That is the argument I've heard.

• 13:41Speaker 01

  It doesn't carry much water with me because I think the people who do make investments and who would be have high enough income to pay capital gains taxes are not like on the fence about whether to invest. This is just about taxing appreciation and asset investments. And we've lowered that tax rate and we can make it a lot higher. And we've lowered the rate and we've also lowered the things like through the step up basis, the amount that's actually taxed and we can change it.

• 14:08Robin Rauzi?

  Okay. Sarah McCrory in Eugene, Oregon asks, can you explain the federal $1,700 tax credit scholarship program, which was part of the one big beautiful act? How weird is it to make something like this a tax credit instead of a deduction like all other donations?

• 14:29Speaker 01

  Okay. This is a disaster waiting to happen and we can see it unfolding in real time. I'm going to mainly punt on this question, but the $1,700 tax credit created in the one big beautiful bill for school spending says, if you give up to $1,700 to a quote unquote scholarship granting organization, an SGO, you can reduce your tax bill by $1,700. It's a one for one reduction in your taxes.

• 15:05Speaker 01

  Those SGOs in turn can redistribute the money as tuition or covered qualified school expenses, which is like a Coverdell expense. This was a voucher program.

• 15:19Robin Rauzi?

  On steroids.

• 15:21Speaker 01

  This was trying to push a voucher program through the federal tax code. Most of their efforts to do it have been cut back, but it is still an attempt at a federal voucher program. States now can opt into it, but the, the, the reason why I'm punting is because we don't know what this will look like yet. They put it into the bill. It doesn't have a lot of meat on that bone. The Department of the Treasury needs to write guidance on exactly how this will work and they haven't come up with the rules for it yet. So the person I follow in following this is a guy named John Philant, who's at the Brown Chalkboard Center at Brookings. This guy effing hates this thing and he follows it really closely and he writes really lovely blog posts explaining it.

• 16:03Speaker 01

  So I'm waiting to see what he says about the Treasury rules and we can put a link to him. But yeah, I think it's, I think it's probably going to be a disaster. I mean, his worry is just how much fraud there is going to be in this program.

• 16:18Speaker 01

  But most new aspects of the tax code, kind of like the Trump accounts for kids, have really, really low take up in the first couple of years. So I think the bright light here is that it's so obscure, so complicated. We don't have rules yet. They've already missed one tax season for this being really viable. By the time we get to another one, there's time to like kill this thing before it really gets off the ground, which is what I heard through the grapevine Democrats are waiting to do.

• 16:54Robin Rauzi?

  Okay, Robert Mittelkauf of Chicago says, outside the housing supply issues, I also hear lots of debate about whether institutional investors are causing problems in the housing market. People, including the president, seem to feel strongly that they do. What are your thoughts?

• 17:10Speaker 01

  All right. Short answer, we have no idea. The evidence is just not good in either direction that institutional investors are doing good or bad. So an institutional investor, lot of definitions, but typically something like they own a thousand homes in at least three housing markets. And they do, institutional investors are in all parts of the housing market, but the part that seems to get people mad are institutional investors that buy single family homes and convert them into rentals.

• 17:43Robin Rauzi?

  Right.

• 17:44Speaker 01

  So that's like of institutional investors.

• 17:48Robin Rauzi?

  Yeah, they don't care if you're in apartment buildings.

• 17:50Speaker 01

  Yeah, it's that it's the single family home being used for rentals. So how big are they? Really depends. They're very concentrated in specific markets. The biggest three are Atlanta, Jacksonville and Charlotte. So people dislike them because they think that they push up home prices and squeeze out first time home buyers. Very hard to tell in either direction whether or not that's true because home prices tend to rise in markets with rising jobs, which is what in population, which is what Atlanta, Jacksonville and Charlotte are. They're very hot markets for employment and jobs and people. So you can't say the institutional investors are pushing up their home prices.

• 18:30Speaker 01

  Some people really like them because they buy houses. And on average, will spend 20 to $40,000 repairing them and renovating them. So the thought around an institutional investor is that they're basically making money, assuming that their housing market will continue to grow. And the cost and risk that they face is that they buy a lemon. So they're going to buy 100 houses and a lot of them will need $10,000 worth of work or $20,000 of work and one's going to need like 200,000. And so they spread the risk of high renovation cost through their properties and then they turn them into rentals. So are they bad?

• 19:15Speaker 01

  The evidence is truly mixed because it's really hard to tease out cause and effect. I've read from like liberal organizations like the Urban Institute that the evidence is not overwhelming. It doesn't go in one direction. What they said was what you really need is to make it easier for individual buyers to take on renovation loans. Because you apply for a loan to purchase a house, you will need to apply for a separate loan to remodel, renovate, make large changes to the house. And that second loan has a really high denial rate.

• 19:48Robin Rauzi?

  Yeah.

• 19:48Speaker 01

  So, I mean, we've got an older housing stock. We've got people like the boomers who have been in their houses for a long time. They need a lot of work. You have a harder time selling to a like a household, a person to person sale, if it needs structural repair. So the house that we bought in Houston, we bought from a developer. I don't know if it was an institutional investor. I don't think so. It could have been. But the person who lived in this home for a long time, when she died, her children tried to sell it and they couldn't find a seller because the inspection revealed that it needed $30,000 worth of foundation repair. But getting a foundation repair loan or buying it with 30 grand, they just were not able to sell it.

• 20:32Speaker 01

  So they sold it to someone who would pay for that, which would be a developer and flipper. And then we bought it with like the foundation work already done. That's something that can be fixed through changing how things are financed. That doesn't necessarily make as much space for institutional investors. So that's, that's what the Urban Institute wanted to stress. You know, but even libertarians who hate all government, I couldn't get anything from the Cato Institute that said their presence is uniquely bad or good. So.

• 21:02Robin Rauzi?

  Yeah. I was surprised. The numbers are, I mean, like you say, they're kind of concentrated in, in high growth areas and they're concentrated in part because people want to rent houses. You know, they're moving into a place. They don't want to live in an apartment. Maybe they've got kids, maybe they've got a dog, whatever it is. And so there's, there is a market for that. There was a lot of resentment in Southern California after the Great Recession that they snapped up a ton of houses in largely black and Latino neighborhoods all at once. But overall, the numbers that I see, and again, I don't know how accurate they are, are like 3% or less.

• 21:39Speaker 01

  Super small. And there is some agreement that they helped stabilize the housing market during the foreclosure crisis because they did buy so many homes. But the foreclosure crisis was higher in black and Latino neighborhoods. And yeah, it definitely doesn't look good. I'm with you. Doesn't look good. But I haven't seen, if they were really, really insidious, I think we would have seen something by now that would have looked more telling than we have.

• 22:07Robin Rauzi?

  Anna Kirchhoff of Montreal, Canada, says, "You've said in various ways that Trump's policies, in essence, will be wiped from history as time passes. However, they are exacerbating existing economic inequality. What type of policy home runs are going to be needed to rebalance?"

• 22:23Speaker 01

  Okay, so the last hour of our show will be focusing on this question.

• 22:30Speaker 01

  I mean, very, I mean, very, very much, let me clarify. I think his policies will be erased because he's not building anything and he will make no meaningful contribution to the US economy. That doesn't mean I don't think he will do harm. No, but even the accounts, they're, they're not his idea and they'll rename them.

• 22:49Robin Rauzi?

  Yeah.

• 22:50Speaker 01

  Like, I think he is doing harm, actively doing harm, but I don't think that that harm will define what America looks like in the future. Things that we can do quickly is we can pass a set of labor regulations that require paid sick days, paid vacation days, and greatly raise the minimum wage, while increasing the enforcement budget for the wage and hour division. You know, the, the big thing behind that is we need to update labor law. But the small thing we can do is make improvements that we know we need to make. We can make them right away. None of that costs the federal government money, but then give the federal government money to do more wage and hour enforcement. So that's, that's one thing we can do really quickly.

• 23:35Speaker 01

  Another thing that I think would actually be really quick to set up would be paid family and medical leave, a universal paid family and medical leave program and a retirement savings. So sick vacation, minimum wage, you could do that tomorrow. Setting up a universal paid family and medical leave, a universal retirement contributory account, like the Trump savings plans that you proposed, year, I think it could take a, a year. Other things that we can do right now is we can... Pass some investments in children that don't have complicated delivery mechanisms, AKA free school lunch.

• 24:10Robin Rauzi?

  Mm-hmm.

• 24:11Speaker 01

  We can restart the 2021 universal cash benefit that kids had. And we could make every kid in America eligible for Medicaid through their 19th birthday tomorrow.

• 24:22Robin Rauzi?

  Mm-hmm.

• 24:23Speaker 01

  Done.

• 24:23Robin Rauzi?

  Okay.

• 24:24Speaker 01

  Present. So those are some, those are some also really fast ones.

• 24:27Robin Rauzi?

  Those are quick, okay.

• 24:27Speaker 01

  And I think the-

• 24:28Robin Rauzi?

  Mid to long term, yeah.

• 24:30Speaker 01

  So I think lurking behind these really short investments in children on things like school lunch is setting up a universal childcare after school and summer education program. I proposed this for the Roosevelt Institute and I called this a universal childhood development system that has like a basically integrated curriculum around health and wellbeing and development from zero to 18. I think that would take one year to start, maybe three years to roll out.

• 24:59Robin Rauzi?

  Okay.

• 25:01Speaker 01

  Next one would be, we could do really quick things to our tax system. So like reverse one big beautiful bill, reverse a lot of TCGAA, just it kind of like immediately end the step up basis. You can restore rates for capital gains, corporate tax, pass through, you could do all those things that would not take that much. I think that you could pass for the next tax year. Social Security, we could fix that tomorrow.

• 25:26Robin Rauzi?

  Mm-hmm.

• 25:27Speaker 01

  I mean, we could fix Social Security's finances 15 years ago, but we could also still do it tomorrow. Uh, and then lingering behind fixing Social Security tomorrow is implementing a new unemployment insurance system, which again, I think would take reasonably six months to start and then three years to probably fully roll out. And then the biggest hurdle, the one that will take some years doing, that we need to do, is health reform.

• 25:57Robin Rauzi?

  Yeah.

• 25:58Speaker 01

  And I say the biggest hurdle because we're not half-assing at this time. I mean, props to Obama, they accomplished so much and they changed the conversation about health in the United States, but they made everybody really unhappy with health in its own way. And that's great because we need to change our health reform system. And I think it will legitimately take- Five years to transition to a new universal health plan. And the pain point, the biggest pain point will come from ending the tax subsidy for employer-sponsored healthcare that will make the private provision of healthcare through your employer no longer financially feasible for most employers or people, and it would move everybody off of employer-provided healthcare.

• 26:40Speaker 01

  I imagine that that would seriously bankrupt private health insurance companies. I mean, like, it's one thing if you don't like private health insurance, but do you like how much we subsidize private health insurance?

• 26:56Robin Rauzi?

  Yeah.

• 26:57Speaker 01

  Again, like, I think I am a cutthroat capitalist on one level, and kind of in my core, I'm like, yo, if they can't survive and sell health insurance and have a profitable health insurance without the trillions of dollars that they've gotten from the federal government, then why do we have them? Like, why are they private if they need the federal government's support on almost every level to be sustainable? Sounds like they're not a good private company. I don't say that because I don't like the people who work there, or I don't think the people who work there do good things. I just don't think they have a feasible private sector market product, and then it needs to go away. And if a government is spending so much money to prop up private health insurance, you know what, y'all? Why does it need to be private? If it's publicly supported, I don't think we're getting much from having private insurance

• 27:41Speaker 01

  anymore, except for making middle-class people feel good that they're not on public health insurance. And I think they'll get over it if we give them about five years. So, those are things we can do tomorrow, things that we can pass the day after tomorrow for one to three years in the future, and then we put our eyes on the prize. Let's tear down the US healthcare system.

• 28:02Robin Rauzi?

  Rebecca of New York City. As an elder millennial, I graduated into the recession and was uninsured, but got a job with insurance right after the ACA passed. I paid off my student loans just months before Biden started forgiving them. Do you think we'll have significant economic reform before millennials retire? Because based on my previous experience, I assume that the United States will pass UBI or increase social security payouts the day I die.

• 28:31Speaker 01

  Girl, you're seen.

• 28:34Speaker 01

  I'm with you. I see you. Yes, I think two things are going to force Congress's hand. One, political. One, demographic. So the politics are, Trump is destroying so much and causing so much economic harm that it can't, you can't just like, oh, let's just revert to how we were before. Like, he has created so many new problems with some of his policies that now we have to go back and fix it. And fixing it's like, well, we need to do something new. So I think there's going to be a lot of policy urgency created by repairing the damage that we are all living through in real time right now.

• 29:17Speaker 01

  That's the political part. The demographics, y'all are running out of people. And we need them. And Congress has never tried to do anything about that. And eventually, they're going to try.

• 29:32Robin Rauzi?

  You mean, people like worker bots? Or do you mean?

• 29:34Speaker 01

  Worker bots. We're running out of worker bots.

• 29:36Robin Rauzi?

  Okay.

• 29:36Speaker 01

  We need more worker bots.

• 29:38Robin Rauzi?

  We got retirees out the wazoo.

• 29:39Speaker 01

  Yeah, I got retirees for days, son. Give me some of them worker bots. Yeah, the, we need more worker bots. And that is going to force Congress's hand in a lot of ways.

• 29:51Robin Rauzi?

  Mm hmm.

• 29:52Speaker 01

  And I don't mean that just cruelly. I mean legitimately, like, Americans are not having the number of children that they want. Because they can't afford them. So a lot of European countries have beaten us to the moment that we are now because they've never had the same levels of immigration that we have. Like, every family, family policy passed in European countries, not everyone, but lots of them were passed with like, oh, my God, we're running out of children. And it's not as if, like, the French are better at feminism. Like, they're proto-feminist, you know, forward women, and that's why they have paid family leave and childcare. Like, that's a conservative country that was running out of people. There is an impetus to action that comes from, for a lot of these things

• 30:37Speaker 01

  of like, we need to care about the workers, we need to care about children, we need to care about working moms. But truly, what, what has historically made legislators

• 30:47Speaker 01

  Act in this area is the economic exigencies of demographic realities. So we need people, Americans can't afford children. We're going to have to start making some changes about labor supply pretty soon. And at the nexus of all of those things are childcare, health insurance, labor regulations and minimum wage, better policy around things like work from home, better labor law enforcement. Like, all of those things are in service of getting more workers. And so I think a lot of these big, big capital L liberal policies are going to coast on the big D demographics.

• 31:25Robin Rauzi?

  David King of San Antonio, Texas. I'd like to hear your opinion about the economic wisdom of a city financing a sports stadium through a hotel tax. Are there better things a city should do with a hotel occupancy tax? Or is the stadium the perfect jobs program for San Antonio? I guess this is up for debate in San Antonio right now.

• 31:46Speaker 01

  Mm-hmm. Yeah, so a lot of times I have economic answers for y'all and I don't here because I detest this policy. I don't like paying for stadiums for very non-profitable leagues. So I don't know if I have an economic answer for you. I, I think this is, oh, you know what? Here we go. I will be in support of states and cities building stadiums with a 50% gender split. So you can't build a men's stadium until you spend the exact same amount of money building a women's stadium and you have to catch up with all investment since the first female professional sports league was incorporated. So you've got 25 years, almost 30 years. How long has WNBA been around? 30?

• 32:31Robin Rauzi?

  I don't know.

• 32:32Speaker 01

  So you have 30 years of stadium investment that you have to catch up on for women and then you can build another stadium for men. Failing that, don't build stadiums from public dollars at all. WNBA established 1996. So y'all, I-

• 32:46Robin Rauzi?

  Nicely done.

• 32:47Speaker 01

  Is there a better thing that San Antonio could do with its hotel occupancy tax? Yes. It can go to rental assistance, housing assistance, it can go to childcare, it can help new businesses that run childcare centers, it can do- You know, it could do all kinds of things.

• 33:08Robin Rauzi?

  Yeah, I hate hotel occupancy taxes myself, but...

• 33:12Speaker 01

  Yeah, I mean, or get rid of the hotel occupancy tax and not spend it on a stadium and just make it a really cheap place to come visit because it doesn't have a hotel occupancy tax. I've never spent a night in San Antonio because it's always been worth driving back to Houston.

• 33:27Speaker 01

  So, there you go.

• 33:29Robin Rauzi?

  There you go.

• 33:29Speaker 01

  That's like, do you want me to stay angry about this? Bye.

• 33:34Robin Rauzi?

  Nathan, who works for a state labor agency, and we're gonna just not say where that is. He says, "I work for a state labor agency and wonder how I can affect positive economic policy as a progressive pro-labor economic optimist in a deeply conservative state. I do research and advocate for better data, but the actual policy levers I have at my disposal are minor. I help set definitions for demand occupations, and I work on credential advocacy. Any ideas on what a person in my situation can do to move toward a more equitable labor market that actually works for workers?"

• 34:14Speaker 01

  You know, you can't make your job progressive if it's not progressive. I could empathize with how thwarted you could feel sometimes that you don't have more power at your disposal to do good for the workers in your state. You know, you can execute the labor policy in your state, but that doesn't always mean you're doing as much for workers as you want. I would say if you are a state employee, at the very least, you are embodying the progressive ideal that there are good, effective people who do public service. One of the things you hear so much when we propose policy that is bold, that is aggressive, you know, "Hey, let's have universal childcare. Hey, let's make the minimum wage this much." We're told

• 34:56Speaker 01

  that we can't do it. Not just that we're not allowed to do it, but we can't do it because we'd never be able to implement. That's too complicated. That's too big. That requires too much. You can do anything with good people. Truly, you could execute on almost any economic policy. That doesn't mean the policy is good. That doesn't mean the policy will work perfectly. It doesn't mean the policy won't have problems. But the idea that we can't do it is fundamentally saying that we don't have the people to execute on a vision. And so doing your job and doing it well means that they're wrong. Because you, there's someone like you who is able to execute on a vision. Maybe that vision hasn't arrived in your state, but like, stay ready so you don't have to get ready.

• 35:38Robin Rauzi?

  Emily, writing from Kentucky, says she's been reading Lower Ed by Tressie McMillan Cotton. And one idea that has really stayed with me is how much of the responsibility and risk for employment has shifted on to workers. We pay for our own education, our certifications, and continual re-skilling just to stay employable. It made me wonder, how did we arrive at a system where workers carry so much of the risk? And what would it take for that balance to shift back?

• 36:11Speaker 01

  So this is the last hour of the show?

• 36:15Robin Rauzi?

  I actually did reply to her, and I said, this may be too long. I should have put it at the end.

• 36:20Speaker 01

  I think that maybe starting in the 1970s, there was a real move towards kind of this you're on your own, free market philosophy. Corporations don't need to pay as much. They don't have as much responsibility. They just need to be profitable and reward money to their shareholders. A lot of people point to the influence of Milton Friedman. And they've had 50 years of runway to show us what they'll do when we don't make them do much. I think it's a really valuable lesson to have in hand, that the answer is not going to come from corporations doing the right thing. And if they're motivated by profit, and that's what they have to do, then fine. Make it easy for them. You're not offering health insurance anymore.

• 37:05Speaker 01

  You're not offering retirement anymore. Like, we need to get those off of your books, and we will regulate your labor provisions, and that's it. And then we will tax you for the things that you don't want to provide voluntarily. And you had 50 years to show us that you weren't going to provide it voluntarily. So you don't want to pay an extra payroll tax? Like, we could have a corporate tax rate that's a special, like, 1% tax on corporations that we pay for worker retraining. They would fight and scream and say that they can't do it. But you know what? Fifty years later, they've never invested so little in their own worker skill development. So, fine, like, you don't want to pay for it? That's great. Like, you don't want to do it? We will tax you and we will have someone else do it.

• 37:49Speaker 01

  And so I think for me, like, there is a real, like, devolution to be mourned here that we used to have different-looking institutions in our economy. We used to have different-looking actors. And they're gone. And so I'm not going to pretend like the people we have today look like this. They have a single-minded goal? Fine. Take everything else off their books, tax them to provide it ourselves. And let's do it through the government where it's fair and people like Nathan are there, ready to carry the mantle forward.

• 38:20Robin Rauzi?

  Erin Johnson from Minnesota. The gigantic care economy that is so essential is also so strained. I'm thinking childcare, elder care, professional, domestic, and unpaid. What would it look like to re-center our economy on caregiving and care services?

• 38:36Speaker 01

  How do I want to start this? The most important thing to stress is just how feasible it is to do better by care in our economy. So I think it seems like a really big problem in that being able to have a paid, respected care economy that's formalized and recognized and dignified seems like a lot. But I don't think we're that far away. In every care situation, break it down into, one, how is the care delivered? And two, how is the care paid for? And so you have these kind of two components: delivery and payment. So the policy question is kind of then twofold. Do we need to build a delivery system, amend it, change it, formalize it? And then how do we compensate within that delivery system?

• 39:21Speaker 01

  So childcare is an example of one where, like, yeah, we have a delivery system. We have a distributed, mixed-delivery method for childcare. It's in people's homes. It's a family-based center. It's a center, like, an off-site center. It is currently paid for in a priced market. So we should take that delivery system, build on it, and end the market and pay via federal reimbursement for care as opposed to payments out of parents' pockets.

• 39:51Speaker 01

  That doesn't require tearing down every childcare center we have and building a new one in its place. It's just a tinkering of the payment methods so that it moves to a reimbursement model. So, you know, elder care, I think this one is the hardest one because it's the one where we don't necessarily have a large delivery system, either in private or informal settings, and nor do we have a good payment structure set up. But the state of Washington has set up an elder care, long-term care insurance program that is in year something of its rollout.

• 40:23Robin Rauzi?

  Yeah, not that long.

• 40:24Speaker 01

  Yeah, but it's very successful. And it includes money for long-term care in-house in a facility, as well as payment for family members who are providing care. So, I don't think we need to re-center our economy around care, or even greatly alter it, not because care isn't important, but because it doesn't require a fundamental change to our economy to make care universal, available, high-quality, and paid. I mean, we're so close. We're so close. We don't have to dramatically remake everything that's come before to do right by people who need care or provide care. I don't think, I think it'll benefit our economy.

• 41:09Speaker 01

  I don't think it'll disrupt our economy.

• 41:18Robin Rauzi?

  Connor Jobs of New York City. He asks, "What do you make of the fact that US companies were able to absorb so much of the cost of tariffs for nearly a year without hiking prices? Is there a natural profit that companies should be making, and how do we police businesses from price gouging?"

• 41:37Speaker 01

  Okay. Two things to stress. One, tariffs were much lower in practice than how they were announced.

• 41:46Robin Rauzi?

  Right.

• 41:47Speaker 01

  So if you just read press releases, or had like a casual following of the news around tariff announcements, you would think tariffs went up to like 45% on every country.

• 41:56Robin Rauzi?

  Sure, yeah.

• 41:58Speaker 01

  At the peak, the estimated effective tariff rate was around 17%. But people shift their supply and their consumption so that maybe on paper it was closer to 17, but given what people were consuming, it was probably closer to 15%, which is not low. It's the highest it's been in almost 100 years, but it's not 40%. So it wasn't as high as they probably said. Second thing to know is that prices did go up. But they didn't grow 15%. No, but there are some things that kept prices low. One of them was there was a lot of initial hoarding and prep around the tariffs coming,

• 42:42Speaker 01

  that people increased imports while there was not an import tax. That helped in building up inventories beforehand. And then two, the prices on tariffed goods went up, in some cases, 11%. So they didn't go up the full measure, but there was an increase in prices. And goods that had higher tariffs did see higher price increases. I don't think that that's a reasonable benchmark for what we thought was going to happen. Not 100% of our goods and services are affected by tariffs. So the degree that prices went up, we wouldn't have expected a one-to-one effect on our overall prices. It's nuanced, but not everything you consume is imported or affected by imports.

• 43:27Speaker 01

  All of that said, I think what the past four years of the inflation spike of 2022, and then the tariffs of 2025, and where we are now, I think what that has taught us in a very visceral way is that a lot of companies are price setters. So his question was, how do we police businesses from price gouging? More competition. Yeah, y'all, I mean, yeah, I mean, cutthroat capitalists here, y'all, they need some competition. Yeah. If they're charging too much for something, they have too much market power. So you either need to break them up, tax them more, or a combination of the other, of both, while you allow for more competition.

• 44:10Speaker 01

  I mean, you can have some policing, but I...

• 44:15Speaker 01

  I think there's something to be said for them utilizing market power for good. Right, so we had a listener write the executive order that things have to come in pre-sized packages, so you know exactly how much you're going to get. Yeah, exactly. I mean, or make, you know, you have to have for public disclosure, for consumer protection purposes, if you change any aspect of your product, either the weight, the amount inside, or any part of the component, you have to put a sticker on it. This now uses a different setting. You know, this now has 15% less goods. You just put a sticker on there that says, "This bag has less chips in it than it did six months ago, and people won't buy it."

• 44:55Speaker 01

  It's not affecting the market, it's just saying that people in the market need to be more informed about what's going on, and those companies would absolutely change their behavior. So I'm more of a like, "Let's harness market power, let's have lots of competition, and let's have lots of disclosure," because consumers can be savvy when they have information at their disposal. So give them the information and have some competition.

• 45:20Robin Rauzi?

  Okay, from Erin in Nevada, "I listened to your episode about the wealth gap as the true causation of the housing affordability crisis. What are your thoughts about rent caps? A lot of progressive candidates talk about them, so what are your thoughts as an economist?"

• 45:36Speaker 01

  Okay, I'm torn on this one. I mean, the economic argument, as is often the case, is simple and cruel, right? If you mess with the market price, you distort the market, which means if you put a cap on every time you start a new rental agreement, you'll have fewer units, you'll push up the price of units that aren't under the cap, you'll have massive rent increases in between tenants, you'll disincentivize maintenance of units, you'll disincentivize renting units at all. I think all of those things are true. That said, I don't think that that's the whole story. There's more to it. Landlords get a ton of help.

• 46:17Speaker 01

  Maybe, Robin, as a landlord, you will disagree with me, but they get to operate their rental property as a business so they can write off all expenses. Is this a yes or no?

• 46:28Robin Rauzi?

  Half, I mean, in my, in my case.

• 46:30Speaker 01

  Half, in your case. They get to, so they get to write off expenses, they get to claim depreciation.

• 46:36Robin Rauzi?

  Yes.

• 46:36Speaker 01

  Yes. And they're claiming expenses and depreciation on a property that is almost always increasing in value.

• 46:44Robin Rauzi?

  I would say the property, the value on rental properties goes up with its rents. So rent caps actually hurt the value of a property by, by limiting the amount of income that it can generate.

• 46:58Speaker 01

  Okay. There are anti-gouging laws that some localities have put into effect where you can, you can raise rent every year, but you have to raise it to a cap.

• 47:09Robin Rauzi?

  Yeah. And that's kind of actually how rent control functions here in Los Angeles.

• 47:14Speaker 01

  Yeah, I mean, I can't think of a single policy in which like a nominal fixed amount is ever appropriate. Like, we should always be adjusting for the change in prices and wages over time. Seems very reasonable to me. What that cap is and what those exceptions are, I think, would have to depend on the locality.

• 47:32Robin Rauzi?

  Yeah.

• 47:33Speaker 01

  And kind of what the housing stock looks like. I mean, you could imagine, in certain places, you don't have that many landlords and the housing stock is single-family homes where you've got one person renting out their former primary residence, and that's most of the rental units in, say, a certain town, versus, you know, in a really dense area like Washington DC where it's like people's basements, or you've got multi-unit houses. Like, I think it would depend on the locality of how they would want to structure it and the expenses, but you could design it really thoughtfully to, to kind of use the data that you have on the amount of expenses and depreciation that landlords claim to then

• 48:16Speaker 01

  inform what rent's caps could look like, or rental growth caps could look like.

• 48:22Robin Rauzi?

  So, MJC in my home state of Ohio says, "You mentioned that some states have big government programs like healthcare, childcare, free school lunch, and paid sick leave. If states can do this, which might satisfy states' rights conservatives, why should the federal government do it?"

• 48:41Speaker 01

  Okay, I think there's a few arguments you could make here as to why the federal government should do it. There's certainly an ethical argument to be made that if you think of states as being a testing ground for policy, if you find a policy that's beneficial, it's on some level unethical to withhold it from other citizens. We know that free school lunch helps kids' health and their educational and academic performance because they're not hungry at school. So is that something we should withhold for children because their state hasn't gotten around or isn't inclined to help children in their state? I mean, they're still Americans. What sets the lowest bar for American children? What we know is to

• 49:24Speaker 01

  be best or what we allow to be worst? That's the ethical argument. There's a very clear economic argument for federal policy because states are not equally rich. They don't have the same property tax base, they don't have the same income tax base, and they don't have the sales tax base. So these big government programs in certain states, they are not coming from the poorest states by a long shot. And to say like, well, once a state can afford it, those people get to have childcare, but in poor states, they can't afford it and so they don't get it. You know, how much inequality do you need across states? The tax base in Mississippi is not large. Not large enough to afford everything that you listed in your question. So is that just too bad, so sad, the federal government isn't going to help

• 50:09Speaker 01

  you? Or we know something works, but economically you can't afford it, so now you're punished for being poor by having less investment? I don't, I don't really like setting that up to put states on a timer to always have fewer resources and investment. That's the, I mean, so that's the ethical argument, that's the economic argument. I think there's a political argument to be made here, which is that you can't talk about states' rights in the United States without talking about black people. So do you want black people in the South to have something? If the answer is no, by all means, states' rights. But if the answer is yes, then you need to go federal. Now, to be clear, policies that withhold investment also withhold investment from white people in those states on the state or federal level.

• 50:52Robin Rauzi?

  For all sorts of civil rights, which would include women's rights, and it would include gay rights, and it would include trans rights, in this moment especially.

• 51:00Speaker 01

  There was a mortality study in the US and it was looking at the intersection of three border counties on Lake Erie. And so they were comparing mortality in these three counties, one of which is in New York, one of which is in Pennsylvania, and one of which is in Ohio. And what they were pointing out was that because of state policy, the mortality rate of this same cluster of people that live right up in or outside Erie, Pennsylvania is very different because Ohio doesn't have a good Medicaid program. It doesn't have good supports for very poor people. It doesn't have the same type of

• 51:40Speaker 01

  cigarette taxes and seatbelt laws. And it's a state that has like a low regulation, low investment state environment. And that New York state is, on the contrast, a state that like, it's got a really good Medicaid program. They spend a lot of money on it. They have tons of public health interventions. And it was comparing, you know, just how many years of life living in Ohio shaved off your life compared to living in New York, even if it's 20 miles away. Is that right? It's a states' rights question. Is it right that Ohio is allowed to drive its citizens to an early grave through terrible policy when 20 miles upstate, they would be doing better? 20 miles, 20 miles up I-90?

• 52:22Speaker 01

  20 miles up I-90 and you get better benefits, you get more support. Like, so many researchers have covered what we learned from the Medicaid gap and the Medicaid expansion. And what we learned is that states were willing to kill a lot of people by withholding health insurance from its members because it didn't believe in a government policy. So when is that okay? I don't think that that should be the bar for what Americans get, is a spiteful state government that doesn't like a federal policy and therefore they opt their citizens out of it even to their own detriment. I don't think that's the bar that Americans should be held to. I don't think that's the bar that Americans should live by. If we

• 53:03Speaker 01

  know good policy helps people, why do we let some governor who wants to run for president harm the people in his state deliberately with all the evidence in hand that he's doing so? Is that something that we allow? That's a state's rights. So no, federal policy, when we know it works, states have proven it works, so now let's give it to everybody and not let some governor decide.

• 53:26Speaker 01

  Who gets to live or die? Hello, come here. Did you throw something at me? Come here. You mama was talking and you threw something at me. What did you throw at me? Oh, my God. Oh, my God. Hold on. Don't you dare. Is that a dart?

• 53:43Speaker 01

  Wait, what are you doing? You little devil. Don't you dare. OK, OK, OK, OK, OK. All right, you guys, I think we should wrap this up.

• 53:51Robin Rauzi?

  I think we should.

• 53:57Robin Rauzi?

  The Optimist Economy podcast is edited by Sophie Lilon. Our video production for social media is by Andy Robinson Video. I'm sorry, Andy Robinson. Just Andy Robinson.

• 54:08Speaker 01

  Just Andy Robinson.

• 54:09Robin Rauzi?

  You can share video clips from our show on TikTok, Instagram, YouTube, or LinkedIn. And if you're on Substack, we have an Optimist Chat there and you can follow along and talk with your fellow optimists. Optimist Economy is supported entirely by listeners like you. If you have the means to contribute, you can do so at optimist economy dot com. And we are still spitballing names for our various new support levels. We'll also happily sell you a T-shirt or a hat.

• 54:37Speaker 01

  Or a tote bag.

• 54:38Robin Rauzi?

  Or sticker.

• 54:40Robin Rauzi?

  Thank you for joining us. We'll be back next week with a regular episode.

• 54:44Speaker 01

  Thank you, optimist.