Chapter 1: What is the main topic discussed in this episode?
Hey, everybody. Welcome back to the find out podcast. You've got Tim, Rich and Zach today. And we're going to take a little bit of a break talking about, you know, ice going into all of our communities and, you know, shooting people and everything. But we're going to talk about something.
They're done. Right. Are they done now?
That's all over.
I heard they were done.
Well, we're going to move. We're going to move to the state of the economy because we've actually got. one of the top economists in the United States. We have Justin Wolfers with us, who is an Australian economist and public policy scholar, and he is a professor of economics and public policy at the Gerald R. Ford School of Public Policy at the University of Michigan.
Justin, thanks for joining us today. Thanks. Good to be here.
I'm also an American by the way.
Oh, you are. Oh, I'm sorry. I was, I was reading your Wikipedia page, so I'm going to have to, I'm going to have to. Great research being done on our side. Oh God. Yeah. We, we go real deep here. I was reading the first paragraph off, but anyway, so, so Justin, so, uh, Tell us, just generally speaking, I saw you gave a grade for the U.S. economy recently, and I think it was a B minus.
So we are hearing everything from the economy is amazing. It's great. It's never been better to we are basically on the precipice of a recession. In your opinion, generally at the 10,000 foot level, where are we economically? Like what's working and what's not?
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Chapter 2: How does Justin Wolfers evaluate the current state of the U.S. economy?
So in each case, you know, things can go okay. Unemployment was low. Inflation was a bit high and we might want it, but was edging back down to where the Fed wanted it. So that's what the president inherited. And the good thing about economies is they move slowly. Economic news, like the talking heads on CNBC and so on, don't. But actual economies move slowly.
And so you heard a lot of doom and gloom, but actually the economy kept on keeping on. Now, when I say it kept on keeping on, we didn't enter recession. Things didn't turn south. The world is still here. But it's also been a year in which the unemployment rate has continued to rise. You know, what do we want? We want to get the unemployment rate as low as we can get it.
And then we just want it steady. So anytime it's rising, we must be doing worse than what we can do. So that says we're not producing as much stuff. We're not employing as many people as we might otherwise. That's one part of the economy. I think it's the most important. Jobs are a big part of how we define ourselves. They have an important social meaning.
They're how we look after ourselves and our families. Being unemployed sucks. And when there's not enough jobs, it's not just a question of those who lose their jobs. People stay in their jobs, but they can't find new opportunities. They can't get pay rises and so on. So slowly rising unemployment is worse than it ought to be. The word slowly there gives you some wiggle room.
Inflation hasn't come down as quickly as we might have hoped. And folks, I'm sure, have noticed prices continuing to rise. The president relentlessly lies about this. He lies that he's gotten prices down. It's an absurd lie because unlike him, the rest of us go to the store.
Right. The rest of us know what prices are. It's a crazy word. It's a fashion word.
He was in Iowa the other day and he's been lying for months saying gas is $1.99. And every time he says it, it gets fact checked. So he went to Iowa where it's not true, still not true. It's still never been true. And he said, oh, it got even better. It's now down to $1.85. Oh, great. So the imaginary economy is doing terrific. The one we live in a little less so.
And then I want to bore everyone with that sort of stuff economists are forced to talk about. The budget deficit. Look, here's the simple logic of budgets. What you want to do is stash some extra money away during good times so you can have a cash splash, help people out when times are bad.
If you thought times were really, really, really bad right now, you might think it's okay to have a deficit as big as we do. if you thought that things were kind of okay, maybe we should be at roundabout neutral. Um, we're miles from that. And so what we have is a huge amount of money, government money supporting what at the moment is, you know, a B minus economy.
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Chapter 3: What factors contribute to rising unemployment in the economy?
So I'm just going to throw on another statistic for you. This same survey asks, what do you think about the quality of our macroeconomic policy? And the share of Americans who rate it as poor has never been higher.
Right.
Of course. We have lost trust in our leadership. And that, you know, is a matter of civics and blah, blah, blah. You guys talk about that all the time. I'm sure it might worry you. But it's a matter of economics. is really quite problematic because am I going to invest in an education? Am I willing to buy a house? Does it make sense to get an education? Does it make sense?
These are very long run decisions. And if people feel they can't plan, they may be less likely to make those investments.
That makes sense. Well, let me ask you this then, because here is another thing that we have seen over and over again.
I assume that you do not agree that when you give massive tax cuts to millionaires and billionaires, that that then, because you're giving these people all this extra money, that it doesn't come raining down on the rest of us and lift us all back up, as we've been told since the 80s, I believe?
So, Tim, you're actually making, I think, a really fundamentally important point. And I want to step even further back before we step into it. Every day we wake up to a new news cycle, a new outrage of the day, a new kerfuffle. There's all sorts of bullshit and nonsense going on. What we have to do is step back from what he says and look at what he does.
That's actually a very important exercise when it comes to economics because every day there's a new debate. Should we do this? He called that person fat. He called that person ugly. Whatever, right? Totally unlike my middle school experience. What has he actually done? Well, I can think of two things. One is this tax bill, is the budget.
The Trump budget was the single biggest redistribution from poor to rich in a single bill in American history. It was the anti-Robin Hood. Yeah. Take from the poor, give to the rich. Largest redistribution in American history. Separate from that, you add tariffs. And the thing about tariffs is tariffs are like a sales tax. Well, the higher your income, the less of your money is spent.
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Chapter 4: How does inflation affect everyday Americans?
Now, here's an interesting question for you, because I have struggled with this for a long time, because we saw Ronald Reagan do this. We saw George W. Bush do this. Now we've seen Donald Trump do it twice. Like, I guess what's confusing to me is like, first of all, it's very clear it doesn't work economically. But like, how do we convince people of that?
Because this seems to me like we've done it like four or five, six times now, and it never has the stability of effect that they claim. So I guess one, how do we explain this to people? And two, I assume they know this and just don't care. But they say the trickle down thing because it sounds good. Am I on to something?
Let's steal the rest of the audience in on what you just said. So what we've had is folks giving tax cuts to the rich now for several generations. This was the heart of Reagan and the heart of Thatcher, if you want to sound very fancy British. Back then they justified it. They said what will happen is this will stimulate investment, employment, growth.
It will trickle down from the rich to the poor. It turns out when you find ways for the rich to get rich, the rich get rich. Turns out when sharing is optional, they often choose not to do it. Right. The question that I want to ask you, Tim, is you said, I think that's the economic theory again this time. I'm not sure they even bothered, to be honest.
I don't think they even went out and really said, you know what we can do? We can like help working in middle class Americans by providing new opportunities for investments among the rich. I think we have a billionaire president. who's beholden to the billionaire class who just did this as a reflex. And I don't think he actually really tried to win the argument at all.
Um, I think they've given up on the theory and it's just like, we're in control. We take the big heart. I might be wrong about that, but, um, It didn't... You're the first person who asked me that question in a long time.
Isn't that crazy? Because it is all in the open. Like, he wants to... Sorry, I'm just, like, kind of... He wants to build this... Yeah.
Go ahead. Well, no, I just... Sorry, I don't mean to cut you off, Rich, but I'm just, like... To me, it just seems like the ground, like, truth here that, like, you were saying, like, you know, there are different political parties who have different philosophies of how to stimulate the economy, right?
And I think, and this is, I would say, a blame for people on the left, not economists or politicians, but like this, it's been proven to not work, like over and over. Tax cuts for the rich make rich people rich.
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Chapter 5: What role do tariffs play in the current economic landscape?
Right. Right. I mean, I mean, I don't want to see a depression. Don't get me wrong. And I know like it can get really bad, but like. You know, it's like Trump gets to come in or Bush gets to come in and cut taxes and look like a hero. And then we have to like roll the back and you don't get anything in return, but you get a more spiscally sound base.
But like then the far left, for example, are like, well, you're just as bad as the Republicans. And our coalition is not as airtight as I think the Republican coalition is. So from a practical matter, I would very much be like, yes, let's be the adults and do that. But like it's getting harder and harder to tell Democrats to to push for that, because what is like.
You know, we don't want Trump anymore and then we're going to bring you stability and people are going to go yawn. You know, it's a hard problem. So I don't I actually don't know how to do it because Dems do care about policy and they look at the numbers and, you know, and they like. are trying to help as many people as possible.
But like the reward we get is basically a double middle finger every four to eight years. And now we've ended up with a guy who bankrupted casinos and has convinced, you know, tens of millions of Americans. He's a good businessman. So I don't actually know the answer to this. It's a, it's a really hard one. I don't think anybody does. Well, just let me ask. I am good. You're rich.
It's going to fix it.
Okay. I got a fit. No, I have a fix. I got a fix. What's your fix in those? those smash rooms where you like break things with a bat for like $50, whatever.
Um,
The next president auctions off or not even auctions off, just like for $5 a hit. You can go to that ballroom with a hammer and you just get one swing. Oh, I would do that. Right. 90 million Americans, like five, six hits each. Boom. We just closed the deficit. And the tourism dollars. Going to D.C. Right. Stimulus.
So can we ask the economics professor if he thinks that that is a sound approach to solving our deficit?
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Chapter 6: How do economic policies impact the average American's life?
Right.
I reckon the answer is no. I would rather have another trillion or so for the next pandemic, the next recession, the next war, the next crisis of some form. Right. Then there's the microeconomics of it all, which is in some sense just code for common sense. Look, debt's not necessarily a bad thing. I say to my students all the time, go and get a student loan, go to college, get an education.
Here's why. The average college graduate over the course of their lifetime will earn more than a high school graduate by more than a million dollars.
Mm-hmm.
So if college costs you less than a million, it sounds like a good deal. Right. And it costs a lot less than a million. So borrowing today to boost your future purchasing, future incomes, which will make it easy to repay those student loans. Now, it doesn't work for everyone. We have to acknowledge that. And there are predators in this space and there are shitty colleges and so on.
And those are all really big problems. But socking away money for an investment that's likely to pay off is a good idea. I mean, borrowing money for investment will pay off. Now, also Michigan has, we have frat houses and we have some people, some students who come here and never leave their frat house. They never come to my lectures, which are, my lectures are insightful, interesting.
Well, you have students that sign up and they don't show up?
Some of them. Yes. And realize they're borrowing $40,000 a year for this. Right. And they're staying for a kegger.
Yep.
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Chapter 7: What are the dangers of high national debt?
The latest GDP report comes out, CNN calls me, I say blah, blah, blah. They say blah, blah, blah. We blah, blah, blah about it. We even did it at the start of this podcast. I want you to step back and ask a deeper question. And that question is why are some countries rich and some poor? The United States is rich. I was born in Papua New Guinea. Papua New Guinea is a country of grinding poverty.
Right. Low literacy rates, very high rates of maternal mortality. Kids die in childbirth. People sometimes are hungry. High murder rate.
Right.
And economists have asked versions of this question now for decades. And sometimes we'll look at the experience over as long as a million years, sometimes a hundred years, sometimes a thousand years, sometimes the last few decades. Sometimes we look at every country. Sometimes we look at specific case studies. Sometimes we're doing quantitative analysis. Sometimes we're telling histories.
The answer appears to be that what matters is what we call institutions. Institutions are the rules of the game. So the rules of the game in the United States are we respect contracts. We respect the rule of law. If you happen to own something, I'm not allowed to steal it, and the state will help enforce those property rights.
They're the incentives for research and development, which are part of our intellectual property laws. And on and on it goes. It's an independent central bank. It's a functional democracy that means that when the leadership pursues their own self-interest rather than those of the rest of us, we kick the bums out.
And my greatest fear is that what has been undermined more than any news story we've talked about is those foundations in the United States. In fact, by this telling of the story, perhaps the greatest economic flaw of the current president is an attempt to overturn an election. Because nothing does more to undermine the quality of our governance than not being accountable to the people.
And there are deep questions whether he has undermined democracy. I'm just going to put it out there that we shouldn't even be at a point where that's a question. And so we've been talking more recently about the independence of the central bank. If we think about the public service, to cite, lots of people think of public servants as bums. I happen to think of them as noble people.
These are many of my students. who want to make a difference in public life. And so you think about, if you think about what the president's undermined, the president has systematically tried to enrich himself and his family, he's invited foreign countries to essentially bribe him in a variety of ways that yield payoffs for him and in return he's enriching folks elsewhere.
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