1 00:00:04,880 --> 00:00:14,360 Speaker 1: On this episode of Newts World, about eight states, including California, Connecticut, Hawaii, Illinois, Maryland, Minnesota, 2 00:00:14,680 --> 00:00:19,759 Speaker 1: New York, and Washington have introduced her considered legislation targeting 3 00:00:19,760 --> 00:00:22,800 Speaker 1: the wealth of high net worth residents with a quote 4 00:00:23,200 --> 00:00:27,159 Speaker 1: wealth tax. Now, the state of Washington is facing a 5 00:00:27,160 --> 00:00:31,440 Speaker 1: budget shortage and lawmakers are debating a proposal they would 6 00:00:31,440 --> 00:00:36,320 Speaker 1: create a nearly ten percent annual tax on personal earnings 7 00:00:36,560 --> 00:00:40,520 Speaker 1: over a million dollars. Because of the proposed Blue state 8 00:00:40,600 --> 00:00:44,919 Speaker 1: wealth taxes, many high net worth individuals are moving out 9 00:00:44,920 --> 00:00:48,360 Speaker 1: of their home states to states like Florida and Texas. 10 00:00:48,880 --> 00:00:52,239 Speaker 1: To understand this, what I think is an insane policy. 11 00:00:52,640 --> 00:00:56,160 Speaker 1: I'm really pleased to welcome my guest. Jack Salmon, is 12 00:00:56,200 --> 00:00:59,840 Speaker 1: a Gibbs Scholar and research fellow at the Mercada Center 13 00:01:00,160 --> 00:01:04,480 Speaker 1: at George Mason University, where he focuses on economic and 14 00:01:04,520 --> 00:01:10,440 Speaker 1: fiscal policy, with an emphasis on federal budgets, taxation, economic growth, 15 00:01:10,800 --> 00:01:30,880 Speaker 1: and institutional analysis. Jack, welcome, and thank you for joining 16 00:01:30,920 --> 00:01:32,200 Speaker 1: me on Newts World. 17 00:01:32,480 --> 00:01:34,319 Speaker 2: Thank you for having me on speaking and Rich, I 18 00:01:34,319 --> 00:01:36,280 Speaker 2: appreciate the opportunity to speak about this. 19 00:01:36,800 --> 00:01:39,360 Speaker 1: You know, I'm very impressed with the quality of work 20 00:01:39,680 --> 00:01:43,279 Speaker 1: being done at the Mercada Center in general at George 21 00:01:43,280 --> 00:01:47,480 Speaker 1: Mason University. Beyond this high taxation thing, what are your 22 00:01:47,520 --> 00:01:49,880 Speaker 1: general focuses as a scholar? 23 00:01:51,120 --> 00:01:56,680 Speaker 2: So I mostly focus on federal budgets, federal taxation and spending, 24 00:01:56,720 --> 00:01:59,840 Speaker 2: debts and deficits, so the stuff that's often quite depressing 25 00:01:59,840 --> 00:02:03,640 Speaker 2: in policy space. But I've been paying increasing attention to 26 00:02:03,760 --> 00:02:06,000 Speaker 2: what's happening at the state level because I've noticed in 27 00:02:06,080 --> 00:02:09,840 Speaker 2: recent years, particularly sort of post COVID years, that there's 28 00:02:09,960 --> 00:02:14,080 Speaker 2: been a movement of Blue states towards applying cur taxes 29 00:02:14,200 --> 00:02:17,239 Speaker 2: and additional capital gains. And now we've seeing proposals for 30 00:02:17,600 --> 00:02:21,600 Speaker 2: wealth taxes on high earners. They're just seemed very determined 31 00:02:21,639 --> 00:02:23,400 Speaker 2: on chasing their tax spaces away. 32 00:02:23,760 --> 00:02:27,639 Speaker 1: I've been watching this, in particular reading Steve Moore's newsletter. 33 00:02:28,760 --> 00:02:32,280 Speaker 1: I think it's stunningly stupid, because we have a good 34 00:02:32,360 --> 00:02:35,160 Speaker 1: history of this. We've seen countries like France try this 35 00:02:35,280 --> 00:02:37,600 Speaker 1: sort of thing and drive so many people out of 36 00:02:37,600 --> 00:02:39,920 Speaker 1: the country that they had to repeal it. Let's start 37 00:02:39,960 --> 00:02:44,520 Speaker 1: with the Washington State, because five years ago, Washington was 38 00:02:44,560 --> 00:02:46,800 Speaker 1: one of the nine states that had no income tax. 39 00:02:47,600 --> 00:02:50,920 Speaker 1: Now they've passed a nine point nine percent tax on 40 00:02:51,040 --> 00:02:54,080 Speaker 1: income over a million dollars. What happened to change it? 41 00:02:54,120 --> 00:02:58,200 Speaker 2: So grammatically, Yeah, you're right, Washington was actually one of 42 00:02:58,200 --> 00:03:01,400 Speaker 2: the more attractive states as it relates to tax competition. 43 00:03:01,480 --> 00:03:04,080 Speaker 2: There's a reason why there's so many sort of well 44 00:03:04,120 --> 00:03:07,240 Speaker 2: known businesses based in Seattle and in the state broadly. Right, 45 00:03:07,360 --> 00:03:12,000 Speaker 2: Costco is from Washington State. The Amazon headquarters in Seattle, 46 00:03:12,680 --> 00:03:15,600 Speaker 2: and there's been a net positive movement of particularly high 47 00:03:15,639 --> 00:03:19,919 Speaker 2: earning individuals, entrepreneurs, innovators into that state in large part 48 00:03:20,040 --> 00:03:24,760 Speaker 2: because of its competitive tax policy. Well, what's happened is 49 00:03:25,120 --> 00:03:27,200 Speaker 2: we're told that it's sort of a budget problem, right, 50 00:03:27,200 --> 00:03:29,400 Speaker 2: we have budget shortfall, But in reality, what it is 51 00:03:29,480 --> 00:03:33,480 Speaker 2: a spending problem. In Washington State, the level of spending 52 00:03:33,480 --> 00:03:37,280 Speaker 2: has doubled in the past decade alone, and so by 53 00:03:37,400 --> 00:03:42,120 Speaker 2: twenty twenty one, the state policymakers proposed to implement for 54 00:03:42,160 --> 00:03:44,800 Speaker 2: the first time this seven percent capital gains tax on 55 00:03:44,880 --> 00:03:47,520 Speaker 2: those making two hundred and fifty thousand dollars and above. 56 00:03:48,840 --> 00:03:51,920 Speaker 2: A few years later, they again had a budget shortfall. 57 00:03:52,800 --> 00:03:54,880 Speaker 2: Part of this is because some of the highest earning 58 00:03:55,440 --> 00:03:58,840 Speaker 2: taxpayers in the state left the state. This doesn't just 59 00:03:58,960 --> 00:04:01,480 Speaker 2: include people in that bracket the twenty and fifty thousand 60 00:04:01,520 --> 00:04:04,360 Speaker 2: and above, But it includes billionaires like Jeff Bezos who 61 00:04:04,400 --> 00:04:06,760 Speaker 2: have been in that area for many years. He moved 62 00:04:06,760 --> 00:04:11,080 Speaker 2: to Florida and took his tax dollars with him. In fact, 63 00:04:11,080 --> 00:04:14,320 Speaker 2: in twenty twenty four alone, Jeff Bezos file to sell 64 00:04:14,400 --> 00:04:18,000 Speaker 2: seventy five million shares. He sold thirteen and a half 65 00:04:18,040 --> 00:04:21,640 Speaker 2: billion dollars in stock, and that's revenue that the Washington 66 00:04:21,680 --> 00:04:25,520 Speaker 2: State won't be collecting in its coffers because of that. Now, 67 00:04:25,839 --> 00:04:29,440 Speaker 2: again they're in a position where they have another budget shortfall, 68 00:04:29,680 --> 00:04:31,920 Speaker 2: and it's not a revenue problem right. If anything, they're 69 00:04:31,960 --> 00:04:35,560 Speaker 2: chasing their tax base away as we've seen, and now 70 00:04:35,600 --> 00:04:39,960 Speaker 2: they're proposing to apply a nine point nine percent income 71 00:04:40,000 --> 00:04:42,640 Speaker 2: tax on those making over a million dollars. And this 72 00:04:42,760 --> 00:04:44,760 Speaker 2: is on top of the new taxes they proposed since 73 00:04:44,760 --> 00:04:48,920 Speaker 2: twenty twenty one. This would mean that the highest taxpayers 74 00:04:48,960 --> 00:04:52,359 Speaker 2: in Washington State are paying at marginal rate north of 75 00:04:52,440 --> 00:04:55,040 Speaker 2: eighteen percent. That's just at the state and local level. 76 00:04:55,120 --> 00:04:56,960 Speaker 2: At the federal level, we're talking about a fifty eight 77 00:04:56,960 --> 00:05:00,320 Speaker 2: percent marginal tax rate. Any entrepreneur inn they for all 78 00:05:00,400 --> 00:05:03,240 Speaker 2: that anybody who plans to invest in their business in 79 00:05:03,279 --> 00:05:06,120 Speaker 2: that state is looking to leave, and it's a perfectly 80 00:05:06,120 --> 00:05:07,080 Speaker 2: irrational response. 81 00:05:07,640 --> 00:05:11,680 Speaker 1: Ronald Reagan was so strongly in favor of the three 82 00:05:11,760 --> 00:05:15,320 Speaker 1: year tax cut and suppli side economics that really turned 83 00:05:15,320 --> 00:05:18,240 Speaker 1: the whole country around in the eighties. As a movie actor, 84 00:05:18,800 --> 00:05:21,200 Speaker 1: the tax rate at one point was ninety two percent, 85 00:05:22,200 --> 00:05:24,360 Speaker 1: and so he had many friends who'd make one movie 86 00:05:24,400 --> 00:05:27,880 Speaker 1: a year and then they quit because they'd say, the 87 00:05:27,960 --> 00:05:30,479 Speaker 1: next movie I make, I'm going to get eight percent. 88 00:05:31,279 --> 00:05:33,160 Speaker 1: Why would I go out and work for six months 89 00:05:33,520 --> 00:05:36,119 Speaker 1: with the government taking all of my money. That really, 90 00:05:36,160 --> 00:05:42,160 Speaker 1: to him was such a practical example of how taxes 91 00:05:42,960 --> 00:05:47,919 Speaker 1: can kill incentives, kill entrepreneurs, kill people from working, that 92 00:05:48,000 --> 00:05:53,240 Speaker 1: he was passionate about tax cuts. Now, I'm really curious 93 00:05:53,760 --> 00:05:57,039 Speaker 1: when you start talking about a fifty eight percent marginal 94 00:05:57,080 --> 00:06:03,040 Speaker 1: tax rate and you watch in real time very wealthy 95 00:06:03,080 --> 00:06:07,800 Speaker 1: people leave. Why do the state legislators not sort of 96 00:06:07,800 --> 00:06:08,440 Speaker 1: get the hint. 97 00:06:10,160 --> 00:06:13,080 Speaker 2: It's a good question. At some point you start to 98 00:06:13,120 --> 00:06:16,280 Speaker 2: think that much of the fiscal policy in these states 99 00:06:16,360 --> 00:06:20,479 Speaker 2: is driven less by genuine concern for filling the fiscal gap, 100 00:06:21,040 --> 00:06:24,120 Speaker 2: and instead there's some sort of ideological reasons behind it. 101 00:06:24,240 --> 00:06:26,320 Speaker 2: You touched on it earlier. We have several examples in 102 00:06:26,360 --> 00:06:31,440 Speaker 2: Europe where they've applied these significantly higher marginal tax rates 103 00:06:31,560 --> 00:06:34,320 Speaker 2: or wealth taxes. For example, in nineteen ninety there were 104 00:06:34,320 --> 00:06:37,920 Speaker 2: a dozen European countries with wealth taxes. By twenty nineteen 105 00:06:37,960 --> 00:06:40,400 Speaker 2: there were only three left. Why was that. It's because 106 00:06:40,440 --> 00:06:44,760 Speaker 2: we learned lessons. The capital left, the millionaires packed up 107 00:06:44,800 --> 00:06:48,000 Speaker 2: and moved to lower tax jurisdictions, and the cost of 108 00:06:48,040 --> 00:06:51,720 Speaker 2: administering on an annual basis the value of assets itself. 109 00:06:51,960 --> 00:06:54,520 Speaker 2: My home country in the UK in the nineteen seventies 110 00:06:54,520 --> 00:06:57,320 Speaker 2: flirted with the idea of imposing a wealth tax, but 111 00:06:57,400 --> 00:07:00,080 Speaker 2: even the Socialist government in the nineteen seventies came to 112 00:07:00,120 --> 00:07:02,880 Speaker 2: the conclusion that the cost of administering the tax would 113 00:07:02,880 --> 00:07:06,120 Speaker 2: probably outweigh any net revenues gained, and so even they 114 00:07:06,520 --> 00:07:10,760 Speaker 2: didn't impose a wealth tax during that period. I think 115 00:07:10,840 --> 00:07:13,640 Speaker 2: part of the reason we've seen this wave is there 116 00:07:13,720 --> 00:07:17,160 Speaker 2: was somewhat of a windfall of revenues from the COVID 117 00:07:17,200 --> 00:07:19,200 Speaker 2: stimulus money that went to the states. We're talking about 118 00:07:19,320 --> 00:07:22,920 Speaker 2: hundreds of billions of dollars. Some wide states built rainy 119 00:07:23,000 --> 00:07:26,920 Speaker 2: day funds or perhaps lowered their tax rates to sort 120 00:07:26,960 --> 00:07:29,800 Speaker 2: of use those windfalls in that way, but many Blue 121 00:07:29,800 --> 00:07:33,760 Speaker 2: states decided to double down and significantly increase their spending, 122 00:07:34,280 --> 00:07:40,080 Speaker 2: launch new programs, new educational programs, expand healthcare programs to 123 00:07:40,120 --> 00:07:43,320 Speaker 2: people in the middle class, and even undocumented immigrants in 124 00:07:43,360 --> 00:07:46,760 Speaker 2: some states, and so that's why they've ended up with 125 00:07:46,920 --> 00:07:49,680 Speaker 2: the shortfalls that they now have. And it's actually, in 126 00:07:49,760 --> 00:07:52,680 Speaker 2: some ways, the Blue states having these massive shortfalls that's 127 00:07:52,760 --> 00:07:56,000 Speaker 2: pushing these high earning individuals out of the state. It's 128 00:07:56,040 --> 00:07:57,920 Speaker 2: actually a boon for the red states to be able 129 00:07:57,960 --> 00:08:00,280 Speaker 2: to keep cutting their taxes because they've now we've got 130 00:08:00,280 --> 00:08:03,320 Speaker 2: a growing tax base of new residents coming in, particularly 131 00:08:03,440 --> 00:08:04,720 Speaker 2: high earning individuals. 132 00:08:05,400 --> 00:08:10,560 Speaker 1: Washington State had six hundred million dollars stolen from the 133 00:08:10,600 --> 00:08:13,360 Speaker 1: COVID money. As part of what you get into with 134 00:08:13,440 --> 00:08:18,400 Speaker 1: these things is that you have bureaucracies that are inefficient 135 00:08:19,000 --> 00:08:21,440 Speaker 1: that can't keep up with the crooks. Who just saw 136 00:08:21,440 --> 00:08:25,600 Speaker 1: this in Minnesota, where their estimate is somewhere between nine 137 00:08:25,640 --> 00:08:30,080 Speaker 1: and sixteen billion was stolen in California during the COVID cycle. 138 00:08:30,640 --> 00:08:36,480 Speaker 1: Maybe the most bizarre example, twenty billion dollars and COVID 139 00:08:36,520 --> 00:08:41,240 Speaker 1: money was stolen by prisoners in the state prisons using 140 00:08:41,320 --> 00:08:45,160 Speaker 1: the California State Prison Computer System. So you have these 141 00:08:45,160 --> 00:08:48,240 Speaker 1: states that these used bureaucracies. The bureaucracy's absorbed more and 142 00:08:48,280 --> 00:08:52,440 Speaker 1: more money, and they've punished the people who they're relying 143 00:08:52,480 --> 00:08:56,080 Speaker 1: on for money. And people aren't stupid. I mean, if 144 00:08:56,120 --> 00:08:59,880 Speaker 1: you're successful enough to be wealthy at the level we're describing, 145 00:09:00,400 --> 00:09:02,840 Speaker 1: you're successful enough to have advisors who say to you, 146 00:09:03,440 --> 00:09:05,880 Speaker 1: why are you staying here and paying us when you 147 00:09:05,920 --> 00:09:09,640 Speaker 1: could go to Texas or Tennessee or Florida. And I 148 00:09:09,760 --> 00:09:14,280 Speaker 1: noticed that in Washington State they had twenty three hundred 149 00:09:14,840 --> 00:09:18,800 Speaker 1: high earners left the state in twenty twenty one, and 150 00:09:18,840 --> 00:09:21,760 Speaker 1: they had sixty four hundred more who left the state 151 00:09:21,800 --> 00:09:42,760 Speaker 1: in twenty twenty two. When you lose people on that scale, 152 00:09:42,760 --> 00:09:45,440 Speaker 1: when the Washington state's not that big, I mean, they're 153 00:09:45,480 --> 00:09:49,079 Speaker 1: only taking the tax space with them, aren't they. 154 00:09:49,800 --> 00:09:54,000 Speaker 2: Yes. And although those numbers might not seem that grand 155 00:09:54,000 --> 00:09:56,360 Speaker 2: in the grand scheme of sort of millions of residents, 156 00:09:56,800 --> 00:10:00,680 Speaker 2: I'm just focusing there on the highest earners that the 157 00:10:00,720 --> 00:10:04,679 Speaker 2: IRS data has available. And so just to give an example, 158 00:10:04,840 --> 00:10:08,280 Speaker 2: I'm not entirely sure on the sort of distributional contributions 159 00:10:08,280 --> 00:10:11,040 Speaker 2: of tax revenues in Washington State, but in many states, 160 00:10:11,080 --> 00:10:15,079 Speaker 2: including California, the top one percent of earners contribute between 161 00:10:15,080 --> 00:10:18,720 Speaker 2: forty and fifty percent of all income tax revenues. So 162 00:10:18,840 --> 00:10:21,720 Speaker 2: this is a really important base. Even a sort of 163 00:10:21,720 --> 00:10:25,120 Speaker 2: a marginal decrease in the number of those residents has 164 00:10:25,160 --> 00:10:29,360 Speaker 2: a significant long term impact on the sort of potential 165 00:10:29,360 --> 00:10:31,040 Speaker 2: revenues that those states can reap. 166 00:10:31,480 --> 00:10:35,199 Speaker 1: When you talk about people like Howard Schultz from Starbucks 167 00:10:35,800 --> 00:10:39,520 Speaker 1: or Jeff Bezos on Amazon, I mean they're taking huge 168 00:10:39,720 --> 00:10:43,120 Speaker 1: quantities of wealth with them when they leave. These are 169 00:10:43,160 --> 00:10:48,600 Speaker 1: folks who are dramatically reducing the amount of revenue that's 170 00:10:48,640 --> 00:10:52,199 Speaker 1: being taxed neer state. You had mentioned earlier that Bezos 171 00:10:52,240 --> 00:10:56,640 Speaker 1: had sold thirteen and a half billion dollars in Amazon stock. 172 00:10:57,120 --> 00:10:58,800 Speaker 1: How much of that would he have paid to Washington 173 00:10:58,840 --> 00:11:01,040 Speaker 1: State if he was still there because he laughed. 174 00:11:02,360 --> 00:11:05,400 Speaker 2: I believe that sale was twenty twenty four, so that 175 00:11:05,440 --> 00:11:08,240 Speaker 2: would have been taxed at seven percent, above the two 176 00:11:08,280 --> 00:11:10,800 Speaker 2: hundred and fifty thousand dollars threshold. So we're talking about 177 00:11:10,840 --> 00:11:13,960 Speaker 2: billions of dollars. So last year, in twenty twenty five, 178 00:11:14,040 --> 00:11:17,360 Speaker 2: they had an additional nine point nine percent capital gains 179 00:11:17,400 --> 00:11:20,560 Speaker 2: for income above a million dollars, so that capital gains 180 00:11:20,600 --> 00:11:23,760 Speaker 2: tax has actually gotten even more burdensome since he made 181 00:11:23,760 --> 00:11:25,880 Speaker 2: those sALS. So had he made those sales in twenty 182 00:11:25,920 --> 00:11:28,280 Speaker 2: twenty five, his bill would have been even larger by 183 00:11:28,360 --> 00:11:32,160 Speaker 2: quite a significant margin. So we're talking about billions of 184 00:11:32,240 --> 00:11:35,760 Speaker 2: dollars in lost revenue because of the exodus of these 185 00:11:35,800 --> 00:11:37,280 Speaker 2: billionaires from these states. 186 00:11:37,720 --> 00:11:42,240 Speaker 1: The Seattle Seahawks general manager John Schneider was worried about 187 00:11:42,280 --> 00:11:46,000 Speaker 1: signing free agents because they're going to be taxed so heavily. 188 00:11:46,400 --> 00:11:51,200 Speaker 1: And I saw some number that the super Bowl in 189 00:11:51,200 --> 00:11:53,600 Speaker 1: a lot of these states, if you're in that state 190 00:11:53,640 --> 00:11:55,880 Speaker 1: for one day and you earn money that one day, 191 00:11:56,480 --> 00:11:59,880 Speaker 1: they want to tax it. And the amount of the 192 00:12:00,160 --> 00:12:03,640 Speaker 1: were taxing the players in the super Bowl, who's larger 193 00:12:03,640 --> 00:12:06,920 Speaker 1: than the amount they're getting paid for playing that particular game. 194 00:12:07,840 --> 00:12:10,120 Speaker 1: Then there was a real sense of that the Blue 195 00:12:10,120 --> 00:12:12,679 Speaker 1: States are going to lose having these kind of sporting 196 00:12:12,720 --> 00:12:16,320 Speaker 1: events because it make it too expensive on the athletes 197 00:12:16,360 --> 00:12:17,520 Speaker 1: to be worth going and doing it. 198 00:12:18,640 --> 00:12:21,920 Speaker 2: Yes, in economics, I think a lot of economists who 199 00:12:21,960 --> 00:12:24,000 Speaker 2: spend a long time in this field they forget some 200 00:12:24,040 --> 00:12:26,959 Speaker 2: of the sort of foundational basics of economics, and one 201 00:12:27,000 --> 00:12:29,679 Speaker 2: of them is trade offs. Right, when these state policy 202 00:12:29,679 --> 00:12:32,280 Speaker 2: makers impose these taxes, the things they have in mind, 203 00:12:32,320 --> 00:12:34,640 Speaker 2: funding their new programs, the new ambitions, and all these 204 00:12:34,640 --> 00:12:37,200 Speaker 2: sorts of things. What they don't consider is what Frederick 205 00:12:37,200 --> 00:12:39,800 Speaker 2: Bassi app would call the unseen right. These are the 206 00:12:39,800 --> 00:12:43,520 Speaker 2: secondary order effects. These are the unintended consequences of these policies. 207 00:12:44,040 --> 00:12:46,839 Speaker 2: It's that you don't have these sports teams in your state. 208 00:12:47,160 --> 00:12:50,280 Speaker 2: You don't have these entrepreneurs or these business leaders or 209 00:12:50,320 --> 00:12:53,120 Speaker 2: these billionaires who create jobs in your state. It's not 210 00:12:53,160 --> 00:12:56,520 Speaker 2: just the revenues that leaving, it's the startups that aren't happening. 211 00:12:56,920 --> 00:12:59,679 Speaker 2: It's the jobs that are leaving with those businesses. It's 212 00:12:59,679 --> 00:13:02,559 Speaker 2: the busines in its headquarters that I'm moving to different 213 00:13:02,559 --> 00:13:05,240 Speaker 2: cities and states around the country. And so these are 214 00:13:05,280 --> 00:13:08,360 Speaker 2: the sort of secondary order effects that these policymakers really 215 00:13:08,400 --> 00:13:10,120 Speaker 2: aren't considering or perhaps overlooking. 216 00:13:10,840 --> 00:13:14,520 Speaker 1: There has been an initiative to put a California billionaire 217 00:13:14,679 --> 00:13:18,280 Speaker 1: tax on the rules by having people vote at and 218 00:13:18,320 --> 00:13:22,000 Speaker 1: it would impose a one time five percent tax on 219 00:13:22,120 --> 00:13:26,840 Speaker 1: the worldwide net worth of individuals worth more than a billion. 220 00:13:26,920 --> 00:13:29,600 Speaker 1: So I suspect This is why people are heal Unmusk 221 00:13:29,679 --> 00:13:34,240 Speaker 1: and others are leaving California because the idea that the 222 00:13:34,280 --> 00:13:36,960 Speaker 1: state's going to take five percent of everything they have 223 00:13:37,120 --> 00:13:39,440 Speaker 1: worldwide gets to be real money. 224 00:13:40,600 --> 00:13:44,679 Speaker 2: Yes, and this proposal is perhaps far more insidious even 225 00:13:44,720 --> 00:13:48,800 Speaker 2: than these taxes and capital gains taxes on the rich. First, 226 00:13:48,880 --> 00:13:52,720 Speaker 2: I'll sidestep the idea that this is a one time tax, 227 00:13:52,720 --> 00:13:55,480 Speaker 2: because let's face it, there's no such thing but a 228 00:13:55,559 --> 00:13:58,920 Speaker 2: five percent tax on the networth of residents who were 229 00:13:59,000 --> 00:14:01,959 Speaker 2: resident in the state as of the first of January 230 00:14:02,040 --> 00:14:04,880 Speaker 2: twenty twenty six. That's what the proposal says. It's a 231 00:14:04,920 --> 00:14:07,640 Speaker 2: ballot initiative for later this year, and it's so bad 232 00:14:07,720 --> 00:14:10,400 Speaker 2: that even Governor Newsome is campaigning against it. That tells 233 00:14:10,440 --> 00:14:13,640 Speaker 2: you just how harmful this could be. And the argument 234 00:14:13,720 --> 00:14:16,640 Speaker 2: being used for proponents of this wealth tax is that 235 00:14:16,679 --> 00:14:19,240 Speaker 2: it's going to be used to sort of offset the 236 00:14:19,240 --> 00:14:22,320 Speaker 2: healthcare funding short for that their claiming is caused by 237 00:14:22,600 --> 00:14:25,600 Speaker 2: cuts to Medicaid funding in the states. First, I have 238 00:14:25,680 --> 00:14:28,320 Speaker 2: to note very importantly that this is actually a tax 239 00:14:28,360 --> 00:14:32,080 Speaker 2: scheme that they're talking about. So many states, such as California, 240 00:14:32,440 --> 00:14:37,120 Speaker 2: created these medical provider taxes whereby the state would tax 241 00:14:37,560 --> 00:14:41,560 Speaker 2: medical institutions and then they would reimburse them with the 242 00:14:41,560 --> 00:14:44,760 Speaker 2: money they tax them with and claim a federal match 243 00:14:45,320 --> 00:14:48,840 Speaker 2: for medicaid funding. So this was actually just cheating the 244 00:14:48,880 --> 00:14:53,040 Speaker 2: federal taxpayer of dollars for money that was sort of 245 00:14:53,320 --> 00:14:56,880 Speaker 2: essentially made up. These sorts of schemes were limited and 246 00:14:56,960 --> 00:14:59,760 Speaker 2: heavily restricted by the one big beautiful bill tax reform 247 00:15:00,200 --> 00:15:02,840 Speaker 2: last year, which was a very important reform in my opinion. 248 00:15:03,480 --> 00:15:06,640 Speaker 2: That's what they're claiming is causing these medical funding shortfalls. 249 00:15:07,640 --> 00:15:10,720 Speaker 2: Not the fact that the state of California has increased 250 00:15:10,760 --> 00:15:14,720 Speaker 2: its spending by sixty eight percent since twenty nineteen alone, 251 00:15:15,200 --> 00:15:17,920 Speaker 2: Not the fact that the state of California has expanded 252 00:15:17,960 --> 00:15:23,040 Speaker 2: Medicaid to many middle income households, and the state of 253 00:15:23,040 --> 00:15:26,960 Speaker 2: California has expanded medicaid to many undocumented immigrants within its state. 254 00:15:27,520 --> 00:15:31,240 Speaker 2: That has led to this massive explosion in healthcare funding. 255 00:15:31,960 --> 00:15:34,120 Speaker 2: So that's the excuse they're using for why they need 256 00:15:34,120 --> 00:15:37,080 Speaker 2: this wealth tax. But then you have to consider, as 257 00:15:37,120 --> 00:15:42,320 Speaker 2: I mentioned earlier, the top percent pays a huge disproportionate 258 00:15:42,400 --> 00:15:45,880 Speaker 2: amount of income taxes in the state of California, and 259 00:15:45,920 --> 00:15:49,760 Speaker 2: we've already seen that many people in the highest sort 260 00:15:49,800 --> 00:15:55,920 Speaker 2: of wealth deciles are leaving. Many left before the residency 261 00:15:55,960 --> 00:15:59,160 Speaker 2: requirement came into place, so they've already anticipated this wealth 262 00:15:59,200 --> 00:16:02,920 Speaker 2: tax being an acted. In fact, the proponents argue this 263 00:16:03,000 --> 00:16:06,200 Speaker 2: tax would raise about one hundred billion dollars, and there 264 00:16:06,320 --> 00:16:11,200 Speaker 2: was a very detailed analysis published by the Hoover Institution 265 00:16:11,320 --> 00:16:14,560 Speaker 2: at Stanford University by Joshua Raw and other economists there 266 00:16:14,920 --> 00:16:19,400 Speaker 2: where they actually did a legitimate deep dive into what 267 00:16:19,880 --> 00:16:23,840 Speaker 2: that number would realistically look like. Once they considered the 268 00:16:23,840 --> 00:16:28,240 Speaker 2: fact that the initial review had ignored the fact that 269 00:16:28,600 --> 00:16:31,040 Speaker 2: three of those billionaires had left the state before the 270 00:16:31,040 --> 00:16:34,640 Speaker 2: petition even existed. That was about six billion dollars from 271 00:16:34,680 --> 00:16:38,400 Speaker 2: their revenues gone. Then they looked at six who left 272 00:16:38,440 --> 00:16:41,600 Speaker 2: before the deadline came into place. Now they're one hundred 273 00:16:41,600 --> 00:16:44,920 Speaker 2: billion dollars falls to sixty seven billion dollars. Then they 274 00:16:44,960 --> 00:16:48,600 Speaker 2: accounted for the departures that weren't made public by using 275 00:16:48,960 --> 00:16:52,080 Speaker 2: economic analysis based on the literature. In terms of the 276 00:16:52,120 --> 00:16:54,320 Speaker 2: cost and the trade offs, it turns out that the 277 00:16:54,360 --> 00:16:57,320 Speaker 2: average billionaire in California pays between three and six billion 278 00:16:57,360 --> 00:17:01,040 Speaker 2: dollars in income taxes every year, So that's a loss. 279 00:17:01,120 --> 00:17:03,520 Speaker 2: Once they calculated the net present value. In other words, 280 00:17:03,520 --> 00:17:07,000 Speaker 2: they looked at the lifetime income tax contributions of those 281 00:17:07,280 --> 00:17:10,800 Speaker 2: who would leave. They found that this wealth tax won't 282 00:17:10,880 --> 00:17:13,879 Speaker 2: raise one hundred billion dollars. It will actually lose the 283 00:17:13,880 --> 00:17:17,960 Speaker 2: state twenty five billion dollars, just under twenty five billion dollars. 284 00:17:18,600 --> 00:17:24,080 Speaker 2: So this tax proposal that is being proposed to close 285 00:17:24,440 --> 00:17:28,520 Speaker 2: a supposed healthcare funding gap would actually lose the state 286 00:17:28,600 --> 00:17:31,200 Speaker 2: twenty five billion dollars in net present value. 287 00:17:31,480 --> 00:17:33,640 Speaker 1: Why is it so hardy at that across? 288 00:17:34,920 --> 00:17:38,200 Speaker 2: It's deeply problematic, but it's much more of a sort 289 00:17:38,200 --> 00:17:40,920 Speaker 2: of narrative messaging that we're seeing that all of our 290 00:17:41,040 --> 00:17:44,880 Speaker 2: fiscal short force can be solved by simply taxing billionaires 291 00:17:44,880 --> 00:17:47,760 Speaker 2: and millionaires. We're also seeing this more and more at 292 00:17:47,800 --> 00:17:49,879 Speaker 2: the federal level. You know, every few years we have 293 00:17:49,960 --> 00:17:53,639 Speaker 2: Bernie Sanders and his company coming out with reposals for 294 00:17:53,680 --> 00:17:56,719 Speaker 2: wealth taxes marked to market type taxes, so these are 295 00:17:56,760 --> 00:17:59,119 Speaker 2: annually applied wealth taxes. He doesn't hire the fact that 296 00:17:59,119 --> 00:18:03,240 Speaker 2: this isn't a one time unlike California. The economic literature 297 00:18:03,560 --> 00:18:08,240 Speaker 2: and the math itself just doesn't support the simple fact 298 00:18:08,280 --> 00:18:12,320 Speaker 2: that we can't fix our fiscal shortfalls by taxing a 299 00:18:12,480 --> 00:18:17,280 Speaker 2: very small tax base that provides much of the growth 300 00:18:17,400 --> 00:18:20,440 Speaker 2: of the innovation of the jobs. This tax base is 301 00:18:20,480 --> 00:18:22,320 Speaker 2: also the most mobile. They're also the most savvy. They 302 00:18:22,359 --> 00:18:24,600 Speaker 2: also have the best accountants, so they know how to 303 00:18:25,080 --> 00:18:28,400 Speaker 2: get around these sorts of things. But ultimately you're going 304 00:18:28,440 --> 00:18:32,919 Speaker 2: to end up with hugely costly administrative costs, little to 305 00:18:32,920 --> 00:18:37,159 Speaker 2: no additional revenue, if not negative, and the worst possible 306 00:18:37,160 --> 00:18:38,399 Speaker 2: outcome is capital flight. 307 00:18:38,960 --> 00:18:42,760 Speaker 1: We see that happening between states. It's one of the 308 00:18:42,800 --> 00:18:45,600 Speaker 1: amazing things of the American system is that you can 309 00:18:45,880 --> 00:18:48,520 Speaker 1: just pick up and leave, and so you have a 310 00:18:48,520 --> 00:18:53,639 Speaker 1: constant migration away from high cost to lower cost. I 311 00:18:53,680 --> 00:18:55,919 Speaker 1: think what we're seeing now in both New York and 312 00:18:55,960 --> 00:18:58,919 Speaker 1: California is that for a long time they could get 313 00:18:58,960 --> 00:19:02,199 Speaker 1: away with higher tax because the quality of life was 314 00:19:02,280 --> 00:19:05,880 Speaker 1: such that for local cultural things would search, et cetera. 315 00:19:06,480 --> 00:19:09,879 Speaker 1: But then they somehow reached tilt, and now people are 316 00:19:09,880 --> 00:19:13,760 Speaker 1: just sort of giving up and just moving. The secondary 317 00:19:13,760 --> 00:19:17,119 Speaker 1: effects of all that in terms of who's going to 318 00:19:17,119 --> 00:19:19,399 Speaker 1: be around to sustained the opera, who's going to be 319 00:19:19,480 --> 00:19:22,760 Speaker 1: around to go to plays and Broadway, et cetera. Lether 320 00:19:22,920 --> 00:19:28,120 Speaker 1: be watching a really profound shift in activity and creativity 321 00:19:28,640 --> 00:19:31,919 Speaker 1: away from these very high cost blue states to the 322 00:19:31,960 --> 00:19:32,800 Speaker 1: rest of the country. 323 00:19:33,920 --> 00:19:36,800 Speaker 2: I think, so it seems as though red states are 324 00:19:36,840 --> 00:19:41,119 Speaker 2: increasingly moving towards lower tax rates, while blue states are 325 00:19:41,119 --> 00:19:44,520 Speaker 2: moving towards taxing the rich, and they're really departing further 326 00:19:44,560 --> 00:19:47,080 Speaker 2: and further over time, and I think we're going to 327 00:19:47,080 --> 00:19:50,320 Speaker 2: continue to see those sorts of migrations of high earners 328 00:19:50,400 --> 00:19:54,000 Speaker 2: from blue to red states. But I would also caution 329 00:19:54,440 --> 00:19:58,119 Speaker 2: the Red states to use the additional revenues wisely. This 330 00:19:58,200 --> 00:20:01,520 Speaker 2: is where my primary interest in the federal fiscal situation 331 00:20:01,600 --> 00:20:05,879 Speaker 2: comes into play here, because I think, given how dire 332 00:20:05,960 --> 00:20:10,120 Speaker 2: the federal fiscal situation is, we're only about six years 333 00:20:10,160 --> 00:20:14,200 Speaker 2: away now from Social Security and Medicare trust fund depletions. 334 00:20:14,880 --> 00:20:17,520 Speaker 2: That's going to be a serious fiscal burden in about 335 00:20:17,520 --> 00:20:21,280 Speaker 2: six or seven years. We're running two trillion dollar deficits 336 00:20:21,320 --> 00:20:23,399 Speaker 2: with no end in sight, and that's only getting worse. 337 00:20:24,600 --> 00:20:28,399 Speaker 2: And our entitlement programs are growing well beyond our potential 338 00:20:28,440 --> 00:20:33,800 Speaker 2: economic growth rates, and the first sets of spending that 339 00:20:33,880 --> 00:20:35,919 Speaker 2: are going to be the low hanging fruit are funds 340 00:20:35,960 --> 00:20:38,760 Speaker 2: to the states. So I think if we come to 341 00:20:38,800 --> 00:20:41,160 Speaker 2: a sort of fiscal inflection point. As my colleag creonic 342 00:20:41,200 --> 00:20:44,280 Speaker 2: deruge you CAUs it, in a few years time, it 343 00:20:44,320 --> 00:20:46,840 Speaker 2: will be the state funding. The state federal funding that 344 00:20:46,880 --> 00:20:49,160 Speaker 2: gets cut first is probably one of the first things 345 00:20:49,160 --> 00:20:51,640 Speaker 2: on the chopping board. So I think if the Red 346 00:20:51,640 --> 00:20:55,160 Speaker 2: states are wise, they'll use these broadening bases, this growing 347 00:20:55,240 --> 00:20:58,320 Speaker 2: tax base of high earners, to build rainy day funds 348 00:20:58,359 --> 00:21:01,040 Speaker 2: and to start if they can, to lower their dependence 349 00:21:01,200 --> 00:21:03,800 Speaker 2: on federal funding, because I know there are many states, 350 00:21:03,920 --> 00:21:07,040 Speaker 2: including red states, that receive thirty to forty percent of 351 00:21:07,119 --> 00:21:10,800 Speaker 2: their revenues from the federal government, and that simply isn't sustainable. 352 00:21:26,880 --> 00:21:31,560 Speaker 1: An interesting point, which is it when the politicians in 353 00:21:31,720 --> 00:21:36,200 Speaker 1: Washington really hit the crunch at some point, one of 354 00:21:36,280 --> 00:21:38,960 Speaker 1: their first reactions is going to be to quit subsidizing 355 00:21:39,800 --> 00:21:43,480 Speaker 1: the states, which will also correct me if I'm wrong, 356 00:21:43,480 --> 00:21:46,800 Speaker 1: But I think it also then disproportionately hurt the very 357 00:21:46,840 --> 00:21:49,920 Speaker 1: blue states that have already driven out their tax base 358 00:21:50,000 --> 00:21:53,480 Speaker 1: by raising taxes too much and are the most dependent 359 00:21:54,200 --> 00:21:56,200 Speaker 1: on federal money. 360 00:21:56,760 --> 00:21:59,320 Speaker 2: I believe so, yes, by this point, the tax basis 361 00:21:59,320 --> 00:22:02,200 Speaker 2: would have been narrow even further. Assuming that they don't 362 00:22:02,240 --> 00:22:02,800 Speaker 2: change course. 363 00:22:02,840 --> 00:22:03,040 Speaker 1: Soon. 364 00:22:03,640 --> 00:22:06,199 Speaker 2: But I just hope that the red states that are 365 00:22:06,200 --> 00:22:09,160 Speaker 2: cutting their taxes they also use some of those extra 366 00:22:09,160 --> 00:22:13,359 Speaker 2: revenues to sort of prepare for the worst possible outcome 367 00:22:13,760 --> 00:22:16,440 Speaker 2: when that federal funding tap gets turned off eventually, because 368 00:22:16,440 --> 00:22:19,000 Speaker 2: I think that is a real risk, particularly as we 369 00:22:19,040 --> 00:22:23,240 Speaker 2: move towards these significant shortfalls in terms of trust funds, 370 00:22:23,280 --> 00:22:25,639 Speaker 2: but also just the trajectory we're on. I mean, I 371 00:22:25,640 --> 00:22:28,679 Speaker 2: think yesterday we hit thirty nine trillion dollars. The public 372 00:22:28,720 --> 00:22:32,240 Speaker 2: debt is thirty one point four trillion dollars. It's increased 373 00:22:32,240 --> 00:22:34,200 Speaker 2: by two and a half trillion dollars just in the 374 00:22:34,240 --> 00:22:36,640 Speaker 2: last nine months, not even the last year. The last 375 00:22:36,680 --> 00:22:39,720 Speaker 2: nine months, debt held by the public has increased by 376 00:22:40,359 --> 00:22:44,720 Speaker 2: two and a half trillion dollars. That's about sixteen and 377 00:22:44,760 --> 00:22:48,480 Speaker 2: a half thousand dollars per federal taxpayer just in the 378 00:22:48,520 --> 00:22:52,080 Speaker 2: last nine months. We're spending twenty two cents on every 379 00:22:52,160 --> 00:22:55,040 Speaker 2: tax dollar just on servicing the debt at this point, 380 00:22:55,480 --> 00:22:58,119 Speaker 2: and that's only getting worse based on projections, and in 381 00:22:58,119 --> 00:23:02,199 Speaker 2: my opinion, those projections by the budgetary institutions, including the CBO, 382 00:23:02,600 --> 00:23:05,240 Speaker 2: have more rosy assumptions built in. I think it's worse 383 00:23:05,400 --> 00:23:08,280 Speaker 2: than what they're showing. So I think we need to 384 00:23:08,280 --> 00:23:10,439 Speaker 2: be prepared for that, and the states also need to 385 00:23:10,440 --> 00:23:13,400 Speaker 2: be prepared for when this happens, because, as you pointed out, 386 00:23:13,720 --> 00:23:17,480 Speaker 2: they'll be the first sets of spending categories that get 387 00:23:17,480 --> 00:23:22,000 Speaker 2: placed on the chopping block, because the more politically popular programs, 388 00:23:22,000 --> 00:23:25,640 Speaker 2: the entitlement programs, but also the debt servicing obligations are 389 00:23:25,680 --> 00:23:27,240 Speaker 2: going to be the last things that get cut. 390 00:23:28,040 --> 00:23:34,480 Speaker 1: Wow, a speaker, we passed the only four consecutive balanced 391 00:23:34,480 --> 00:23:38,879 Speaker 1: budgets in the last one hundred years. I do not understand, 392 00:23:39,640 --> 00:23:42,639 Speaker 1: both in the Congress and in the executive branch, this 393 00:23:42,960 --> 00:23:46,159 Speaker 1: mindset that you can keep running up the credit card 394 00:23:46,680 --> 00:23:51,080 Speaker 1: and they'll never come do Historically, that's not how life occurves. 395 00:23:52,400 --> 00:23:54,720 Speaker 2: Yes, and it's a million miles away from where we 396 00:23:54,760 --> 00:23:56,800 Speaker 2: are now, where we were in the nineties, I mean, 397 00:23:57,280 --> 00:23:59,359 Speaker 2: when you were a speaker, I believe we had real 398 00:23:59,400 --> 00:24:03,480 Speaker 2: budgets completed in the real manner as intended, and we 399 00:24:03,520 --> 00:24:06,080 Speaker 2: haven't had those for many decades. I mean the nineties 400 00:24:06,160 --> 00:24:08,520 Speaker 2: is a good example, but also the nineteen eighty three 401 00:24:08,600 --> 00:24:11,440 Speaker 2: Social Security reform. A lot of people forget just how 402 00:24:11,480 --> 00:24:14,400 Speaker 2: close we came in the early eighties to trust fund 403 00:24:14,440 --> 00:24:17,160 Speaker 2: depletion with Social Security. This isn't the first time we've 404 00:24:17,160 --> 00:24:19,680 Speaker 2: gotten this close. We were about one year away from 405 00:24:19,720 --> 00:24:22,720 Speaker 2: there being no money left in the Social Security system, 406 00:24:22,880 --> 00:24:25,240 Speaker 2: and it was a last minute fix, and it was painful. 407 00:24:25,359 --> 00:24:27,600 Speaker 2: I mean, they had to raise the retirement age over 408 00:24:27,640 --> 00:24:31,960 Speaker 2: those years, they had to raise the federal insurance contribution taxes, 409 00:24:32,080 --> 00:24:35,760 Speaker 2: the payroll taxes on workers. But the problem that we're 410 00:24:35,800 --> 00:24:39,159 Speaker 2: facing now is about twice as large in terms of 411 00:24:39,200 --> 00:24:41,920 Speaker 2: the fiscal costs as it was in nineteen eighty three. 412 00:24:42,480 --> 00:24:44,359 Speaker 2: So even if we leave it until the last minute 413 00:24:44,440 --> 00:24:45,919 Speaker 2: to come up with a fix is going to be 414 00:24:45,960 --> 00:24:46,960 Speaker 2: incredibly painful. 415 00:24:47,200 --> 00:24:49,240 Speaker 1: One of the things I think we've got to somehow 416 00:24:50,200 --> 00:24:54,840 Speaker 1: bring much further to the front of the conversation. Here's 417 00:24:54,880 --> 00:24:58,000 Speaker 1: the fact that I think current projections are that Social 418 00:24:58,040 --> 00:25:01,520 Speaker 1: Security will go broken about twenty thirty two, which is 419 00:25:01,520 --> 00:25:04,479 Speaker 1: not very far away. What's your sense of the timing 420 00:25:04,560 --> 00:25:07,760 Speaker 1: on both Social Security and Medicare trust funds? 421 00:25:08,440 --> 00:25:11,399 Speaker 2: So both the Social Security and then Medicare trust fund 422 00:25:11,600 --> 00:25:14,960 Speaker 2: trust these reports find that yeah, it's about twenty thirty two, 423 00:25:15,000 --> 00:25:17,280 Speaker 2: it might be thirty three, so we're six or seven 424 00:25:17,359 --> 00:25:21,359 Speaker 2: years away. From that point where the trust fund effectively 425 00:25:21,400 --> 00:25:25,080 Speaker 2: reaches zero. At that point, these programs can only afford 426 00:25:25,160 --> 00:25:27,280 Speaker 2: to pay out as much as they receive in revenues, 427 00:25:27,359 --> 00:25:30,400 Speaker 2: so they'll be quite a significant shortfall For Social Security. 428 00:25:30,400 --> 00:25:32,959 Speaker 2: I believe it's about twenty three or twenty four percent, 429 00:25:33,119 --> 00:25:36,840 Speaker 2: So by default, the government is supposed to cut benefits 430 00:25:36,880 --> 00:25:40,440 Speaker 2: by about twenty three percent starting in twenty twenty three. 431 00:25:41,160 --> 00:25:44,160 Speaker 2: Now whether or not they do that is another question. Alternatively, 432 00:25:44,160 --> 00:25:47,520 Speaker 2: they may raise taxes, or possibly the worst possible outcome, 433 00:25:47,760 --> 00:25:49,760 Speaker 2: they borrow it with general funds and we could end 434 00:25:49,880 --> 00:25:53,440 Speaker 2: up with significant inflation either way. This is a countdown 435 00:25:53,480 --> 00:25:56,080 Speaker 2: that's coming up quick and it's very significant because both 436 00:25:56,119 --> 00:26:00,359 Speaker 2: Social Security and the Medicare Hospital Insurance Trust Fund complete 437 00:26:00,400 --> 00:26:04,879 Speaker 2: around the same time. I've calculated the thirty years shortfall 438 00:26:05,359 --> 00:26:08,560 Speaker 2: including the interest cost of these two programs, and it's 439 00:26:08,560 --> 00:26:14,240 Speaker 2: about one hundred and twenty trillion dollars of shortfalls for 440 00:26:14,320 --> 00:26:18,719 Speaker 2: both programs plus the interest cost. So that's over thirty years. 441 00:26:19,080 --> 00:26:21,600 Speaker 2: That's money that we don't have to support those two 442 00:26:21,600 --> 00:26:23,640 Speaker 2: programs that we're going to have to get from somewhere. 443 00:26:24,080 --> 00:26:26,760 Speaker 2: That's going to be either a heavy tax burden or 444 00:26:26,760 --> 00:26:29,800 Speaker 2: it's going to be inflated, which is going to just 445 00:26:30,280 --> 00:26:33,280 Speaker 2: create inflation like it would make twenty twenty one look 446 00:26:33,640 --> 00:26:37,159 Speaker 2: fairly tame in comparison. So we really have a big 447 00:26:37,359 --> 00:26:39,720 Speaker 2: pending problem there, and that becomes. 448 00:26:39,440 --> 00:26:43,600 Speaker 1: Almost a vicious circle because the face with a pain 449 00:26:43,720 --> 00:26:46,800 Speaker 1: level on that scale, the politicians flinch, and then the 450 00:26:46,840 --> 00:26:50,199 Speaker 1: pain level gets worse, and then they flinch again. The 451 00:26:50,240 --> 00:26:52,359 Speaker 1: other big factor here. I spend a lot of my 452 00:26:52,480 --> 00:26:56,640 Speaker 1: time on health reform because when you have a health 453 00:26:56,680 --> 00:26:59,720 Speaker 1: system that's at seventeen or eighteen percent of the growth 454 00:26:59,760 --> 00:27:03,879 Speaker 1: to most product, you can't yet to anything like a 455 00:27:04,000 --> 00:27:08,159 Speaker 1: balanced budget until you have a dramatic improvement in the 456 00:27:08,160 --> 00:27:11,960 Speaker 1: effectiveness of the health system. That becomes another one of 457 00:27:11,960 --> 00:27:13,600 Speaker 1: those topics that people don't want to deal with. 458 00:27:14,320 --> 00:27:17,800 Speaker 2: Yes, along with hope security, that's the primary driver of 459 00:27:17,880 --> 00:27:21,200 Speaker 2: our long term unsustainable fiscal trajectory. It's ultimately the health 460 00:27:21,200 --> 00:27:23,960 Speaker 2: care costs. It doesn't seem to be getting much better. 461 00:27:24,760 --> 00:27:29,159 Speaker 2: I mean, that's fundamentally a structural problem in the ninety 462 00:27:29,200 --> 00:27:33,360 Speaker 2: percent of dollars spent on healthcare aren't between the provider 463 00:27:33,359 --> 00:27:35,280 Speaker 2: and the consumer, but by a third party, whether that's 464 00:27:35,320 --> 00:27:38,359 Speaker 2: the government or an insurance company. That's a deeply structural 465 00:27:38,359 --> 00:27:40,600 Speaker 2: problem that makes the system opaque and gets rid of 466 00:27:40,600 --> 00:27:43,560 Speaker 2: any sort of transparency. There's a much sort of deeper 467 00:27:43,560 --> 00:27:45,920 Speaker 2: problem that we have with our healthcare system that really 468 00:27:46,000 --> 00:27:47,359 Speaker 2: requires fundamental reform. 469 00:27:47,760 --> 00:27:52,840 Speaker 1: I've been a very strong advocate for transparency so that 470 00:27:52,960 --> 00:27:57,080 Speaker 1: you can know both in quality and cost before you 471 00:27:57,160 --> 00:28:01,200 Speaker 1: make a health decision. Has earned the heart. It comes 472 00:28:01,240 --> 00:28:05,639 Speaker 1: down to show me the money. All these groups, whether 473 00:28:05,720 --> 00:28:10,199 Speaker 1: there are hospitals, pharmaceuticals, insurance companies, doctors, you have it. 474 00:28:10,480 --> 00:28:13,439 Speaker 1: All these groups look up and say, but I want mine. 475 00:28:14,240 --> 00:28:17,040 Speaker 1: It really makes it very hard to reform the system. 476 00:28:17,320 --> 00:28:20,240 Speaker 1: And yet I think if you didn't get to transparency 477 00:28:20,280 --> 00:28:23,520 Speaker 1: and to real choice by the consumers of health care, 478 00:28:23,920 --> 00:28:26,439 Speaker 1: they would in fact save an enormous amount of money 479 00:28:26,880 --> 00:28:29,120 Speaker 1: in a way that you will never get to by 480 00:28:29,119 --> 00:28:31,959 Speaker 1: having the bureaucrats try to do it. People will not 481 00:28:32,040 --> 00:28:36,280 Speaker 1: accept cuts, but they will accept savings. And the difference 482 00:28:36,359 --> 00:28:38,800 Speaker 1: is savings is when you don't pay for something you 483 00:28:38,840 --> 00:28:41,840 Speaker 1: don't need, and it cuts when you're afraid they just 484 00:28:41,880 --> 00:28:45,920 Speaker 1: took away money you do need. And it's politically very 485 00:28:45,920 --> 00:28:49,760 Speaker 1: hard to cut health care fighting is very easy to 486 00:28:49,840 --> 00:28:53,640 Speaker 1: find savings, except that every interest group will then fight you. 487 00:28:54,320 --> 00:28:57,720 Speaker 1: Do you get any sense that the left may be 488 00:28:58,880 --> 00:29:04,040 Speaker 1: on the edge of learning that driving successful people is 489 00:29:04,080 --> 00:29:05,280 Speaker 1: not a smart strategy. 490 00:29:06,680 --> 00:29:09,600 Speaker 2: I have to be glass half for working in fiscal 491 00:29:09,640 --> 00:29:13,160 Speaker 2: policy because it's mostly doom and gloom, as you can imagine. 492 00:29:13,800 --> 00:29:16,120 Speaker 2: So I try to see the silver lining. When someone 493 00:29:16,160 --> 00:29:19,360 Speaker 2: like Gavin Newsom comes out and says I'm strictly opposed 494 00:29:19,400 --> 00:29:22,200 Speaker 2: to this proposal because this will chase away the wealthiest 495 00:29:22,720 --> 00:29:26,760 Speaker 2: individuals in our state. That acknowledgment alone gives me some hope. Now. 496 00:29:26,800 --> 00:29:29,560 Speaker 2: I don't know if that's just a moderating position because 497 00:29:29,800 --> 00:29:32,200 Speaker 2: he may be planning to run for a certain position 498 00:29:32,240 --> 00:29:35,680 Speaker 2: in a couple of years, but it does signal that 499 00:29:35,720 --> 00:29:39,200 Speaker 2: there are some sensible people still in positions of power 500 00:29:39,640 --> 00:29:42,960 Speaker 2: who deep down behind all of these sort of ideological rhetoric, 501 00:29:43,600 --> 00:29:47,720 Speaker 2: they do still understand the basic economics, the unintended consequences 502 00:29:47,760 --> 00:29:51,080 Speaker 2: of imposing these sorts of proposals for wealth taxes and whatnot. 503 00:29:51,400 --> 00:29:53,760 Speaker 2: You really have to try and find little pieces of 504 00:29:53,760 --> 00:29:56,800 Speaker 2: hope where you can. Plus you're us Speaker of the House. 505 00:29:56,800 --> 00:30:00,600 Speaker 2: In the nineteen nineties, there was some bipartisan work done 506 00:30:00,600 --> 00:30:03,320 Speaker 2: on this front, and the fiscal position did improve, which 507 00:30:03,680 --> 00:30:05,520 Speaker 2: if you're around in the seventies and eighties, it was 508 00:30:05,560 --> 00:30:07,880 Speaker 2: pretty bleak and you may not have thought that was possible, 509 00:30:07,920 --> 00:30:10,360 Speaker 2: but it was done and we had a balanced budget briefly, 510 00:30:10,840 --> 00:30:12,440 Speaker 2: So you know, I think we can get there again. 511 00:30:12,520 --> 00:30:13,920 Speaker 2: It's going to be more painful than it was in 512 00:30:13,960 --> 00:30:16,480 Speaker 2: the past, but I have to be optimistic in this role. 513 00:30:16,840 --> 00:30:19,360 Speaker 1: Well say, I think the work you're doing is really important. 514 00:30:19,760 --> 00:30:22,680 Speaker 1: I think you're right. This is an issue which is 515 00:30:22,720 --> 00:30:26,040 Speaker 1: suddenly going to loom over all of us. Having smart 516 00:30:26,080 --> 00:30:28,600 Speaker 1: people study it is going to be a big factor 517 00:30:29,000 --> 00:30:31,280 Speaker 1: and our ability to get through this. So I want 518 00:30:31,320 --> 00:30:34,000 Speaker 1: to thank you for joining me. Our listeners can follow 519 00:30:34,000 --> 00:30:37,520 Speaker 1: the work you're doing at the Mercadas Center by visiting 520 00:30:37,520 --> 00:30:40,880 Speaker 1: the website at Mercadas dot org. And I really appreciate 521 00:30:40,960 --> 00:30:43,920 Speaker 1: Jack You're taking the time to share these ideas with 522 00:30:44,040 --> 00:30:44,520 Speaker 1: us today. 523 00:30:45,320 --> 00:30:47,280 Speaker 2: Thank you for having me on speed Ingrish. I really 524 00:30:47,320 --> 00:30:49,720 Speaker 2: appreciate you having me on, and I really enjoyed this conversation. 525 00:30:52,840 --> 00:30:55,720 Speaker 1: Thank you to my guest, Jack Salmon. New to World 526 00:30:55,800 --> 00:30:59,440 Speaker 1: is produced by Gengish who sixty and iHeartMedia. Our executive 527 00:30:59,440 --> 00:31:04,080 Speaker 1: producers Arncy Sloan. Our researcher is Rachel Peterson. The artwork 528 00:31:04,120 --> 00:31:07,560 Speaker 1: for the show was created by Steve Penley. Special thanks 529 00:31:07,600 --> 00:31:10,280 Speaker 1: to the team at Gingrich three sixty. If you've been 530 00:31:10,360 --> 00:31:13,600 Speaker 1: enjoying Newsworld, I hope you'll go to Apple Podcasts and 531 00:31:13,680 --> 00:31:16,160 Speaker 1: both rate us with five stars and give us a 532 00:31:16,200 --> 00:31:19,640 Speaker 1: review so others can learn what it's all about. Join 533 00:31:19,720 --> 00:31:24,240 Speaker 1: me on substat at gingrichthree sixty dot net. I'm Newt Gingrich. 534 00:31:24,680 --> 00:31:25,600 Speaker 1: This is Newsworld.