Pod Insights Optimist Economy Q&A Part 1: Tax Philosophy, Liberal vs. Conservative Economists, Marriage vs. Poverty and More About this episode In the first of two mailbag episodes, economist Kathryn Edwards answers questions from optimist listeners on taxation on wages vs. investments, whether student loans are regressive, how bona fide economists wind up on opposite sides of policy debates, and what it really means when a Montana Congressman calls the CBO “historically wrong.” Yeah, this episode has a long title. But there was a lot of talking. And that’s why Part 2 is coming in a few days.
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Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
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0:35 Speaker 02 Hello and welcome to Optimist Economy. I'm Catherine.
0:38 Robin Rauzi? I'm Robin.
0:39 Speaker 02 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.
0:52 Speaker 02 Today is a very special episode.
0:54 Robin Rauzi? It's our second Mailbag episode.
0:56 Speaker 02 It's the second Mailbag episode. To review, I have not seen the questions. Robin is hitting me cold, and we'll see how I do. But before we get into them, we should let you know, we might know it, but y'all should also know that we have a website, optimist economy dot com. And through that, we send out newsletters, we take your money through Substack and Buy Me a Coffee. And you, of course, can always email us, optimist dot economy at gmail dot com.
1:22 Robin Rauzi? Yeah, I wanted just also to say, we broke 1,000 newsletter subscribers this week, and Substack sent me this note saying we have subscribers in 49 states. So, of course, I wanted to know who wasn't in the fold. And it's North Dakota. So, North Dakota, get on the, get on the stick.
1:39 Speaker 02 Somebody find a friend in North Dakota.
1:43 Robin Rauzi? Phone a friend.
1:43 Speaker 02 I have a friend in Nebraska. I don't have a friend in North Dakota.
1:46 Robin Rauzi? We do well in Nebraska. We've
1:48 Speaker 02 We do well in Nebraska.
1:49 Robin Rauzi? We know that from our last, our last Q and A. And we have two questions from Nebraska last time.
1:54 Speaker 02 I love it.
1:55 Robin Rauzi? Okay.
1:55 Speaker 02 So, we're going to skip through our normal chapters and just go straight into each question.
2:00 Robin Rauzi? You know what, actually, I had a term and condition that I did want to just mention.
2:04 Speaker 02 Oh.
2:04 Robin Rauzi? So
2:05 Speaker 02 We don't skip our chapters and don't go straight into the questions.
2:10 Robin Rauzi? No, I just, we had somebody who, who became a, you know, I don't know, a legit optimist in this last week. And he sent in his spiritual sponsor, which was a choral descant. Now, I don't know if you know what a choral descant is. It's when you have a, you know, choir singing and instead of them, the sopranos are usually singing the melody, they sing sort of a counter melody that sort of soars like above everything else. It's extremely beautiful. And he said, you know, these just bring tears to my eyes every time. And, you know, as somebody who's done some church singing in my day, you know, I totally concur. But I wanted to look it up to make sure that it was always a treble melody. Because, you know, it could just be some particular kind of musical counterpoint. And I found
2:55 Robin Rauzi? out that descant also means to talk tediously or at length.
2:59 Speaker 02 Mm hmm.
3:00 Robin Rauzi? As in, I have descanted on this subject before.
3:03 Speaker 02 Mm hmm.
3:04 Robin Rauzi? I had no idea. I had no idea that that's what that meant. And we are going to descant on some subjects today in our Mailbag episode.
3:12 Speaker 02 We're going to descant. I mean, that really sounds like something that I'm mispronouncing. Like, there's a real word there, but I'm mispronouncing it in a Texas accent. I'm like, let's descant. I've descanted on that. Let's go. It's, it's, it sounds like a word that's wrong when I say it.
3:28 Robin Rauzi? It's descant.
3:31 Speaker 02 Descant.
3:32 Robin Rauzi? Descant.
3:33 Speaker 02 Descant. Descant.
3:34 Robin Rauzi? Accent on the first word. Okay.
3:35 Speaker 02 All right. Well, you know what?
3:36 Robin Rauzi? Close enough.
3:37 Speaker 02 Let's just do economics. I feel a little bit comfortable in this space.
3:39 Robin Rauzi? Okay, let's go. All right. We have a question actually related to our student loans episode from Melissa in Michigan.
3:45 Speaker 02 Okay.
3:46 Robin Rauzi? Would you consider student loan interest to be regressive? Those with less family support end up with more loans that grow almost exponentially with high interest rates on a high principal that compounds over time. And also, if it's so much cheaper in other countries, why don't US students go there?
4:02 Speaker 02 Okay, well, I think the two questions are related. Yes, if you have to take out loans because you have less money, but you have to pay interest on them, but not to your parents who give you your education, then yes, student loan interest is going to be regressive. If it increases with the size of the loan, reflecting need, then yeah, student loan interest is going to be regressive. The question as to why we don't go to other countries, I'm thinking about this from the framework that, here's a question, which state sends the fewest share of kids out of state for college?
4:33 Robin Rauzi? Texas.
4:33 Speaker 02 It's Texas. Yeah, because if you're big enough, you don't need to go far to have a lot of options, is what we tend to think, right? Like, not only is it a function of in-state tuition being cheap if you're at public school, but you don't have to leave the state to have a ton of options. I think the same is true in the US. We just have so many colleges and universities here, and so many, it's such a wide variety, that you don't necessarily have to go abroad.
4:57 Robin Rauzi? Yeah, true.
4:59 Speaker 02 I think, I do wonder with her question of student loans being regressive, I'm not going to stop talking just because it looks like I came to the end of a point.
5:07 Robin Rauzi? Discount on, my friend.
5:09 Speaker 02 Discount on.
5:12 Speaker 02 I think her, there's like a question behind her question of like, if this makes it harder for poorer students to go, and makes it more regressive for students, for poorer students, then why do we do it this way? And I think that that's a fair question, that doesn't necessarily have an answer, other than, this is the system we came to, you're making an investment, there should be more financial aid support that comes from the federal government. And, you know, my like, mean economist answer would be, yeah, these interest rates from the federal government aren't great, but if you didn't have the federal government saying it's okay to lend to these people, nobody would go to college who didn't have their parents afford it, because the private market for loans, they have no type of federal
5:55 Speaker 02 government guarantee for student loans, like, you're not going to have a lot of banks lining up to give 18-year-olds really good rates.
6:02 Robin Rauzi? What?
6:03 Speaker 02 So it's, it's, it's not great from like, the government versus, say, free college, but the government being a lender as opposed to, you know, a private bank being a lender, you know, the government's doing a better job than the market would do, even though it's still flawed.
6:20 Robin Rauzi? Okay. Ready?
6:22 Speaker 02 Yeah.
6:23 Robin Rauzi? This is from Corky Garco of Colorado.
6:27 Robin Rauzi? In a recent episode, I was struck by Catherine's comments about economists falling into left or right camps on issues like the child tax credit. I'd love to hear more about how these camps form, especially particularly among economists with PhDs, not to be confused with those social media influencers who play economists online. I'm assuming these folks all go through the same kind of rigorous programs, study the same foundational literature, and examine the same data. How do they wind up on opposite sides of politically charged issues?
6:59 Speaker 02 Well, the first part is the hardest part to understand is that in addition to being economists, we are sometimes human beings.
7:06 Robin Rauzi? What?
7:07 Speaker 02 But I think even for economic issues, you know, I've said so many times on this show, what I believe to be true is that when it comes to economic policy and choices, it's not about there being a winner, it's about the trade offs and risks that are palatable to you. And so I think where you get camps in terms of economists, it part comes from what are the trade offs that you value, or what are the risks that you are willing to take relative to others?
7:37 Robin Rauzi? The status quo and stuff.
7:38 Speaker 02 And so, you know, you have two economists look at a set of data around a child allowance. You give cash to every kid in the US, some amount. If you are a conservative economist, you're going to look for the trade off that you don't want to risk, which is labor force participation and labor supply of the parent, probably the mom. If you're a liberal economist, you're going to look at the kind of decrease in child poverty and the fact that has in the long term, which, you know, you're willing to risk labor force participation, whereas other economists are not. So that's one. But two, broadly, please do not let my demeanor fool you, we don't know everything.
8:19 Speaker 02 And we still don't know most things, and that means there's just a lot left for interpretation. There's some things that we have like a pretty broad consensus on, like tariffs aren't great, but you're going to find some random economist who's now famous in the administration who will say like, they're worth it, we need it right now, because, you know, we can't predict the future, we don't know everything. And, you know, in that gray area falls interpretation, and where there's interpretation, there's bias and preference. And we suffer from it, too. We don't always talk about it, but we suffer from it, too.
8:52 Robin Rauzi? All right, Brad Nelson in Dennison, Iowa, says, "Tax rates are higher on income earned by our own sweat than the income earned on investments." Those of us who work for a living pay income taxes, payroll taxes, consumption taxes. The trust fund babies and wealthy retirees can sit on the veranda sipping martinis, never break a sweat or earn a dollar from their own effort, and they pay favored tax rates which are much lower. This seems backwards to me. Why don't we tax dollars that are earned through your own labor at a lower rate and tax dollars from investments at a higher rate? Shouldn't we encourage people to utilize their skills and labor to earn money? Why do we encourage martini sipping and discourage earned income?
9:37 Speaker 02 Wow, this is such a good question.
9:40 Robin Rauzi? I love this question just for the imagery of the sipping martinis on a veranda.
9:44 Speaker 02 Yeah, I don't want other people who wrote in questions to feel like we have favorites, but like, I'm really loving this. I'm loving the effort that went in and like, just the vivid imagery. So, I can give you a few answers to break this down. First, let's think about payroll taxes. Social Security, unemployment insurance, Medicare. The reason why these are attached to work is because that is part of how you earn your eligibility as a worker or non-worker. So, it's the tax being set on workers is because that's how we end up determining your eligibility for the program.
10:17 Robin Rauzi? So, if all of your income in your whole life only came from investments, you wouldn't be eligible for those because you would never have paid those taxes?
10:25 Speaker 02 Yeah, in theory, you could have like, a trust fund kid. I mean, because like, if you're self-employed and you're getting earned income, you have to report it to Social Security and then you pay both sides of it. But if it's not earned income and it's investment income, then no, you wouldn't be subject to Social Security and I don't think you would have a tax record. You wouldn't have a wage record, you might not be eligible for it. Most people who aren't eligible for Social Security are immigrants who don't have a long enough work history.
10:53 Speaker 02 That's why the payroll tax is tied to the worker. The income tax mainly coming from earnings is a function of a few things. One, that is where most income in the US is generated. Two, it's the easiest for the IRS to count because it's double reported. You report it and your employer reports it. This is my understanding of why people have argued that investment income needs to be taxed at a lower rate. So I earn money from my job. I pay taxes on it and then I take the money that's left over in my savings and I invest it into, you know, the stock market. I'm amazing and I make a million dollars off of that money. And now the government wants to tax me again.
11:37 Speaker 02 I already paid taxes on that money. That was my earned money. And then I, whatever, they're basically taxing savings and investments. And so they're double taxing. So the argument you have of like, they're taxing labor twice and therefore they're discouraging labor is the, like, the inverse of the exact same argument that people would say about savings and investments is that you're taxing savings and investment, which is the product of the funds left over from when you were taxed as an earner. And so you're discouraging savings and investment by taxing the returns. And I don't know if it's because-
12:12 Robin Rauzi? You're just discouraging investment and we want to encourage investment because that has all sorts of good effects.
12:17 Speaker 02 Yeah, we want people to invest their money. And so this, this whole idea of a double tax was really in vogue in the late 90s and the early 2000s of like, we need to reduce the capital gains tax rate because we're double taxing people. And we're punishing them for being-
12:31 Robin Rauzi? Like the death tax.
12:33 Speaker 02 Yeah, so it's a lot more rhetoric than it is reality. Again, like, policy choices are all about trade offs. Like, are you willing to risk the possibility that someone will invest less because of the capital gains tax, understanding that there are people who are now wealthy enough to exist entirely off of investment income who you never tax? Like, are you willing to forego tax income from investments because small dollar investors that have already earned, like, taken this money from their wages? You don't want to punish them twice or you feel that you are. We have a bunch of things left over from just how the system was started back in 1913. We have some taxes we've added relative to public programs.
13:18 Speaker 02 But then we have these like really deep philosophical debates of like, are you taxing labor twice? If you invest it, if you are taxed on the investment and so on. There are like so many good ideas here that we can pursue to kind of avoid the double tax, but not necessarily like-
13:38 Robin Rauzi? Yeah, or minimize it.
13:38 Speaker 02 Yeah. You buy a house, you sell the house.
13:42 Robin Rauzi? Yeah.
13:42 Speaker 02 If you have lived in the house-
13:44 Robin Rauzi? For three of the last five years or two-
13:46 Speaker 02 For three of the last five years, you don't pay capital gains on the house.
13:50 Robin Rauzi? Up to a limit of $500,000 per couple.
13:53 Speaker 02 Right. That's an example of like, okay, if I'm someone who's really wealthy and buys six houses for investment purposes, stays with them for a week and then flips them. That house is an investment vehicle. The federal government has come up with a means of taxing, separating out the majority of people who buy houses, which are just trying to find shelter and make it a long-term investment. I'm not going to be taxed for capital gains from real estate realizations if it's my actual house and I've lived there three of the past five years. There are ways to do it so that this idea of like, but we're double taxing can be shielding-
14:27 Robin Rauzi? Yeah, that's exactly what I was thinking of was like, yeah, there's, there are, there are thresholds that you could put in place, like above which the tax is different. And yeah, primary residence, the sale of your primary residence is a good, a good example of that.
14:40 Speaker 02 Yeah, if it's the stock that you've inherited versus like stock that you bought, you know, on the, like, there's all kinds of ways to do, and we have whole other, we have entire accounting systems of how to value things that you've held on to for a long time for tax purposes. I think the short version, which obviously is what I'll end with, having talked for a long time, the short version is a lot of the evolution of the tax system has moved to favor that wealth in investment.
15:07 Robin Rauzi? Invested wealth, yeah.
15:08 Speaker 02 Which means it's a choice and we can choose differently.
15:11 Robin Rauzi? Yeah. All right. This question is from Shelley Gardner in Utah. I teach financial literacy in high school in a conservative state. And it was brought to my attention that next year, they are going to add to our strands and standards that we have to teach what's known as the success sequence, which, among other things, says you have a better chance of avoiding poverty if you get married before having kids. As an economist, what's your opinion and assessment of the research on this?
15:41 Speaker 02 Oh, man, it's so hard not to give my honest take here. So the question is, is having kids before marriage a predictor of poverty?
15:52 Robin Rauzi? Yes, essentially.
15:53 Speaker 02 Or a cause of poverty?
15:54 Robin Rauzi? Exactly. We have causation and correlation questions there, don't we?
15:58 Speaker 02 Some of it doesn't need to rely on research. It's very intuitive. Two incomes are greater than one.
16:05 Robin Rauzi? So if you're married?
16:06 Speaker 02 So if you're married and you have two people working, your income is going to be higher and therefore you're less likely to be in poverty. And it's, that tends to be why we have a lot of single parents have higher poverty rates. They have fewer earners in the household. So it's not as if they all have, you know, single moms are necessarily like people who aren't working or who are in terrible jobs. It's just that they don't have two incomes that would, kind of mechanically, tends to push people over the poverty line.
16:35 Robin Rauzi? Yeah, I was also curious about whether conventional thinking on this came out of research that was done, say, in the 80s or 90s, when the teenage pregnancy rates were so much higher.
16:47 Speaker 02 Yeah.
16:48 Robin Rauzi? You know, I think that a lot of this was probably about encouraging people not to try to get pregnant when they're in high school, probably through abstinence in conservative states. But, you know, teenage pregnancy has just dropped like a stone.
16:59 Speaker 02 Yeah. Yeah, it's considered a massive economic and social and cultural success that we don't have as many kids pregnant at 16 as we used to. And it is, as we kind of said in the fertility episode, it's one reason why overall fertility has fallen because we've very much tried to push down fertility of a certain group. So for everybody, it doesn't matter if it's one parent in the household, two parents in the household, every kid is poorest on the day that they're born. Because that tends to be the youngest that their parents are, and young people don't earn as much as they do than when they're older. I earn more at 45 than I did at 25. I earn more over my lifetime. So... You know, yes, there's a historical composition that a lot of single parenthood
17:43 Speaker 02 that happened in the past was experienced by younger people. And so you not only had single households where you have one income is less than two, you have younger households and younger income is less than older income. No one would say to a 40-year-old woman who pulls down $200,000 a year that if she has a kid without a partner and she's a single mom by choice, like, her success sequence is towards poverty.
18:07 Robin Rauzi? Right.
18:08 Speaker 02 I tend to think of poverty as a function of the income going into the household, which has really key predictors as opposed to just the family situation.
18:18 Robin Rauzi? Mm-hmm.
18:19 Speaker 02 Now, that said, there are a set of economists who think that marriage is better for kids, and it's not just income. There are another set of economists who think that marriage is really only better for kids because of income. And it's very hard to tease out of what makes kids from two-parent households, on average, more likely to be better off because they have two incomes or because they have two parents, and it's very hard to tease out the causal relationship. So I think the economics research would be divided. A lot of economists would say, maybe we should promote marriage because marriage is good for kids, and other ones would say it's just a matter of income. I myself have written columns that have said, "Single moms need higher wages, not husbands."
19:03 Speaker 02 I think we do a big get-out-of-jail-free card for terrible labor market policies when we say that women who have a kid but not a husband and they have some terrible job, that the problem is that they didn't have a husband and not that the minimum wage is $7.25 an hour. So like, I think that we put too much on the marriage decision when it's really just a mirror reflecting back the economic situation of those two people.
19:29 Speaker 02 And I just want to add, just because this is kind of a fun topic.
19:34 Robin Rauzi? Yeah.
19:34 Speaker 02 Um, the relationship between kids and marriage and earnings is crazy in terms of the gender divide. So, men.
19:43 Robin Rauzi? Make more.
19:43 Speaker 02 Basically, they make more after they get married and then they make more after they have kids. Where like, there is a genuine set of evidence that shows that men benefit from earlier family formation because it basically forces them to grow up. And that when they have responsibility of a family, they perform better in the labor market, whether that family is just a wife or, or husband, or that family is actual kids. Whereas for women, we have huge motherhood penalties. And so we have these big conflicts over like, should you get married early or should you get married later? Like, who does that favor and who benefits? But I would say if an economist is telling you what to do with your family, you should just run the other direction. We should not have influence in this space.
20:28 Speaker 02 People should make choices that work for them, and if the economy isn't working for them, it's always easier to say, well, that's your fault. And it has nothing to do with not having paid sick days in a country with economy worth $30 trillion. So I, I would say there's, there is genuine economic research questions here that could be interesting in your success sequence, but success sequence is another way to say blame people for choices sequence.
20:56 Robin Rauzi? Yeah, our circumstances, not choices.
20:59 Speaker 02 And we shouldn't have an economy that has a success sequence. Like, that's a failure for the economy if you have to do these five things in order to succeed and we only support one family type. Like, what an incredible, like, damnation of the US economy that like, it only works if you're a two-parent household where both people are working and you had to have gotten married first, and if you don't follow those things, then you don't get to have prosperity? No, no. That is a performance measure of the economy on its own. So, I don't know how you put that into a high school curriculum, assuming they only listen 5% of the time, but hopefully I gave you some fuel there.
21:34 Robin Rauzi? Yeah, good luck. Good luck, Shelley.
21:37 Speaker 02 Good luck, Shelley.
21:39 Robin Rauzi? Okay. Lauren Henry in Helena, Montana. In a virtual town hall, my House Representative Troy Downing said that the CBO is, quote, "historically wrong" and the projected deficit growth from the new tax bill is wrong because it doesn't factor in economic growth and the bigger economy in the future as a result of the tax cuts. Can you please help me understand his logic?
22:04 Speaker 02 Okay, so there's two questions there. One, is the CBO always wrong?
22:10 Robin Rauzi? Historically wrong.
22:11 Speaker 02 Historically wrong. And two, is that because they don't account for economic growth?
22:20 Robin Rauzi? Right. Obviously, the way he stated this was politically loaded, but where is he getting this idea that the CBO is historically wrong?
22:28 Speaker 02 The CBO can't predict the future, and that's not their job. And they're not trying to predict the future because that's not their job and because it's not possible. What they're trying to do is give Congress a toolkit, some type of reference to understand the relative value and cost of a piece of legislation. The cost part is the part that they can focus on because that's what they can control. I know how much money is going to go out the door. I know how much money is going to come in. How that money that goes out the door is then spent in the economy, we have less and less of an idea of how that happens. So some things that the government does, we have a really good idea of what the economic kind of basically callback would be.
23:13 Speaker 02 Some of them, we have almost no idea. So how does the Congressional Budget Office prepare comparable estimates for pieces of legislation if some of them, we have an incredible degree of knowledge of what we think is going to happen in the economy, and some of them, we have almost no idea what it'll do in the economy? What the CBO does in order to produce a set of comparable statistics for a set of people that don't seem to show a ton of sophistication in this space is that they just do for all legislation what they can do for all legislation. So they show you how much something costs. That cost estimate has to come with a set of assumptions about the economy, but it's not a prediction. It's a projection of a certain aspect of government behavior, and it's meant to be
23:56 Speaker 02 simplified so Congress is going to be able to compare it across pieces of legislation. What I'll say about the economic growth part is that if legislation has the capability of paying for itself, it's over the 30- to 50-year time horizon. If it's going to generate enough investment, it takes that long for that investment to reaccrue back into tax dollars. So what's ironic about all of this is that Republicans in the past have gotten so pissed off that tax cuts are expensive with almost no economic return, according to the CBO, that they have previously mandated that legislation have quote unquote "a dynamic score" where the projections from the economy are taken into account.
24:41 Speaker 02 And they still hate this because the CBO has It still doesn't show. It still doesn't show it because the CBO is like, "Well, we've had four tax cuts, and they've each been multi-trillion dollars, and they increased the economy for one year at maybe a half a percent rate, and they'd have to increase it 9% to pay for themselves." So these really are just like sunk costs, lost dollars. So what's funny in particular is that when they did the dynamic score for the 2025 tax bill, what they found is that if you took into account the economic distribution and economic effects of the tax bill, it cost more and not less because it requires so much borrowing from the federal government, and the entire thing is debt financed, that
25:24 Speaker 02 the dynamic cost that takes into account economic effects, it makes it more expensive with a smaller effect on the economy than their dummy projections because their sophisticated projections are like, "Well, yeah, this is actually going to hurt the economy that the federal government is so much in debt." And you're making this worse. This came at a very specific moment in the fight about the 2025 legislation because once the CBO came back and said, "This is so terrible, it's worse for the economy." If we actually look at the detail, they all stopped talking about it and then just went back to their talking point about how the CBO is historically wrong. I have friends at the CBO, these people are heroes, they are serving probably like the least satisfied and respectful customers that anybody else in the United States, and they are doing an incredible service for Americans by giving us a benchmark to hold
26:08 Speaker 02 our representatives accountable. And if you find that your congressman is outmatched and outgunned by the CBO, he's in good company because most people are. And if you want to say shit about the CBO, you do not say it in front of me. Sorry, um, Helena, if you just want to like print that out and give it to him, that's fine.
26:27 Robin Rauzi? Our next question is from Sarah Lyons in Walden, Vermont. Has anyone actually considered making adjustments to social security payments as a way to address inequities or undesirable outcomes in the economy? Could, for example, we adjust social security to correct for racial or gender pay gaps? Could we have adjustments for people, mostly women, who spend years of their lives providing necessary unpaid care for children and elders? Could a boosted social security payment make things fairer until we have comprehensive policy solutions in place?
26:56 Speaker 02 So, the answer is yes and probably not. So, yes, social security is adjusted to affect inequities in the labor market because it's a progressive formula for the benefit. So, that is determined by the replacement rate. If I were to look at how much you typically earned over a 35-year period, and then you get a social security benefit reflecting that, the lower you earned over those 35 years, the more your benefit replaces that amount. So, if you earned, on average, two grand a month, your social security benefit might be as high as 1,100 or 1,200. But if you earned 20 grand a month, your social security benefit might be 4,000 or 5,000 dollars, but it's not going to be half.
27:40 Speaker 02 It's going to be closer to a quarter of what you used to earn. So, we put progressivity into the formula. You could interpret this as social security makes the correction, but just on the wage side. And it doesn't make extra corrections for, say, racial imbalances or gender gaps. It's just going to assume that those things are all reflected in the wage, which is then progressively adjusted for.
28:02 Robin Rauzi? Right. And the wage is calculated over time, too. So, that includes years missed, years out of the workforce.
28:09 Speaker 02 Social security is based on your highest 35 years of earnings. So, if you were out of the workforce for some time, you could have zeros in that calculation. Now, could it do more than that? Oh, sure. I mean, it's our program. We pay for it. We could say that like black people get 10% higher social security. A lot of advocates would be scared of doing that because the program right now has such a broad political buy-in that using it for this purpose would be risking the support that it has long had. That said, there are specific policies that could be incorporated into the program to address very specific things like a caregiving credit. So that if you took five years out of the workforce to look for kids at home while
28:54 Speaker 02 they were younger, you didn't pay into social security. So it's a zero, but social security like credits you.
29:00 Robin Rauzi? Mm-hmm.
29:01 Speaker 02 You know, basically what you, yeah.
29:02 Robin Rauzi? Yeah.
29:03 Speaker 02 And that's a popular credit. There's policies to have social security adjusted so that if you worked in a physical job, your retirement age is earlier.
29:12 Robin Rauzi? Mm-hmm. Meaning like a manual labor job that you have to.
29:14 Speaker 02 Yeah. Like if you were in manual labor.
29:16 Robin Rauzi? Yeah.
29:16 Speaker 02 Your retirement age is, you know, 60. But if you are, you know, some like highfalutin actual economist who sits in a computer in an air-conditioned office with a nice window, you know, my retirement age could be like 70 or 85, right? It's just you could use the physicality of jobs to push back the retirement age. That's another proposal. So there's lots of ways to make adjustments that reflect labor market decisions and labor market realities without adding in race and gender or things like that because the truth is all those things are reflected in the labor market.
29:50 Robin Rauzi? Mm-hmm.
29:50 Speaker 02 I will say that social security does not have a great racial history. When it was founded, a lot of people alleged that it was designed to exclude black workers because it excluded domestic workers and agricultural workers from being incorporated to the program when it was started in 35. But that is no longer the case. Social Security is now one of the greatest sources of retirement wealth for black people if you counted it as an asset as opposed to an income stream.
30:15 Robin Rauzi? Mm-hmm.
30:18 Speaker 02 So man, when I know it, I get it out fast, right?
30:20 Robin Rauzi? You do. Very nice.
30:23 Robin Rauzi? This is from Bob in Nevada. I think this is a response to something you did on social. My concern is that you cannot build a thriving economy if there is no incentive for achievement. If everyone gets a similar reward, whether you work or live off the taxpayer, the incentive to work is eliminated. How can we create more effective programs to acquire work and benefits, job training, tax incentives for companies to hire, et cetera? What are your thoughts on that?
30:49 Speaker 02 Well, previewing the next episode, we're going to talk a lot about people in poverty. So there is a set of people readily identifiable that we can say with certainty are living off of the taxpayer, and it's old people. And that is the only group where you can categorically say, yeah, there is a set of Americans that live off of workers, and it's retired people. If there is a second group of people for whom that applies, it would be people with a disability, who have a severe enough disability that they qualify for a cash disability benefit, which is either going to get them at some point Medicaid or Medicare. That's not all people who have a disability, but just people who have been certified disabled enough
31:34 Speaker 02 to get onto either supplemental security income or social security disability insurance. After that, I don't think you could point to any part of the population that has enough to live off a taxpayer. Because after those two groups of people, there is no cash entitlement in the United States.
31:55 Robin Rauzi? You can get SNAP, the cash welfare system is like nonexistent, basically.
32:00 Speaker 02 We used to have aid to families with dependent children, which we commonly refer to as welfare, and predominantly went to low-income families. But like, harking back to the earlier question, one income is less than two, that was often to a single-parent family, and the people who are single parents are moms. So, single moms in the US had a cash entitlement that if you were poor and you had kids, you got to have cash. We ended it in 1996. And right now, there are about 400,000 women on that program. It has a work requirement that is incredibly harsh. So, none of them are sitting around. Like, they all have to do something. Most of them are put into temporary, low-paying jobs.
32:44 Speaker 02 And they can't be on it for more than five years of their entire lifetime. And of course, if you are a drug felon, you can never get it. Just drug felon, though, no other type of felon. So I'm gonna like do the nice interpretation of this question and say, I'm okay with having my grandma live off the taxpayer. And I think that she deserved it. She was a teacher for a really long time. And so I think she retires and she deserves to live off the taxpayer. My mom is living off the taxpayer now, and I think she deserved it too. She also worked for a really long time. And that we should take pride in our country in that we do support people who enter their old age and that they're not left destitute. And they do live off the able bodied and working among us.
33:30 Speaker 02 You know, as far as people with a disability, if their life is so nice, go walk in front of a car and become disabled and get a cash benefit. I bet you won't do it because having a disability is so much more than just getting cash from the governments. And after that, there's really not a set of people who this applies to.
33:46 Robin Rauzi? I mean, I think the heart of his question, though, is whether or not we were doing things that disincentivize achievement in the overall economy and that you need that sort of incentive to build this thriving economy.
33:57 Speaker 02 What I would say is the like, kind of the counterpoint to that question is, do you think that the limit to people's achievement comes solely from their personal motivation and laziness or some type of barrier they face? Because if it's just personal achievement and laziness, well, then yeah, don't give them anything and they'll be fine. But if you think, say, having a medical condition and not health insurance means it's gonna be really hard for you to get a job, then we give people health insurance because it's a barrier to economic success to not have it. Right? And we're giving people the stepping stones to success by helping them. And his question kind of premises the idea that if you help someone, there's no way for them to succeed on their own, completely ruling out the possibility that there are people who can't succeed on their own without help
34:42 Speaker 02 because they face certain barriers. And that with decades of research onto all of these programs like food stamps, Medicaid, we've learned a couple of things. Healthy people do better at work than non-healthy people. Healthy people hold down jobs better than non-healthy people. Kids do better in school when they have food. In fact, they do better on tests, all the way to the SAT, if they had a good lunch before. So when we think of SNAP as giving money to households, mostly households with children, we're banking on the fact that a 15-year-old kid doesn't need the incentive to do better on the test, he needs a full belly.
35:23 Speaker 02 And so the incentive lens is important, but it's not exhaustive of how or why we help people. I would say if you were to look at all the incentives facing low-income Americans versus all the hindrances, there's a lot of things we still don't help with, but need to. So this goes back to something like, should every kid in the US get money? Well, the incentives would be, you're not motivating their mom to really go out and work if she gets cash for every kid. But the barriers that can be reduced with cash for kids is that it makes people less poor.
36:06 Speaker 02 And that kids who grow up in poverty face a lot of hindrances to success when they grow up. And so we're trying to basically buy a higher-performing set of kids because we're not making their parents' limitation the predictor of their future success. It's not about incentives, it's about barriers. So his question probably only applies to adults?
36:26 Robin Rauzi? Yeah.
36:27 Speaker 02 I would assume.
36:28 Robin Rauzi? Yeah, I think, you know, he's sort of like, you know, people make choices when they're, you know, to party and do drugs or whatever it is, and why should we support them when they didn't make the choice to get a job and work hard and perform in the economy?
36:41 Speaker 02 I will say, you know, for what it's worth, we don't support those people. If you don't have kids, if you don't have a disability, you don't get much help from the federal government. In some states, you get Medicaid, but we just voted to kick you off of it. In some states, you can get food stamps, but we also are actively trying to kick you off of it. And they're the only group of people In the United States, for whom there has been absolutely no progress in poverty over the past 50 years.
37:06 Robin Rauzi? Introducing poverty.
37:08 Speaker 02 Yeah, so I'm an able-bodied adult and I don't have kids at home. My poverty rate has seen no progress in five decades. And I get almost nothing from the federal government. Other groups, like children, parents, people with a disability, we've made all kinds of strides. We've almost eradicated elderly poverty. But this group of people, we have always dealt a very like, you need to go out and fix yourself, and when they've made no progress.
37:32 Robin Rauzi? So that didn't work out for us.
37:34 Speaker 02 The other way to interpret this question is like, we've done the incentive hard work thing for like 50 years and it's not making that much of a difference. So maybe we ought to try some like really aggressive stuff of like, let's do felony records clearing and...
37:45 Robin Rauzi? Yeah.
37:46 Speaker 02 The other thing too, is that a lot of programs that could in theory help those people are so under-resourced, understaffed, and meanly provided that they don't end up helping people.
37:57 Robin Rauzi? Yeah, complicated to enroll in and stay in and...
38:00 Speaker 02 Yeah, and you know, I want to go get workforce training and the government's going to help pay for workforce training, but because I don't have kids at home and I'm able-bodied, I don't get any help, like cash help, when I'm doing workforce training. And so now I have to find a job that like has not benefited from training, that's going to keep me afloat to support training. Well, now I'm in a low-wage workforce, I probably don't have a regular schedule, I don't have predictable hours, and if I tell them I have a class I want to go to, their response could be legally, fuck off. So I think incentives and like the firm kick have been shown not to be successful.
38:38 Robin Rauzi? Okay. We got to wrap this up. We actually do wrap our show up every week by thanking the spiritual sponsors for our show. We had Barat in Fremont, California, join us as a spiritual sponsor this last week. And I want to thank him and also to all the people who've been so patient and understanding when I perhaps mispronounce their names. My personal spiritual sponsor this week is stationery stores. I love a good stationery store. And I went into one of my favorites over the weekend and I, my wife bought me this pen, which I love. And there's actually a stationery store crawl going to happen in Los Angeles in a few weeks. Like, if you go to all of them within like, the long weekend. Um, I don't know, you get entered to win something, but I don't know, I may just do it just to do it.
39:22 Speaker 02 You just get six duplicative calendars, which is what I need.
39:26 Robin Rauzi? Exactly.
39:27 Speaker 02 Yeah, take it from my oversized wall calendar of a 365 day calendar that I have up on my wall that, I also love paper stores.
39:34 Robin Rauzi? Yeah. Your spiritual sponsor this week?
39:37 Speaker 02 My spiritual sponsor this week is a now former professor at the University of Texas Austin. I found out that he is retiring and he would be mortified if I said his name, so I won't. But when I was a lost young thing of 20, trying to figure out what to do in life, in full of highly impractical and ill-advised aspirations of what I was gonna do. I took a class in economic statistics and I didn't want to take it because I thought economists were fascists. And I, um, I, I didn't do well on the first exam.
40:19 Speaker 02 And I was like, oh God, I gotta get it off this hours. Um, but the professor was super engaging. He was very helpful and he was tough. Like, he was a very tough professor, but he was tough because he's like, oh, you are not gonna get away without learning exactly what I want you to learn. And you will not be able to trick your way out of learning something like I had been able to do, actually, in a lot of classes. Uh, and I turned my grade around and I made a hundred on the final. And he said that I completely wrecked his curve and that I don't think he, I'd ever seen someone look more proud in my entire life than when he told me that. And it led to-
40:56 Robin Rauzi? I'm sorry, he was proud or you were proud?
40:58 Speaker 02 He was proud. He looked so proud. He was like, you totally wrecked the curve. Like, just like, lights in his eyes. Um, and I think over the course of that semester, in which I learned nothing about economics, but applied a lot of like, hard work to learning something that I could be good at, he, he very much steered me towards becoming an economist. And when he found out I was an English major, he was like, excuse me.
41:25 Speaker 02 But you can do this. And I was like, yeah, it's a little boring though. And through the course of mentorship and stewardship and boost to my confidence when I needed it and a reality check when I needed it, he truly is the reason why I'm an economist. Because he was the first person to tell me.
41:45 Robin Rauzi? You could do this.
41:46 Speaker 02 He was like, you need to go get a PhD in economics. And I was like, my brother, I don't know who you're talking to. You are crazy. And he was like, no, you need to go get a PhD in economics. Like, you could be good at this. And I was like, I think I'm gonna get a master's in creative writing and move to New York. And he was like, oh, my God. And so he was very funny. And I don't think many people can look back and say, I have the career that I have because of this one person that told me to do something. Maybe this is revealing that I'm highly suggestible. But he really did. He was insistent. And it was like a multi-year campaign where he was like, I need you to get the confidence to go do something that you're scared of, but could be good at, because the profession doesn't have enough people like you.
42:31 Speaker 02 And you shouldn't be scared away. He truly saw something in me that I did not see in myself. So my spiritual sponsor is a retiring economics professor who I could not be really more grateful or indebted to.
42:44 Robin Rauzi? And we're all grateful for.
42:50 Robin Rauzi? It's his fault that I'm now on the podcast.
42:53 Speaker 02 So yeah, honestly, he took down a lot. I mean, I took a lot of people down with me going down this career path. Robin, my dad's aspirations that I become a trial attorney, like so many.
43:03 Robin Rauzi? So many things could have gone differently. And yet, here we are.
43:06 Speaker 02 And yet, here we are. So for the mentors that make a difference, that is my spiritual sponsor.
43:11 Robin Rauzi? Good. We always like to thank our producers, Sophie and Andy, who have been standing by for a long time now.
43:21 Speaker 02 Just like Jesus, these people are still talking.
43:23 Robin Rauzi? Descanting, descanting, descanting.
43:25 Speaker 02 Descanting, descanting, descanting.
43:27 Robin Rauzi? Thanks, guys. We appreciate it.
43:28 Speaker 02 Thanks, guys.
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