The Optimists Have Questions…

>> You're used to hearing my voice on the world bringing you interviews from around the globe.

>> And you hear me reporting environment and climate news. I'm Carolyn Bealer. >> And I'm Marka Werman, we're now with you hosting the world together. More global journalism with a fresh new sound. >> Listen to the world on your local public radio station,

and wherever you find your podcasts. [MUSIC] >> Hello and welcome to Optimistic Economy. I'm Katherine Ann Edwards, economist. I'm editor Robin Rousy.

On this show we believe the U.S. economy can be better, and we talked about how to get there when problem and solution at a time. [MUSIC]

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

[LAUGHTER] >> I mean it was something like that. We're going to get to a lot. >> We'll see what we can get to. It's our first Q&A episode of season two.

And thank you everybody for sending all of the questions in that we got and for applying 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.

>> It's so affirming, we want to get straight to the question, 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 that I've been a little”

bit salty about some of the negative feedback we've gotten and it had been crushing my spirit. Too like a, not good degree, but many of you wrote in and just said we love this 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-optimists,

whoever those people are. >> But that's okay, because we have social media. >> Yeah. >> Social media, but we have y'all, and so that's where no longer chippy, f*** mercury, we're going forward. >> [LAUGH] >> Richard, great v. Jan, let's answer some questions.

>> Okay, are you ready? >> Ready. >> Okay, this is from Max Deacon in Portland, Maine. I saw Catherine quoted in the New York Times and a newsletter about retirement savings. How dire is this situation in your estimation?

>> I'm curious whether inadequate retirement savings has been in the shoe for a while.

“Or if there's something generational about it, has poverty already in rising for seniors?”

Or is it expected to rise and these are early warning signs? >> Okay, great question, where to start? Okay, so the social security side, we're great. We're going to be great, we're going to 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 401(k), 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 the retirement plan, and they withdraw some of your paycheck to put money into it. 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 risk, but 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 401(k), that the government sets up an auto enrolls you in. That is coming. So 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. Ready for the next question? I'm ready. I'm sorry.

I'm starting slow, but I feel like I'm going to cook by the end.

One of the programs out of the great recession was a short-lived $8,000 federal tax credit

for first-time home buyers.

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 home buyers now?”

Unclear. Leaning towards no. It's certainly a popular policy. I think Biden had proposed a $15,000 first-time home buyer tax credit. I think Harris proposed like $25,000 home buyer 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. It doesn't mean it's easy, but if you've rented for a long time, you can afford a monthly

payment. 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. I mean, they get part of the down payment comes from a family member.

And so this almost seems like, well, let's make it a little bit fair 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 home buyers of here's 8 grand, here's 10,

20, 50 grand for you, it just makes housing more expensive. So it's really just a subsidy for existing home owners because it's giving their equity a boost.

“Now the reason why it was popular or the reason why I think they went for it in the great”

recession was because the home prices had collapsed. And there was a total freeze of the home purchasing market. And so there the thought was we need people to buy houses and if it has an upward effect on prices, all the better 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 didn't, 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. And so it's not an appropriate policy because of how high home prices are.

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, let's say you buy a $500,000 house and you get a $100,000. That would be sort of the maximum situation. I mean, let's say the house repreciated 20% by the time you sold it, you would give 20% of the appreciation also back into the program.

Interesting. Yeah. Long it's been around. But I was just reading about that. Yeah.

Tax credits. If they're obvious in their 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. Great. But I am glad that it helps people know the houses. It was good at the time. I mean, should we have another collapsed in home prices?

This would probably be something we pursue. Okay, Bob Martin and Oak Park, Illinois. 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? All right, so capital gains. This is a safe space.

What is a capital gain? What is a capital gain? 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, jewelry, artwork. Collections.

I think maybe the easiest thing would be selling a car, except a car is never appreciated

value. Or rarely a bearish value. So, I mean, you make money when you sell a car, but you don't pay capital gains on it because you took a loss on that. I bought a new car for $25,000, 10 years later, I sold it for $10,000, $5,000, even though

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 your 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 on

it. Actually, for you housing people out there, I find it incredible that all of the, like, higher and irritation that gets leveled towards the boomers about holding on the houses

never manifest as we need to get rid of the step-up basis.

So, 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. But if I hold on to it until I die, that value resets with my kids 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 has accrued since my death.

So they owed 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 worth for any type of appreciation, it works for stocks, it works for bonds, it works for art, whatever. 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 do it via tacking the step-up basis with all of your might.”

Anyway, the argument I've heard against the capital gains tax in the United States is that it's a double tax. So I earn $100 an 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 sales tax, and if I save it, I'm going to pay either a dividend

tax or the capital gains tax. And so 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 2 in the early 2000s that like wear taxing savers.

Sounds like conservative branding. Uh-huh. You're not paying taxes on the money you saved your paying taxes on the income generated by the money you saved? Yes.

That's not how they put it. They put it as your taxing savings. It's like death taxing. Yeah. They all have a good way to put it.

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

“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 or two invests. 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. Mm-hmm. Okay. Sarah McCurray 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 of their donations? 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 and SGO, you can reduce your tax bill by $1,700. It's a one-for-one reduction in your taxes."

which is like a covered-ell expense. This was a voucher program on steroids. 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 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.

The person I follow in following this is a guy named John Follant who's at the Brown chalkboard center at Brookings. This guy, F.N. hates this thing, and he follows it really closely, and he hides really lovely blog posts explaining it. I'm waiting to see what he says about the Treasury rules and we can put a link to him.

“Yeah, 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. 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've heard through the great fine Democrats are waiting

to do. Okay, Robert Middle-Coffe 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?

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, a lot of definitions, but typically something like they own a thousand homes and 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. So that's like of institutional investors and the thing that you're going to part of buildings, you know?

“Yeah, 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 art, Liana 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 and 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.

Some people really like them because they buy houses and on average will spend $20 to $40,000 repairing them and renovate 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 a hundred houses and a lot of them will need $10,000 worth of work or $20,000 worth 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? The evidence is truly mixed because it's really hard to tease out cause and effect. I've read from 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 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.

Yeah. 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 like a household person to person sale if it needs

structural repairs. So the house that we bought in Houston, we bought from a developer.

I don't think so. I 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 reveal that it needed $30,000 worth of foundation repair. But getting a foundation repair loan or buying it with 30 grant, they just were not able to sell it. So they sold it to someone who would pay for that, which would be a developer and then we

bought it with like the foundation work already done. That's something that can be fixed through changing how things are finance that doesn't necessarily make as much space for institutional investors.

“So that's what the urban institutions address.”

But even libertarians who hate all government, I couldn't get anything from the Kato Institute that said their presence is uniquely bad or good.

So yeah, I was surprised the numbers are I mean, like you say, they're kind of concentrated

in high-growth areas and they're concentrated in part because people want to rent houses. 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. But whatever it is, and so there's 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 and 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 three percent or less. Super small. And there's 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. Anna Kirkoff 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?

Okay, so the last hour of our show will be focusing on this question. I mean, 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 U.S. economy. It doesn't mean I don't think he will do harm. No, but even the accounts, they're not his idea and they'll rename them.

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 raised the minimum wage. While increasing the enforcement budget for the wage and hour division, 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 cost a federal government money, but then give the federal government money to do more wage and hour enforcement. Okay, that's one thing we can do really quickly.

“Another thing that I think would actually be really quick to set up would be paid family”

medical leave, a universal paid family medical leave program, and retirement savings. So sick vacation minimum wage, you could do that tomorrow setting up a universal paid family medical leave, a universal retirement contributor account like the Trump savings plans that you proposed year, I think they could take 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 a free school lunch. 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. Done. Okay.

Present. So those are some awesome really past ones. And I think the long term. 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 well-being and

development from zero to 18, I think that would take one year to start maybe three years to roll out. Okay. 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 TCGA, just kind of like immediately end the step-up

You can restore rates for capital gains, corporate tax, 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. I mean, we could fix social security finances 15 years ago, but we could also still do it tomorrow. 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 in the

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. And I say the biggest hurdle, because we're not half-assin it this time, I mean, props to Obama, they accomplish so much and they change 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 health care that will make the private provision of health care through

your employer no longer financially feasible for most employers or people. And it would move everybody off of employer-provided health care. I imagine that that would seriously bankrupt private health insurance companies. I mean, it's one thing if you don't like private health insurance, but do you like how much we subsidize private health insurance?

Yeah.

“Again, I think I am a cut-throat capitalist on one level 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? Why are they private if they need the federal government 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 need to be private? If it's publicly supported, I don't think we're getting much from having private insurance 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 U.S. health care system. Rebecca of New York City, as an elder millennial, I graduated into the recession and was uninsured.

Bucket 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.

Girl, you're seen. I'm with 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

you can't just like, oh, let's just revert to how we were before. He has created so many new problems with some of his policies that now we have to go back and fix it. And 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. 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. You mean, because like worker bots, or do you mean worker bots, we're not going to work or bots. Okay. We need more worker jobs.

We need more worker jobs. Yeah. Yeah. I got retirees for days, son. Give me some of them worker bots.

Yeah. We need more worker bots and that is going to force Congress's hand in a lot of ways. And I don't mean that just, truly, 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

we're running out of children.

And it's not as if like the French are better at feminism.

“Like they're a proto-feminist, you know, forward women and that's why they have paid family”

leave in child care. 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 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 has historically made legislators 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 child care, 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. 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 a stadium the perfect jobs program for San Antonio? I guess this is up for debate in San Antonio right now. Yeah, so a lot of times I have economic answers for y'all and I don't hear because I

detest this policy. I don't like pain for stadiums for very non-profitable leagues. So I don't know if I have an economic answer for you. 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, do you want to be a being around? 30? I don't know. 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. I'm feeling that don't build stadiums from public dollars at all. WNBA established in 1996. So y'all, I think, is there a better thing that San Antonio could do with its hotel occupancy tax?

Yes. It can go to rental assistance housing assistance and go to childcare. It can help new businesses that run child care centers. It can do, you know, it can do all kinds of things. Yeah.

I hate hotel occupancy taxes myself, but yeah, I mean, or get rid of the hotel occupancy tax and not spend it on a stadium.

“It just make it a really cheap place to come visit because it doesn't have a hotel occupancy”

tax. Yeah.

I've never spent the nine in San Antonio because I've always been worth driving back

to Houston. So there you go. There you go. Do you want me to stay angry about this? Bye.

Nathan, who works for a state labor agency and we're going to, let's 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, prolavor, economic optimist, and a deeply conservative state. I do research and advocate for better data, but the actual policy leverage I have at

my disposal and minor. I help set definitions for demand occupations and I work on credential advocacy. Many ideas on what a person in my situation can do to move toward a more equitable labor market that actually works for workers. You know, you can't make your job progressive if it's not progressive.

I get empathized 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 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 them minimum wage this much. We're told 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 can execute on almost any economic policy. That doesn't mean the policy is good.

This doesn't mean the policy will work perfectly.

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 states, but like, stay ready so you don't have to get ready.

Emily, writing from Kentucky says she's been reading lower ed by Tracy McMillan Cotton and one idea that has state 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 reskilling 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? So this is the last hour of the show. I actually did reply to her and I said, this may be too long. I should have put it to you.

I think that maybe starting in the 1970s, there was a real move towards kind of this year on your own free market, philosophy, corporations don't need to pay as much, they don't have 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, you're not offering retirement anymore, 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 can 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, 50 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. And so I think for me, like there is a real like devolution to be more and 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. 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?”

I don't 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 into how

is the care paid for? 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?

So child care is an example of one where like, yeah, we have a delivery system, we have a distributed mixed delivery method for child care, 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 the

federal reimbursement for care as opposed to payments out of parents' pockets. That doesn't require tearing down every child care center we have in building a new one in its place, it's just a tinkering of the payment methods so that it moves to reimbursement model.

“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, in order we have a good payment structure set up, but the state of Washington has set up

And not that long.

Yeah, but it's very successful, and it includes money for long-term care in-house

inability 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 is an 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, I don't think it'll disrupt our economy.”

Conner Jobes of New York City, he asks, "What do you make of the fact that U.S. 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-couching?"

Okay, two things to stress, one, tariffs were much lower in practice than how they were announced. Right, 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 percent on every country.

At the peak, the estimated effective tariff rate was around 17 percent, but people shift their supply in their consumption so that maybe on paper it was closer to 17, but given what people were consuming, it was probably closer to 15 percent. Which is not low, it's the highest it's been in almost 100 years, but it's not 40 percent. So it wasn't as high as they probably said.

Second thing to know is that prices did go up, but they didn't go up. But they didn't go up. 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 that people increased imports while there was not an import tax that helped in building up

inventories beforehand.

And then, too, the prices on tariff goods went up in some cases 11 percent.

So they didn't go up the full measure, but there wasn't 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. 100 percent 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.

“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 in more competition? Yeah, I mean, yeah, I mean, cuts are a capitalist here, y'all, they need some competition.

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 both while you allow for more competition. I mean, you can have some policing, but I think there's something to be said for the utilizing market power for good.

Right? So we had a listener, right? The executive order that things have to come in precise 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 that it did six

months ago and people won't buy it. 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, 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.

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? 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. 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? Half. I mean, in my case, half in your case, they get to, so they get to write off expenses, they get to claim depreciation, yes, and they are claiming expenses into depreciation

on a property that is almost always increasing in value.

I would say the property on rental properties goes up with its rents, so rent caps actually hurt the value of a property by limiting the amount of income that you can generate. Okay. There are anti-gouging laws that some localities have put into effect where you can raise rent

“every year, but you have to raise it to a cap.”

Yeah. Actually, I rent control functions here and Los Angeles. 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. Yeah.

And kind of what the housing stock looks like.

I mean, you could imagine, on certain places, you don't have that many landlords in 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, D.C., 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 kind of use the data that you have on the amount of expenses and depreciation that landlords claim to then inform what rents caps could look like, or rental growth caps could look like. So, M.J.C. in my homestay of Ohio says, you mentioned that some states have big government

programs like health care, child care, 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? 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 on ethical 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 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, well, once the state can afford it, those people get to have child care, but in poor states, they can't afford it and so they don't get it.

So 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 you? Or we know something works, but economically you can't afford it, so now you're punished

for being poor by having less investments.

in investment. I mean, so it's the ethical argument, that's the economic argument.

“I think there is 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, but all sorts of civil rights, which would include women's rights, unable to collude gay rights and even include trans rights in this moment, especially.

There is 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 cigarette taxes and seat belt laws, and it's like it's a state that has a low regulation, low investment, state environments, 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 saved up your life compared to living in New York, even if

it's 20 miles away. Is that right? It's a state's rights question. Is it right that Ohio is allowed to drive its citizens to an early grave through terrible policy when 20 miles of state, they would be doing better? 20 miles, 20 miles up by 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 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 who gets to live or die. Hello. Come here. Did you throw something at me? Come here. Did you mama was talking? Did you throw something at me? What did you say? No, my god. Oh my god. Hold on. Don't you dare. Is that a dart? Wait, what are you doing? You little devil.

Don't you dare. Okay, okay, okay, okay, okay. All right, you guys, I think we should wrap this up. I think we should. The optimistic economy podcast is edited by Sophie LaLan, our video production for social media is by Andy Robinson, video. I'm sorry. Andy Robinson. Just Andy Robinson. Just Andy Robinson. You can share a video clip from our show on TikTok. Instagram, YouTube, or LinkedIn.

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