00:00 Speaker A
If you look at the aggregate, if you look at the big numbers, if you look at GDP, GDP is fine and not all consumers need to participate in it. That’s what we’ve seen historically, right? Um, and not only that, but enterprise spending is making a bigger slice of that pie and also because of AI. So, not from purely economics but from economics from a humanitarian perspective, how concerned do we need to be about the reality of people being drawn in this way?
00:50 Speaker B
You know, Julia, that’s a good point. And I often direct people to this, you know, general observation. When we think about a number like GDP, many of us who are listening to this type of program have taken introductory economics classes where we are taught about the production possibilities frontier, technology and the combination of capital and labor that allows us to generate that GDP, and we measure GDP as potential GDP and actual GDP. The simple reality is that there is no possibility of production. It’s not like there’s a huge, you know, national production possibilities limit. That is shorthand for summing up the production possibilities frontier of each individual household. And that’s where the breakdown is happening. We are actually seeing many households unable to clear that threshold for participation in the modern economy. That means they’re either moving to very low, very low-cost systems that don’t have access to the kinds of work they’re developing. It also means that those companies lack employees in the right places, so they are not able to produce fully. Almost every analysis I’ve seen or done at this point around the effects of inequality in the distribution of income, wealth, access to capital, access to employment, etc. shows that our economy is doing far less than it could because of these barriers.
02:35 Speaker A
So, okay, so that tells us what the potential financial risks and impacts might be. Umm, what are the measures that are more on the political side as you indicated? Like, what do you do about all this?
02:53 Speaker B
Well, the simple answer, and this was about the third part of the substack, is that we have been sold a lie about the distribution of taxes as members of the upper income group in this country. I will tell you what we are told all the time the richest Americans pay 50%, the 1% of America pays 50% of income tax. That’s true in a very technical sense, isn’t it? Because I’m separate from income taxes, but if you look at your paycheck, the biggest income tax you pay is actually FICA taxes that pay for Social Security and Medicare. They are the largest portion of most people’s taxes and are limited so that you don’t pay more than $168,000 in taxes. So if you go through the math like I did in my last piece, you’ll find that the last 50 years have seen extraordinary tax cuts for the wealthiest Americans and extraordinary tax increases for the 20th to 80th percentile. Actually avoiding the crux of the issue and refocusing people on an honest discussion and debate about the tax burden and how the US government is financed is really needed at this point.
04:31 Speaker A
Who has that conversation?
04:34 Speaker B
I’m definitely trying and I’ll tell you the fascinating thing for me was the response to my first piece was about 140,000 of this outrage that so many people have actually returned. I mean, one of my favorites is somebody saying, well, the average cost of child care isn’t 32,000, it’s $26,000. Well, like good. So it’s not 100%, it’s 90% of the government’s poverty line. Um, the pieces that start talking about what we should do here, it’s actually been very interesting to watch the think tanks disappear. Because at the end of the day, think tanks understand that they are funded by people who are among the wealthiest and highest-income Americans. And that’s the only conversation they don’t want to see the light of day. And so, you know, that’s really the question. Shall we start talking openly and honestly about real solutions rather than the hoaxes that have been thrown around so far?
