1 00:00:00,200 --> 00:00:02,480 Speaker 1: I'm not very good at Texas. I know that I'm 2 00:00:02,520 --> 00:00:05,160 Speaker 1: an economist, and I know I'm standing up here as 3 00:00:05,160 --> 00:00:08,000 Speaker 1: if I'm an expert, but actually my household, Betsy does 4 00:00:08,000 --> 00:00:10,680 Speaker 1: our Texas. I find the whole thing overwhelming. Some Blanke 5 00:00:10,760 --> 00:00:12,280 Speaker 1: was talking to me about his five X one C 6 00:00:12,480 --> 00:00:16,280 Speaker 1: three the other day. What language is this? 7 00:00:16,840 --> 00:00:18,200 Speaker 2: I'm Megan Connors. 8 00:00:17,880 --> 00:00:21,360 Speaker 1: And I'm justin Wolf's and this is the professor is in. 9 00:00:21,560 --> 00:00:24,000 Speaker 1: Think of this as officeurs and Meghan's here to bring 10 00:00:24,040 --> 00:00:28,360 Speaker 1: me your questions. 11 00:00:29,960 --> 00:00:33,320 Speaker 3: Your recent diving in debunked some of the hype around 12 00:00:33,400 --> 00:00:36,879 Speaker 3: Trump accounts. This episode inspired a lot of debates and 13 00:00:37,120 --> 00:00:39,559 Speaker 3: follow up questions, and I'd like to dig into some 14 00:00:39,600 --> 00:00:42,720 Speaker 3: of that with you. Okay, So, first up, you described 15 00:00:42,760 --> 00:00:46,840 Speaker 3: these accounts as a temporary populis giveaway that stitched onto 16 00:00:46,960 --> 00:00:50,320 Speaker 3: a permanent tax break for the already wealthy. This seems 17 00:00:50,360 --> 00:00:52,680 Speaker 3: to be kind of a go to strategy for the 18 00:00:52,720 --> 00:00:55,120 Speaker 3: second Trump term, and I was wondering if you could 19 00:00:55,120 --> 00:00:57,279 Speaker 3: speak to some of the other ways we've seen this 20 00:00:57,560 --> 00:00:58,680 Speaker 3: fake populism. 21 00:00:58,920 --> 00:01:01,600 Speaker 1: You know, I described it that because that's what it is. 22 00:01:01,840 --> 00:01:05,600 Speaker 1: And you're absolutely right, Megan, to see that this is 23 00:01:05,600 --> 00:01:09,160 Speaker 1: a theme. It's really a theme mostly for the stuff 24 00:01:09,200 --> 00:01:11,440 Speaker 1: coming out of the One Big, Beautiful Bill otherwise known 25 00:01:11,480 --> 00:01:14,280 Speaker 1: as the Trump Budget, otherwise known as the one major 26 00:01:14,280 --> 00:01:17,200 Speaker 1: piece of fiscal policy, the Administration Guide. Look, we saw 27 00:01:17,240 --> 00:01:18,720 Speaker 1: this in a whole bunch of other ways. The President 28 00:01:18,720 --> 00:01:21,480 Speaker 1: went on the campaign trail and promised no tax on tips. 29 00:01:21,680 --> 00:01:24,520 Speaker 1: It turns out you do tax tips if you're in 30 00:01:24,600 --> 00:01:29,720 Speaker 1: certain tip prevalent occupations, though there'll be no tax on 31 00:01:29,920 --> 00:01:32,280 Speaker 1: tips until the end of twenty twenty eight. He talked 32 00:01:32,280 --> 00:01:34,360 Speaker 1: about no tax on overtime. It turns out he does 33 00:01:34,400 --> 00:01:37,000 Speaker 1: tax overtime. So if you work at extra five hours 34 00:01:37,560 --> 00:01:39,679 Speaker 1: and you get time and a half, you'd be due 35 00:01:39,760 --> 00:01:41,880 Speaker 1: to get seven and a half times your hourly wage. 36 00:01:42,160 --> 00:01:45,240 Speaker 1: So it's only the extra half that's not taxable, only 37 00:01:45,319 --> 00:01:48,680 Speaker 1: up to a limit, only for certain occupations. And guess what. 38 00:01:48,920 --> 00:01:51,240 Speaker 1: That also runs out at the end of twenty twenty eight. 39 00:01:51,320 --> 00:01:54,040 Speaker 1: He talked about no tax on Social Security. In fact, 40 00:01:54,160 --> 00:01:56,680 Speaker 1: they still tax social Security. They did something else in 41 00:01:56,680 --> 00:01:59,320 Speaker 1: the tax code to help older people, but social Security 42 00:01:59,360 --> 00:02:02,280 Speaker 1: is still tax Hey, guess what, it runs out at 43 00:02:02,280 --> 00:02:04,560 Speaker 1: the end of twenty twenty eight. You know there's one 44 00:02:04,560 --> 00:02:06,600 Speaker 1: thing that didn't run out at the end of twenty 45 00:02:06,600 --> 00:02:09,920 Speaker 1: twenty eight. The other major part of the Trump budget, 46 00:02:09,919 --> 00:02:12,440 Speaker 1: it was these populist parts. Then there was tax cuts 47 00:02:12,480 --> 00:02:15,440 Speaker 1: for the rich. The tax cuts for the rich are permanent. 48 00:02:15,600 --> 00:02:18,200 Speaker 1: So as it stands, if the next president in Congress 49 00:02:18,400 --> 00:02:21,840 Speaker 1: don't renew any of the gimmick populist giveaways, I think 50 00:02:21,919 --> 00:02:23,800 Speaker 1: each of these are actually, by the way, bad policy 51 00:02:23,840 --> 00:02:26,280 Speaker 1: for a whole range of reasons discussion for another day. 52 00:02:26,400 --> 00:02:29,160 Speaker 1: Then they are literally just going to disappear. That's probably 53 00:02:29,200 --> 00:02:32,200 Speaker 1: a good thing in terms for like economic policy. It's 54 00:02:32,200 --> 00:02:34,320 Speaker 1: probably a bad thing in terms of the president being 55 00:02:34,360 --> 00:02:37,480 Speaker 1: relentlessly dishonest, which is I'm going to pass something briefly, 56 00:02:37,600 --> 00:02:40,720 Speaker 1: let it go away once I'm gone, and have more 57 00:02:40,760 --> 00:02:43,120 Speaker 1: permanent tax cuts that help me and my mates. 58 00:02:43,760 --> 00:02:47,880 Speaker 3: You said that for many families, Trump accounts simply add 59 00:02:47,919 --> 00:02:51,960 Speaker 3: further complexity to an already complex saving system. And I 60 00:02:52,000 --> 00:02:54,080 Speaker 3: was wondering if you could kind of explain what are 61 00:02:54,120 --> 00:03:00,000 Speaker 3: the economic costs of complexity when it comes to personal finances, 62 00:03:00,360 --> 00:03:03,239 Speaker 3: or you could also extend this to taxes or tax 63 00:03:03,280 --> 00:03:04,120 Speaker 3: system as well. 64 00:03:04,400 --> 00:03:05,880 Speaker 1: So that's the funny thing at the end of this. 65 00:03:05,919 --> 00:03:08,200 Speaker 1: So remember, the Trump accounts are two things here's a 66 00:03:08,240 --> 00:03:10,440 Speaker 1: three thousand bucks last for four years. Small number of 67 00:03:10,480 --> 00:03:13,560 Speaker 1: babies get it. There's a permanent tax break for the 68 00:03:13,639 --> 00:03:17,560 Speaker 1: upper middle class, basically helping you pass your wealth onto 69 00:03:17,639 --> 00:03:19,480 Speaker 1: your kids. Now, it turns out there's already a bunch 70 00:03:19,480 --> 00:03:21,280 Speaker 1: of ways that you can pass wealth onto your kids. 71 00:03:21,320 --> 00:03:24,200 Speaker 1: There's so called five twenty nine plans for saving for education. 72 00:03:24,280 --> 00:03:27,000 Speaker 1: There's roth iras, and there's a whole army of tax 73 00:03:27,080 --> 00:03:29,720 Speaker 1: lawyers who know even more acronyms and funny numbers than 74 00:03:29,720 --> 00:03:31,880 Speaker 1: I'll ever know. There's a sense in which I'm actually 75 00:03:31,880 --> 00:03:35,640 Speaker 1: remarkably well qualified to answer your question about complexity, which 76 00:03:35,680 --> 00:03:38,240 Speaker 1: is I'm not very good at taxes. I know that 77 00:03:38,280 --> 00:03:40,960 Speaker 1: I'm an economist, and I know I'm standing up here 78 00:03:41,000 --> 00:03:43,760 Speaker 1: as if I'm an expert, But actually my household, Betsy 79 00:03:43,760 --> 00:03:46,240 Speaker 1: does our taxes. I find the whole thing overwhelming. I 80 00:03:46,360 --> 00:03:48,480 Speaker 1: come from another country, So when someone says to me, 81 00:03:48,960 --> 00:03:51,480 Speaker 1: I reckon, you should really go open a five twenty nine, 82 00:03:51,600 --> 00:03:53,839 Speaker 1: I'm not sure if they're talking about like a bed 83 00:03:53,880 --> 00:03:56,360 Speaker 1: on a Roulette wheel or a highway in Maine, or 84 00:03:56,400 --> 00:03:57,960 Speaker 1: what the heck it is. And by the way, who 85 00:03:58,000 --> 00:04:00,880 Speaker 1: came up with four oho one k some bloke was 86 00:04:00,880 --> 00:04:02,760 Speaker 1: talking to me about his five A, one C three 87 00:04:02,800 --> 00:04:07,880 Speaker 1: the other day. What language is this? But actually that's 88 00:04:08,000 --> 00:04:10,040 Speaker 1: one of the most important problems, which is you've all 89 00:04:10,080 --> 00:04:14,120 Speaker 1: of a sudden noticed I'm a PhD economist and I 90 00:04:14,160 --> 00:04:16,520 Speaker 1: find this too hard. So now what I'm going to 91 00:04:16,560 --> 00:04:19,280 Speaker 1: have to do is either think it's too bloody complicated 92 00:04:19,320 --> 00:04:21,080 Speaker 1: I'm going to leave it alone. And by the way, 93 00:04:21,120 --> 00:04:23,400 Speaker 1: there's a lot of evidence that that's how working middle 94 00:04:23,400 --> 00:04:26,000 Speaker 1: class families feel about tax breaks. So if you want 95 00:04:26,040 --> 00:04:28,240 Speaker 1: things to be hard to get, you address them up 96 00:04:28,320 --> 00:04:31,200 Speaker 1: with all the authority of the sets of institutions that 97 00:04:31,240 --> 00:04:34,760 Speaker 1: people are already inherently mistrust and don't like to be around. 98 00:04:35,000 --> 00:04:37,000 Speaker 1: The IARS is one of them. So it turns out 99 00:04:37,040 --> 00:04:38,800 Speaker 1: they already could have just seent you a check. They 100 00:04:38,880 --> 00:04:40,680 Speaker 1: just want you to do that. Along the way, it 101 00:04:40,800 --> 00:04:45,120 Speaker 1: leads program participation to fall away. That's an overwhelming observation 102 00:04:45,440 --> 00:04:47,760 Speaker 1: from the literature, and tax breaks and other forms of 103 00:04:47,760 --> 00:04:50,960 Speaker 1: social assistance as well. Worse than that, the folks who 104 00:04:51,200 --> 00:04:55,240 Speaker 1: it scares away are often the folks who can't afford 105 00:04:55,279 --> 00:04:57,679 Speaker 1: to be scared away. I earn enough I can afford 106 00:04:57,680 --> 00:05:01,640 Speaker 1: an accountant at some point, probably will call an accountant, 107 00:05:01,680 --> 00:05:03,640 Speaker 1: and an accountant will charge me a lot of money 108 00:05:03,720 --> 00:05:05,880 Speaker 1: to look up the tax code, and then I'll be 109 00:05:05,920 --> 00:05:07,960 Speaker 1: able to get it. But what I worry about is 110 00:05:08,040 --> 00:05:11,000 Speaker 1: the folks out there who literally don't have a PhD 111 00:05:11,080 --> 00:05:13,880 Speaker 1: in economics find it hard to navigate. The only reason 112 00:05:13,880 --> 00:05:15,840 Speaker 1: my accountant's going to be helpful, by the way, is 113 00:05:15,880 --> 00:05:19,320 Speaker 1: because I know to ask him. If I didn't even know, that, 114 00:05:21,040 --> 00:05:23,040 Speaker 1: there's no way I get the tax break. So what 115 00:05:23,080 --> 00:05:25,920 Speaker 1: it does is it takes an already somewhat regressive system, 116 00:05:26,279 --> 00:05:30,320 Speaker 1: and this form of complexity makes it even more aggressive. 117 00:05:30,760 --> 00:05:34,680 Speaker 1: There are other forms of complexity which have different problems. 118 00:05:34,880 --> 00:05:37,720 Speaker 1: My brother, bless him, is a tax lawyer. He gets 119 00:05:37,760 --> 00:05:40,599 Speaker 1: paid a lot of money to find clever ways for 120 00:05:40,680 --> 00:05:44,000 Speaker 1: corporations to pay less tax I love my brother. It's 121 00:05:44,040 --> 00:05:47,360 Speaker 1: not a judgment on him, but I wonder sometimes if 122 00:05:47,400 --> 00:05:49,480 Speaker 1: he thinks, am I making the world a better place? 123 00:05:49,760 --> 00:05:53,280 Speaker 1: So tax complexity keeps him fully employed. It helps some 124 00:05:53,320 --> 00:05:55,760 Speaker 1: of his clients get a log up relative to other clients, 125 00:05:55,920 --> 00:05:57,880 Speaker 1: But I wonder if we wouldn't all be better off 126 00:05:57,920 --> 00:05:59,880 Speaker 1: if he was off doing teach for America and the 127 00:06:00,080 --> 00:06:04,520 Speaker 1: operations he represents better off paying higher taxes. 128 00:06:04,680 --> 00:06:07,919 Speaker 3: My sister has a tax accountant, so we have a 129 00:06:07,960 --> 00:06:10,960 Speaker 3: similar so I had plausible deniability. 130 00:06:11,040 --> 00:06:13,320 Speaker 1: I'm one of six kids, so I didn't say which brother, 131 00:06:13,640 --> 00:06:16,440 Speaker 1: so that from one of the big firms. Don't worry, 132 00:06:16,480 --> 00:06:18,040 Speaker 1: it's not that brother, it's one of the other ones. 133 00:06:18,080 --> 00:06:19,760 Speaker 2: She has a different last name now, so that will 134 00:06:19,800 --> 00:06:20,279 Speaker 2: be helpful. 135 00:06:20,440 --> 00:06:23,160 Speaker 1: Okay, great, let's not get out siblings fired. 136 00:06:23,360 --> 00:06:25,800 Speaker 2: Well, she does my taxes, so I can't complain too much. 137 00:06:26,480 --> 00:06:27,599 Speaker 2: That is helpful for me. 138 00:06:27,960 --> 00:06:31,640 Speaker 3: One thing that I found interesting about the Trump accounts 139 00:06:31,800 --> 00:06:35,160 Speaker 3: was kind of how those employer contributions have a much 140 00:06:35,160 --> 00:06:39,400 Speaker 3: more generous tax treatment than direct family contributions. And I 141 00:06:39,480 --> 00:06:41,359 Speaker 3: know you didn't write this bill, but do you have 142 00:06:41,440 --> 00:06:44,880 Speaker 3: any theories about why that might be or who benefits 143 00:06:44,920 --> 00:06:46,040 Speaker 3: from that structure. 144 00:06:46,360 --> 00:06:49,039 Speaker 1: So this is just an incredibly complex structure, and so 145 00:06:49,120 --> 00:06:52,719 Speaker 1: I need to rewind because even I forget what it is. Okay, 146 00:06:52,720 --> 00:06:55,080 Speaker 1: there's one thousand bucks that's Plan aid that's over there 147 00:06:55,080 --> 00:06:57,479 Speaker 1: in the corner. That's populous, that short term, it's temporary, 148 00:06:57,480 --> 00:06:59,839 Speaker 1: it disappears. Then there's you're allowed to put up to 149 00:06:59,839 --> 00:07:02,960 Speaker 1: f five grand per year into your account. By the way, 150 00:07:03,000 --> 00:07:05,320 Speaker 1: it doesn't have to be mum or dad that does that. 151 00:07:05,400 --> 00:07:07,880 Speaker 1: It could be grandma or grandpa and other family members. 152 00:07:08,120 --> 00:07:10,440 Speaker 1: When you put that money in, you get a small 153 00:07:10,480 --> 00:07:14,120 Speaker 1: tax advantage. The small tax advantage is what we call 154 00:07:14,120 --> 00:07:17,080 Speaker 1: a tax deferral, which is basically grandma or mom or 155 00:07:17,160 --> 00:07:20,600 Speaker 1: dad can put the money in and the dividends that 156 00:07:20,640 --> 00:07:23,640 Speaker 1: you get each year, you're not forced to call that income, 157 00:07:23,720 --> 00:07:25,680 Speaker 1: so therefore you're not forced to pay taxes on it. 158 00:07:25,720 --> 00:07:28,520 Speaker 1: So therefore the magic of compound interest can go on 159 00:07:28,720 --> 00:07:31,920 Speaker 1: uninterrupted by the tax man. Right, That's what's going on 160 00:07:31,920 --> 00:07:34,840 Speaker 1: with families. That's actually quite important to understand that, because 161 00:07:34,840 --> 00:07:38,640 Speaker 1: it turns out that's a fairly small tax deferral. It's 162 00:07:38,680 --> 00:07:40,720 Speaker 1: just not that big of a deal. Your sister Meghan 163 00:07:40,760 --> 00:07:43,280 Speaker 1: will likely say to you, Hey, Meghan, I really really 164 00:07:43,400 --> 00:07:45,360 Speaker 1: enjoyed the video as you did with Justin on this, 165 00:07:45,480 --> 00:07:47,600 Speaker 1: but I'm still going to advise that you don't do this. 166 00:07:48,040 --> 00:07:50,440 Speaker 1: Your sister knows other parts of the tax code which 167 00:07:50,560 --> 00:07:52,560 Speaker 1: would help you if or when you have kids, which, 168 00:07:52,600 --> 00:07:54,440 Speaker 1: by the way, then means we've just added a whole 169 00:07:54,480 --> 00:07:57,200 Speaker 1: stack of extra pages to tax code without helping you. 170 00:07:57,400 --> 00:08:00,080 Speaker 1: So that's the foundation that's the basis of it. How 171 00:08:00,120 --> 00:08:02,680 Speaker 1: far I can explain all of this right, which is 172 00:08:02,720 --> 00:08:05,680 Speaker 1: the populist part, was the veneer, the window dressing, the 173 00:08:05,680 --> 00:08:07,920 Speaker 1: political cover. Let's do it in a way that has 174 00:08:07,960 --> 00:08:10,560 Speaker 1: a minimal budget impact. Let's do it while Trump is 175 00:08:10,600 --> 00:08:14,040 Speaker 1: still president. Let's get liberals talking about something, because liberals 176 00:08:14,120 --> 00:08:16,080 Speaker 1: used to love baby bonds, so they can't be against 177 00:08:16,080 --> 00:08:17,840 Speaker 1: the whole thing. And over here we're going to implement 178 00:08:17,920 --> 00:08:20,200 Speaker 1: different tax break. It is fairly easy to see how 179 00:08:20,600 --> 00:08:24,760 Speaker 1: that came out of the process. The employer part is 180 00:08:24,800 --> 00:08:27,280 Speaker 1: frankly more puzzling. So basically, I'm allowed to put five 181 00:08:27,320 --> 00:08:28,880 Speaker 1: grand in, but actually what I can do is I 182 00:08:28,880 --> 00:08:30,520 Speaker 1: can ask my boss to put in up to half 183 00:08:30,520 --> 00:08:32,440 Speaker 1: of that, up to twenty five hundred bucks. When the 184 00:08:32,440 --> 00:08:34,839 Speaker 1: boss does that, when I put money in, my boss 185 00:08:34,840 --> 00:08:37,880 Speaker 1: gives me money, I pay taxes, and then out of 186 00:08:37,920 --> 00:08:40,600 Speaker 1: what's left I can put that into my baby's account. 187 00:08:40,720 --> 00:08:42,240 Speaker 1: But if my boss does it, they just put it 188 00:08:42,240 --> 00:08:44,560 Speaker 1: straight in the baby's acount. No tax gets lost along 189 00:08:44,559 --> 00:08:48,480 Speaker 1: the way. That's a huge tax advantage. The money that's 190 00:08:48,520 --> 00:08:51,480 Speaker 1: going in and accumulates was untaxed on the way in 191 00:08:52,080 --> 00:08:54,640 Speaker 1: much much much better. So then why are we only 192 00:08:54,679 --> 00:08:58,280 Speaker 1: allowing that for twenty five hundred dollars. My guess is 193 00:08:58,320 --> 00:09:00,960 Speaker 1: the budgetary cost of this is actually really large. Right 194 00:09:01,000 --> 00:09:03,840 Speaker 1: when you give people a tax cut, your less revenue, 195 00:09:03,960 --> 00:09:06,520 Speaker 1: and so this is actually a pretty serious fiscal issue. 196 00:09:06,600 --> 00:09:08,360 Speaker 1: They had to under the process, They had to not 197 00:09:08,400 --> 00:09:10,800 Speaker 1: blow out the budget too much. They went through reconciliation 198 00:09:11,000 --> 00:09:15,320 Speaker 1: rather than being passed through normal process. It's one of 199 00:09:15,360 --> 00:09:18,040 Speaker 1: those bills you read it and you're like, wow, this 200 00:09:18,160 --> 00:09:20,000 Speaker 1: is so complex, with so many ins and outs. It 201 00:09:20,000 --> 00:09:22,079 Speaker 1: could have been written by a Democrat. And by the way, 202 00:09:22,120 --> 00:09:23,880 Speaker 1: that is a dig at my friends. The Democrats who 203 00:09:23,920 --> 00:09:26,920 Speaker 1: love infinite complexity is they just want to prove exactly 204 00:09:27,000 --> 00:09:30,120 Speaker 1: their wonky bona fides. I don't have a theory of 205 00:09:30,160 --> 00:09:34,000 Speaker 1: the case. One thing that's really worrying though, is does 206 00:09:34,040 --> 00:09:37,319 Speaker 1: your employer provide a way for you to take advantage 207 00:09:37,320 --> 00:09:40,560 Speaker 1: of this tax cut? Now it turns out, I know 208 00:09:40,920 --> 00:09:43,720 Speaker 1: in your case, Meghan, because your employer is Platipus Economics. 209 00:09:43,800 --> 00:09:46,160 Speaker 1: Platiticpal S Economics is a very small business that does 210 00:09:46,200 --> 00:09:50,199 Speaker 1: not have set up direct employer contributions to these accounts. 211 00:09:50,240 --> 00:09:52,360 Speaker 1: So not because I don't care for you, I do 212 00:09:52,520 --> 00:09:56,520 Speaker 1: deeply you're amazing, but because I'm a small business and 213 00:09:56,600 --> 00:09:58,760 Speaker 1: so you're going to miss out. It's weird the ways 214 00:09:58,800 --> 00:10:00,920 Speaker 1: we do readistribute in this country. 215 00:10:01,280 --> 00:10:03,240 Speaker 2: Yeah, I think that's a really important point there. 216 00:10:03,360 --> 00:10:07,440 Speaker 3: Okay, So we had a few different comments from people 217 00:10:07,720 --> 00:10:10,280 Speaker 3: that were basically acknowledging some of the flaws of these 218 00:10:10,280 --> 00:10:13,200 Speaker 3: accounts but talking about how they could still be really 219 00:10:13,320 --> 00:10:17,000 Speaker 3: useful in helping give kids an introduction to investing in 220 00:10:17,080 --> 00:10:19,760 Speaker 3: the stock market. And I just wanted to see if 221 00:10:19,800 --> 00:10:21,760 Speaker 3: you had a response to that, like, is there some 222 00:10:22,000 --> 00:10:24,680 Speaker 3: value there or is there a better way to go 223 00:10:24,800 --> 00:10:26,480 Speaker 3: about teaching those skills. 224 00:10:26,880 --> 00:10:28,839 Speaker 1: I saw this too, and I was of so many 225 00:10:28,880 --> 00:10:30,679 Speaker 1: different minds and there are so many ways to think 226 00:10:30,720 --> 00:10:32,360 Speaker 1: about it, And Megan, you might have your own ways 227 00:10:32,400 --> 00:10:36,720 Speaker 1: as well. One we live in tremendously partisan times and 228 00:10:36,840 --> 00:10:38,600 Speaker 1: being able to wake up in the morning and say 229 00:10:38,640 --> 00:10:41,320 Speaker 1: something nice about one side and the other side not 230 00:10:41,520 --> 00:10:44,640 Speaker 1: be one of those partisan you know, firebrands who heights 231 00:10:44,679 --> 00:10:47,400 Speaker 1: everything always and everywhere. I think it's good for the world, 232 00:10:47,640 --> 00:10:50,320 Speaker 1: good for the soul, sometimes, good for your intellectual honesty. 233 00:10:50,480 --> 00:10:52,920 Speaker 1: But I can understand the desire to say, hey, you 234 00:10:52,960 --> 00:10:54,960 Speaker 1: know what, this program sucks, But it's kind of a 235 00:10:55,000 --> 00:10:59,160 Speaker 1: cousin to something that doesn't. Yeah, but it just kind 236 00:10:59,160 --> 00:11:02,120 Speaker 1: of fell for the old bait and switch, which is 237 00:11:02,760 --> 00:11:08,080 Speaker 1: the programmers that actually exists, small temporary goes away. That's 238 00:11:08,120 --> 00:11:10,720 Speaker 1: the thousand bucks. That's the part that all those comments were, like, 239 00:11:10,760 --> 00:11:12,960 Speaker 1: I reckon this thousand bucks, you know, giving kids a 240 00:11:13,000 --> 00:11:15,000 Speaker 1: steak in the stock market. It's a pretty good idea. 241 00:11:15,760 --> 00:11:18,800 Speaker 1: Helping the working class understand and learn and come to 242 00:11:18,880 --> 00:11:20,600 Speaker 1: terms with not just the market, but the magic of 243 00:11:20,600 --> 00:11:23,319 Speaker 1: compound interest, giving us all a stake in the future 244 00:11:23,400 --> 00:11:26,640 Speaker 1: of American business. All that's a really good idea. I 245 00:11:26,640 --> 00:11:28,840 Speaker 1: have no view about the rest of this stuff, ways 246 00:11:28,840 --> 00:11:31,600 Speaker 1: in which the upper middle class can more easily transfer 247 00:11:31,640 --> 00:11:34,240 Speaker 1: their funds to the next generation. If we were talking 248 00:11:34,240 --> 00:11:36,200 Speaker 1: pure and the abstract, you know, I'm sort of okay 249 00:11:36,280 --> 00:11:37,440 Speaker 1: with that. But what if one of them is this 250 00:11:37,480 --> 00:11:39,520 Speaker 1: big and the other one's that big, then you just 251 00:11:39,520 --> 00:11:41,800 Speaker 1: got suck it. And so this is a case where 252 00:11:41,880 --> 00:11:44,160 Speaker 1: if they had just passed a baby bond, just the 253 00:11:44,240 --> 00:11:46,120 Speaker 1: thousand bucks, none of the rest of it, I think 254 00:11:46,120 --> 00:11:48,840 Speaker 1: I would have said, you know, it's not my idea. 255 00:11:49,040 --> 00:11:50,719 Speaker 1: I would have insisted my friends on the left to 256 00:11:50,760 --> 00:11:52,920 Speaker 1: a very progressive who loved this idea, I would have 257 00:11:52,920 --> 00:11:54,920 Speaker 1: insisted that they say, well, if they loved it under 258 00:11:54,920 --> 00:11:57,040 Speaker 1: a democrat, they should love it under a Republican. I 259 00:11:57,040 --> 00:12:00,839 Speaker 1: think I would have said, this idea actually does have 260 00:12:01,080 --> 00:12:03,600 Speaker 1: the kernel of genius in it. In fact, it's just 261 00:12:03,720 --> 00:12:06,520 Speaker 1: not what they've implemented. So the colonel of genius, I 262 00:12:06,520 --> 00:12:09,600 Speaker 1: think is twofold one. Let's teach the power of compound interest, 263 00:12:09,679 --> 00:12:12,160 Speaker 1: let's get people in stocks. But there's actually something far deeper. 264 00:12:12,320 --> 00:12:15,080 Speaker 1: Through centuries, one of the biggest political fights has been 265 00:12:15,160 --> 00:12:17,480 Speaker 1: labor versus capital, and that can lead to some very 266 00:12:17,480 --> 00:12:20,400 Speaker 1: destructive fights where labour goes on strike, for instance, and 267 00:12:20,440 --> 00:12:23,880 Speaker 1: then capital can't get anything made, or where capital tries 268 00:12:23,920 --> 00:12:26,240 Speaker 1: to get certain laws passed in order to restrict the 269 00:12:26,320 --> 00:12:29,319 Speaker 1: returns to labor, and they're each at each other. Well, 270 00:12:29,360 --> 00:12:32,160 Speaker 1: if workers all owned a share of the economy, like 271 00:12:32,200 --> 00:12:34,840 Speaker 1: a really substantial share, then all of a sudden, workers 272 00:12:34,840 --> 00:12:36,800 Speaker 1: have an interest in American business get in the head. 273 00:12:36,880 --> 00:12:39,720 Speaker 1: It no longer becomes workers versus capital. It becomes workers 274 00:12:39,800 --> 00:12:43,520 Speaker 1: and capital because workers own capital. Now, Restructuring society in 275 00:12:43,520 --> 00:12:45,199 Speaker 1: that way takes a lot of work. In Australia, we 276 00:12:45,200 --> 00:12:48,840 Speaker 1: actually do it through retirement savings, which is workers put 277 00:12:48,840 --> 00:12:51,199 Speaker 1: their money aside. Their money goes into the stock market, 278 00:12:51,240 --> 00:12:53,679 Speaker 1: unlike American social security that I think is actually kind 279 00:12:53,679 --> 00:12:56,800 Speaker 1: of helpful. Now, four generations each having one thousand dollars 280 00:12:56,800 --> 00:12:58,880 Speaker 1: in the stock market doesn't do anything for anyone. Like, 281 00:12:59,040 --> 00:13:02,520 Speaker 1: what was your emotion all response to this or analytic? 282 00:13:02,960 --> 00:13:06,760 Speaker 3: Yeah, I mean I think I fell into the camp 283 00:13:06,800 --> 00:13:09,319 Speaker 3: a little bit of. I was somewhat familiar with baby 284 00:13:09,360 --> 00:13:11,320 Speaker 3: Bonds by no means an expert, and I knew they 285 00:13:11,320 --> 00:13:17,280 Speaker 3: held promise, so I understood the kind of hesitance by 286 00:13:17,400 --> 00:13:22,360 Speaker 3: I think most Democrats to criticize this because there is, 287 00:13:22,440 --> 00:13:25,320 Speaker 3: like you said that colonel of genius or colonel of 288 00:13:25,559 --> 00:13:29,360 Speaker 3: what they maybe originally wanted. But that made me, I guess, 289 00:13:29,520 --> 00:13:32,360 Speaker 3: all the more sad when I realized just like how 290 00:13:32,559 --> 00:13:36,600 Speaker 3: kind of inequality exacerbating this would wind up being, And. 291 00:13:37,040 --> 00:13:40,640 Speaker 1: I went from sad to mad. Yeah, it really was 292 00:13:40,679 --> 00:13:43,520 Speaker 1: a tice of reading and thinking hot and being like 293 00:13:43,559 --> 00:13:46,800 Speaker 1: a holy cow. All of the media coverage of this 294 00:13:46,960 --> 00:13:50,920 Speaker 1: was wrong. Yeah, I very rarely say that, but everyone 295 00:13:51,000 --> 00:13:53,480 Speaker 1: was like baby bonds, how exciting, let's to bite this 296 00:13:53,559 --> 00:13:58,000 Speaker 1: progressive idea. Oh, there's a permanent structure over here that's 297 00:13:58,040 --> 00:14:00,200 Speaker 1: not for the folks you care about so well. 298 00:14:00,240 --> 00:14:02,439 Speaker 2: I think that kind of leads into our next comment. 299 00:14:02,600 --> 00:14:04,720 Speaker 3: You acknowledge kind of at the end of your piece 300 00:14:04,760 --> 00:14:08,280 Speaker 3: that this thousand dollars giveaway it's free, but it's not 301 00:14:08,360 --> 00:14:12,480 Speaker 3: really free, nor are the tax expenditures wealthy families primarily 302 00:14:12,520 --> 00:14:14,840 Speaker 3: will receive. And I was just hoping you could kind 303 00:14:14,880 --> 00:14:17,679 Speaker 3: of like expand on that a bit, like, how are 304 00:14:17,679 --> 00:14:18,000 Speaker 3: we going to. 305 00:14:18,080 --> 00:14:18,959 Speaker 2: End up paying for this? 306 00:14:19,320 --> 00:14:19,400 Speaker 1: Like? 307 00:14:19,560 --> 00:14:21,960 Speaker 3: Is there any world where the benefits could be worth 308 00:14:22,000 --> 00:14:22,400 Speaker 3: the cost? 309 00:14:22,640 --> 00:14:25,040 Speaker 1: Okay, so let's actually get some terminologs. You're right, this 310 00:14:25,080 --> 00:14:28,280 Speaker 1: is why these segments are great because we can actually 311 00:14:28,280 --> 00:14:30,520 Speaker 1: go to that next level. Could the benefits succeed the 312 00:14:30,560 --> 00:14:34,920 Speaker 1: costs benefits to the world or to Americans? Absolutely, that 313 00:14:34,920 --> 00:14:37,040 Speaker 1: could already be true, right if what we have is 314 00:14:37,360 --> 00:14:39,680 Speaker 1: progressive taxation and then we take it and we send 315 00:14:39,920 --> 00:14:42,560 Speaker 1: one thousand dollars to every baby. You might think, given 316 00:14:42,600 --> 00:14:46,080 Speaker 1: that most of the money we raise comes from wealthier individuals, 317 00:14:46,320 --> 00:14:49,560 Speaker 1: that this is more equitable. You might think that by 318 00:14:49,680 --> 00:14:53,200 Speaker 1: introducing people to stocks, it provides useful education. You might 319 00:14:53,360 --> 00:14:55,600 Speaker 1: think that by giving people their own nestig and a 320 00:14:55,600 --> 00:14:57,600 Speaker 1: way to get ahead that it's actually going to be 321 00:14:57,600 --> 00:15:00,200 Speaker 1: efficient that generation of babies. Maybe if that thousand it 322 00:15:00,280 --> 00:15:04,120 Speaker 1: becomes ten thousand and they start a small business. Who knows, right, 323 00:15:04,360 --> 00:15:06,240 Speaker 1: So the benefits could have said the cost. That's different 324 00:15:06,280 --> 00:15:08,240 Speaker 1: than asking could to pay for itself. When you're asking 325 00:15:08,240 --> 00:15:10,280 Speaker 1: you to pay for itself. Now you're saying, does the 326 00:15:10,320 --> 00:15:13,400 Speaker 1: tax revenues raised by all of the activity caused by 327 00:15:13,440 --> 00:15:15,840 Speaker 1: the baby bond? I've set the cost of the baby bonds? 328 00:15:16,000 --> 00:15:18,400 Speaker 1: The answer is almost certainly not. It's just taking money 329 00:15:18,440 --> 00:15:21,280 Speaker 1: from one pocket and putting another. So that's what a 330 00:15:21,320 --> 00:15:23,440 Speaker 1: transfer payment is. We call it a transfer payment, right, 331 00:15:23,560 --> 00:15:26,400 Speaker 1: it's we're not providing an incentive to do anything. The 332 00:15:26,440 --> 00:15:29,520 Speaker 1: thing is you get this bond just for being a baby. Now, 333 00:15:29,520 --> 00:15:31,320 Speaker 1: the thing about being a baby is when you're one 334 00:15:31,440 --> 00:15:34,840 Speaker 1: year of age, you have no choice. Taxes and subsidies 335 00:15:34,880 --> 00:15:36,760 Speaker 1: work or what they do is provide an incentive to 336 00:15:36,920 --> 00:15:39,360 Speaker 1: make a different choice. So if this were, for instance, 337 00:15:39,440 --> 00:15:41,720 Speaker 1: like the earned income tax credit, we'll give you money 338 00:15:41,720 --> 00:15:44,840 Speaker 1: for working, that would lead more people to work. This 339 00:15:44,880 --> 00:15:46,520 Speaker 1: is giving you money for being a baby. It's not 340 00:15:46,560 --> 00:15:48,880 Speaker 1: going to lead more people to become babies. So I 341 00:15:48,960 --> 00:15:53,040 Speaker 1: don't see how it's going to create huge efficiencies one 342 00:15:53,080 --> 00:15:57,280 Speaker 1: way or the other. The broader question is an important one, 343 00:15:57,320 --> 00:16:00,200 Speaker 1: which is where are we on our fiscal situation, And 344 00:16:00,240 --> 00:16:02,680 Speaker 1: the answer is we're in a terrible, terrible state. The 345 00:16:02,840 --> 00:16:05,880 Speaker 1: US deficit, as we've talked about before, is at a 346 00:16:06,000 --> 00:16:08,480 Speaker 1: level that you would normally expect if we're in the 347 00:16:08,520 --> 00:16:10,680 Speaker 1: midst of a major recession, and so part of that's 348 00:16:10,720 --> 00:16:13,640 Speaker 1: what's keeping the economy going right now, and so now 349 00:16:13,760 --> 00:16:18,400 Speaker 1: is not the time for populist giveaways. Now's the time 350 00:16:18,400 --> 00:16:19,880 Speaker 1: for a little bit of responsibility. 351 00:16:20,200 --> 00:16:25,680 Speaker 3: Okay, one last question for you, Despite all the criticisms 352 00:16:25,680 --> 00:16:29,000 Speaker 3: we've talked about, do you think the next administration, whether 353 00:16:29,000 --> 00:16:32,120 Speaker 3: they're a Democrat or Republican, do you think they will 354 00:16:32,280 --> 00:16:35,960 Speaker 3: extend the one thousand dollars and maybe more importantly or 355 00:16:36,240 --> 00:16:37,480 Speaker 3: and said should they. 356 00:16:37,680 --> 00:16:40,320 Speaker 1: Let me start with should I think whoever the next 357 00:16:40,320 --> 00:16:42,960 Speaker 1: administration is, should just get rid of the whole damn thing, 358 00:16:43,160 --> 00:16:45,600 Speaker 1: get rid of the one more pointless tax break for 359 00:16:45,640 --> 00:16:48,200 Speaker 1: the upper middle class. And while you're at it, get 360 00:16:48,280 --> 00:16:50,840 Speaker 1: rid of the giveaway. You're actually asking a much harder question, 361 00:16:50,960 --> 00:16:52,960 Speaker 1: which is should we just get rid of the pointless 362 00:16:52,960 --> 00:16:55,200 Speaker 1: giveaway to the upper middle class and keep the thousand 363 00:16:55,240 --> 00:16:59,240 Speaker 1: bucks per kid. Maybe actually it's about providing a political 364 00:16:59,320 --> 00:17:04,480 Speaker 1: foundation for this form of redistribution. If inequality in opportunity 365 00:17:04,480 --> 00:17:06,760 Speaker 1: exists on the day of your birth, this form of 366 00:17:06,800 --> 00:17:09,119 Speaker 1: redistribution stuff that occurs on the day of your birth, 367 00:17:09,160 --> 00:17:11,000 Speaker 1: is the best time and the best place to start 368 00:17:11,040 --> 00:17:14,720 Speaker 1: addressing it. It's a different question if a future democratic 369 00:17:14,760 --> 00:17:16,720 Speaker 1: administration came to me and said, you've got a bunch 370 00:17:16,760 --> 00:17:18,320 Speaker 1: of money to spend, would you like to spend more 371 00:17:18,320 --> 00:17:20,080 Speaker 1: of it on baby bonds or other things? I might 372 00:17:20,160 --> 00:17:22,480 Speaker 1: choose other things. But this at least sort of opens 373 00:17:22,520 --> 00:17:26,560 Speaker 1: a political window which allows a conversation about redistributing to 374 00:17:26,600 --> 00:17:29,320 Speaker 1: the very young. By the way, I am deeply colored 375 00:17:29,320 --> 00:17:31,240 Speaker 1: here by the fact that I'm one of six kids. 376 00:17:31,400 --> 00:17:33,800 Speaker 1: When I was young, I always used to think, you know, 377 00:17:33,840 --> 00:17:36,439 Speaker 1: we got by. We had a middle class income, but 378 00:17:36,560 --> 00:17:39,120 Speaker 1: a middle class income divided by eight because there's also 379 00:17:39,200 --> 00:17:40,959 Speaker 1: mum and dad doesn't go as far. And so I 380 00:17:40,960 --> 00:17:43,560 Speaker 1: remember thinking as a kid, how deeply and profoundly unfair 381 00:17:43,560 --> 00:17:45,920 Speaker 1: that was. Then I went to graduate school and became 382 00:17:45,960 --> 00:17:48,600 Speaker 1: an economist, where instead of thinking about children as people, 383 00:17:48,600 --> 00:17:50,720 Speaker 1: he came to think of them as things that people 384 00:17:50,760 --> 00:17:55,399 Speaker 1: decide to have consumption goods. I think often my younger 385 00:17:55,440 --> 00:17:58,639 Speaker 1: self might have been the more moral, truer, more reliable 386 00:17:58,760 --> 00:18:02,960 Speaker 1: self in that. You then asked me one more question. 387 00:18:03,040 --> 00:18:05,160 Speaker 1: You said, do you think it will get renewed? And 388 00:18:05,880 --> 00:18:08,240 Speaker 1: I think it won't because it's dumb. I talked to 389 00:18:08,280 --> 00:18:11,800 Speaker 1: my better half, Betty Stevenson, who's worked in white houses before, 390 00:18:11,840 --> 00:18:14,120 Speaker 1: and she said, this is how it always works, and 391 00:18:14,160 --> 00:18:16,000 Speaker 1: she thinks it will get renewed. I'm not sure whether 392 00:18:16,000 --> 00:18:18,000 Speaker 1: publicly I should be quoting a walk on the beach 393 00:18:18,040 --> 00:18:20,359 Speaker 1: with my better half, but there you have it, Hi, Betsy, 394 00:18:20,840 --> 00:18:24,119 Speaker 1: It's just a forecast. Her forecast is this stuff seems 395 00:18:24,240 --> 00:18:28,080 Speaker 1: kind of popular. In four years time, Senators and congressmen 396 00:18:28,119 --> 00:18:29,560 Speaker 1: are going to say, well, we have to renew this. 397 00:18:29,600 --> 00:18:31,679 Speaker 1: It would be unfair if the next generation of babies 398 00:18:31,680 --> 00:18:33,840 Speaker 1: didn't get it. And if that's the case, that's how 399 00:18:33,880 --> 00:18:36,840 Speaker 1: we make policy. That actually means that we're often making 400 00:18:36,880 --> 00:18:39,520 Speaker 1: budgetary policy with a lie, which is we have to 401 00:18:39,520 --> 00:18:40,879 Speaker 1: write the law as if there's not going to be 402 00:18:40,880 --> 00:18:44,640 Speaker 1: future costs, and the political reality is everything gets renewed, 403 00:18:44,800 --> 00:18:49,040 Speaker 1: which speaks to that deeper problem with how we write budgets. 404 00:18:49,080 --> 00:18:51,600 Speaker 1: We write stuff as if it's temporary, and then allow 405 00:18:51,640 --> 00:18:55,480 Speaker 1: political forces to take hold, and predictably they become permanent. 406 00:18:55,680 --> 00:18:58,880 Speaker 1: So Betsy thinks they'll still be here. I don't think 407 00:18:58,920 --> 00:19:01,120 Speaker 1: they will be if. If she turns out to be right, 408 00:19:01,200 --> 00:19:02,880 Speaker 1: you can come back in full years and write lots 409 00:19:02,920 --> 00:19:05,520 Speaker 1: of comments saying Bitsy was right, Bitsy was right, you 410 00:19:05,520 --> 00:19:06,160 Speaker 1: were rooming again? 411 00:19:06,400 --> 00:19:07,440 Speaker 2: Justin sounds good. 412 00:19:07,560 --> 00:19:10,159 Speaker 3: I have a feeling some people might be setting that 413 00:19:10,240 --> 00:19:13,320 Speaker 3: alarm in their phone right now. Thank you to our 414 00:19:13,359 --> 00:19:17,000 Speaker 3: audience once again for your thought provoking questions and comments. 415 00:19:17,080 --> 00:19:19,359 Speaker 3: We really hope that you enjoyed this episode of the 416 00:19:19,359 --> 00:19:22,199 Speaker 3: Professor is in. If you like your question answered in 417 00:19:22,200 --> 00:19:25,360 Speaker 3: the future segment, just leave a comment wherever you're listening 418 00:19:25,440 --> 00:19:28,680 Speaker 3: or watching this, and make sure to like and subscribe 419 00:19:28,680 --> 00:19:32,399 Speaker 3: to Platypus Economics on YouTube, substack, and wherever you can 420 00:19:32,440 --> 00:19:40,400 Speaker 3: find us on social media.