Why US famlies are ‘failing to clear’ line to participate in economy
00:00 Speaker A
If you look at the total, if you look at the big numbers, if you look at GDP, GDP is fine and there is no need for all consumers to participate. That’s what we’ve seen historically, right? Not only that, but corporate spending is also making up a larger portion of this pie, thanks in part to artificial intelligence. So how worried should we be about this expansion of people’s realities, not from a human perspective but from a purely economic perspective?
00:50 Speaker B
You know, Julia, that’s a great point. and I often refer people to this general observation. When we think of a number like GDP, most of us who listen to such programs will have taken introductory economics classes where we were taught about the production possibilities frontier, the combination of technology, capital, and labor that allows us to create that GDP, and where we measured GDP as potential GDP and realized GDP. The simple fact is that there is no single production possibilities frontier. It is not as if there is a huge national production possibilities frontier. This is short for the summation of each household’s production possibilities frontier. And this is where the degradation occurs. In fact, we are seeing more and more households failing to meet the threshold required to participate in the modern economy. This means they are moving to much lower, much lower cost regimes where they don’t have access to emerging types of businesses. This also means that these companies have a shortage of employees in the right places and therefore cannot produce full production. Income, wealth, access to capital, access to employment, etc. Almost every analysis I have seen or done myself at this point on the impact of inequality in distribution shows that our economy is operating well below potential due to these constraints.
02:35 Speaker A
Okay, so this shows us what potential economic risks and consequences there might be. What are the solutions that are more on the political side, as you mentioned? Like, what are you doing about all this?
02:53 Speaker B
The simple answer is, which is what the third part of the bottom pile was about, that as a member of the upper income bracket, we have been largely lied to about the distribution of taxes in this country. I will tell you that we are always told that the richest Americans pay 50% of the income tax, while the 1% of America pays 50% of the income tax. That’s true in a very technical sense, right? Because I’m isolating income taxes, but if you look at your paycheck, the biggest income taxes you pay are actually FICA taxes, which pay for social security and Medicare. These are the largest components of most people’s taxes, and they are capped so you don’t pay taxes on anything above $168,000. So if you really look at the math, as I did in my last post, you discover that the last 50 years have seen a spectacular tax cut for the wealthiest Americans and a spectacular tax increase for those in the 20th to 80th percentile. Ignoring that, which is at the heart of the problem, and refocusing people on honest discussion and debate about tax burdens and how the U.S. government is funded is what’s really needed at this point.
04:31 Speaker A
Has anyone had this conversation?
04:34 Speaker B
I’m definitely trying to do that, and let me tell you, what was fascinating to me was that the reaction to my first article was this anger towards the 140,000 people who came back in general. I mean, one of my favorites is when someone says the average cost of child care is $26,000, not $32,000. Okay, looks good. So it’s not 100%, it’s 90% of the government’s poverty line. Um, the parts that start talking here are what we need to do, 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 richest and highest-income Americans. And it’s just a conversation they don’t want to see the light of day. That’s the real question. Will we start talking openly and honestly about real solutions, rather than the platitudes we’ve been saying so far?
