« The Weeds

Tax reforms and garbage factories

2017-12-19

Matt and Ezra talk about what the tax bill actually does, whether the deficit matters, and a white paper about rugged individualism. White paper: Frontier Culture: The Roots and Persistence of “Rugged Individualism” in the United States Other referenced works: Albion's Seed: Four British Folkways in America (America: a cultural history) American Nations: A History of the Eleven Rival Regional Cultures of North America Dialect Diversity in America: The Politics of Language Change 

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This is an unofficial transcript meant for reference. Accuracy is not guaranteed.
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Hello. Welcome to another suited the weeds on the box media pipe cast network. I met her grace. Yes, I join me two days as recline. Sarah is still in the magical and using land. So we are here. I we're gonna talk about the closing of the frontier and rugged visualize on yes, we're gonna talk about. Are you a rugged individuals? Fidessa? I'm not. I am neither rugged nor in history. I moved like us like a soft collectivist turn off, but We also want to talk about what's new in the tax bill, and we want to talk should have more broadly about. You know how to think about some of that, the fiscal issues that that are posed by the matter with you at your elite. Language, contact by debt and deficit, debt and daddy's dead do deficits matter away. So much or
whenever we gonna fix, maybe not in America, but you so ok, so the tax bill. It's untrue! to pass. I think it's gonna past the house by probably as will recording and then the Senate next day, but it's it's locked and load that they have the they don't even need JAMA. Keynes vote is good too How could I know John Mccain, whose at home said yes and I don't they need John Mccain's vote. Mac has John corn in who earlier objected to the Bell for involves Harker Bob sorry, because Bob Corker, who Your objected to the building. They all your deficit too much. They do he changed his mind, even though the new bill is different in quite a few ways, but it does not. increase the deficit by what I want to put a dependable, your reasons it by more honest opinion, courtiers. I want to come back to this, but so they went through its committee, which is where the house in the Senate, Mead and work out their issues with the Bell Discomforts Committee was not merely reconciling two versions of bill, but new things it did not exist in the previous bill entered into the bill. So how did
change legislation, converts committee, while there's a bunch of When things, I would say the most salient thing that they did was that in both House and the Senate legislation the corporate tax rate dropped to twenty percent. In the conference report they bumping up to one percent and the main reason for that is that they wanted to put in a tax cuts for the highest bracket earners. People who making over five hundred thousand dollars a year in the old versions of the legislation, very rich people got their taxes cut if they owned pass through businesses or they own shares of stock and publicly trading companies or very or if they were going to inherit. You have asked multi million dollar fortunes, but if you happen to be in there were some rich people passing through. It was actually a hilarious thing in the house report on it. Was it like specific
He called out Stephan Currie as an example of a rich person who would not be receiving a tax cuts under this bow and or whether to stuff inquiry. Yet it's it's baffled anyway, so it was previously structured so that African American entertain would not get attacks cut, but other kinds of rich people would, but they they they did Stephanie and they re kind of his taxes? A little bed So I want to hold on this for a minute, because when I was talking to a bunch of republican and republican economists about the spill, one thing a lot He said to me, actually is it liberal should be happier than they are about the spill, because What's going on in it, you serve before that France committee, these conversations are happening about three weeks ago. Is that right weakens, have admitted the Democrats are right and bring down. The top marginal tax rate is so unbelievably unpopular. They like that argument is over, like even republicans, are not going to try anymore, to bring never top Marshall
actually the do all this weird stop pass through and corporations and stay taxes, but they're not gonna, touch that marginal tax rate, the left One that argument, you know the top Marshall tax rate is going to be high, maybe leaving go higher and that seem to actually like up like a persuasive point to me, given that neither the House nor the Senate bills did touch that top marginal tax rate mathematical went behind closed doors garments committee, an apple a minute after deciding they could not raise the corporate rate. In order to do marker, Ruby owes provision, would give a bigger child tax credit for for the working poor alike. we can increase the corporation tax, sure that there are no rich people in this country who will knock at an extremely large tax got out of the spell out. I mean there was concern that there was like some millionaires left behind and they they have they have taken care of that objection. Another big change that they made that there have been a lot of discussion about, was the treatment of this state and local tax exemption bread.
So initially in the house bill. They had scrap this entirely useless but this exemption is people talk about law, but I'm not sure. Ok, so if you pay state locally says which most people do, and itemised your taxes, which most people don't you are allowed to deduct the amount that you pay and state local taxes from your federal income tax bill. Somebody. I pay a hundred dollars in taxes to the diesel or government against the real number, obviously, but but just for hypothetical. means that I can deduct a hundred dollars over the total income, I'm paying taxes on to the federal government rack, so the house bill completely scrap this. The Senate bill was going to Allow you to deduct property taxes, but cap. The deduction at ten thousand dollars and not let you do that income taxes so that was like a micro. Targeted bill to screw over California, because California because of a mix of being very
overall politically now but having the old ballot. Opposition limiting property taxes has like way high income tax, write any other state, so then, when it went a conference committee, the House, California Republicans, got them to make it ten thousand dollar cap that you could apply flexibly to their income, taxes or property tax Do any how you want so it end of the day, visible talked about It is very interesting to tax nerds people kind of love, the political irony of Democrats defending a tax break for rich people, because it impacts blue states in the end, I mean the ten thousand old carpet. It means something of that. This will raise my taxes, for example this provision, but it's a a small change in the grand scheme of things, the vast majority of people are not going to be hit by this programme.
and I would say that that is the general trend of this bill that Woodstock it particularly in the house, as it is a process that It had a lot of work, for there was like a really strong left hook of reform in the bill. The cabin Brady, an important here, meaning doing a lot of base broadening closing the notion of allowing those holes. You can have the simpler tax code, it will fit on a postcard, exactly market to be dodge in their taxes, anymore and and well. Ryan and Mccarthy. Rhine Ambrady did not write a revenue neutral tax reform and they didn't distribution. We neutral tax reform. It was tax. Reform was kind I wish it was like a left hook of tax reform in them like an upper cut of tax breaks for rich b. I have no idea what would be meant if you chose indifferent punches air out of it. It's been a jar above tat was the end of the day. It was a big tax. For rather it is a job of tax reform fall by an upper cut of.
of what are either when rich behalf. But now it's not even the job of tax reform, wait, wait. They started, I think we're grapple for a second without reform, and then you break the watered down enormous, and there is just this way? Less were form and two feet, the one point: five trillion dollar deficit window there were lying. overwhelmingly gimmicks rather than on paper. We know there are some gimmick changed in us. Yes, can we talk That is, I think this gimmick thing is worth a minute. Well, ok, why? What? What do you have in mind specifically? So this is how to make change, but one things I did was moved up the expiration date. a bunch of the non corporate provisions What did they move it from that mosaic things that used to expire and twenty twenty? Seven like all the way the end of the window now expired, twenty twenty five. So like me, way through the window. Saudi all talk about what's happening here so
I, the tax policy centre, came out with an estimate of this bill now and the bills impact on inequality. At the end of the ten year windows. Now gotten worse. So eighty three percent of the bills benefits go to the top one percent and twenty twenty seven amazingly more than a hundred per cent of the bills benefits in twenty twenty seven go the top quintal, that's because it increase on a lot of people who were under the top quintal if I remember this quick, I think some like fifty issue. Fifty three percent of the benefits go to the top point. One per Sir John Carney, who is a bright Bart now. I think I'm too back is any said to me, like you know, estimating a bill based on provisions that people think you're gonna be extended as it dumbwaiter look at a bell and that's like the republican men here, that you have this bill and they ve all these provisions to expire, but the provisions won't really expire and, like the way should understand the bill is like as it is written down. But with this kind of like
sexual, like Gimme, that it will be different? the Future Congress is going to make decisions to extend all the stuff which may be true, but to then you asked question well, why did they write the bell this way and the reason they were the bell? This way? Is it if they not the bill B, in eligible to go through reconciliation, even under the rules they have framed, it would cause more than one point five trillion on the debt in the first ten years. Any would pull up the debt in there, after that which would make it ineligible for the bird role. So what you Here is a bill that is written. If you listen to what people are saying to just break the rules, It's going to be much worse for debt and deficit, then their admitting it is going to be much worse in the long run for debt and deficit, then their admitting and they sort of want to have it both ways. They both want to say
spill unit should go through reconciliation, ate it accords to our world, or only can add one point: five tonnes debt in the first ten years, which, by the way is number they put out of thin air right where they just shows one point: five: China could it shows in anything? he chose one point, five trillion. They couldn't even standard than their own fucking limit, and it's not. small limit went without joint is a lot of money to give yourself to play with they. Couldn't you two within their own limit, so they added this gimmick ischemic other things, reduces whatever economic growth. You might think the bill would do because it means that past companies and individuals and aerials cap plan, because you don't actually know what the tax code is gonna, like in ten years and then take hop in all off, while they're saying that the bill should still be seen as something it's gonna only add. We know whatever is roughly a trillion and you know through magic, math, nothing to the deficit. It should so be understood as a bill that will have all these deficit, extending deficit, blowing up provisions extended into the
reaches of eternity it is such. unbelievable dishonesty in all directions like such an amazing game of such an amazing shall game here, I'm just like I'm such a did the brazenness of it to be feared? Bushed Georgia be did. A version of this includes doesn't think. I think it's important to draw decision exists, furious disagreement among journalists. About this point me you, you named John John Carney, whose works it at by partners if a bit of a maniac but but Judge Barrow it a business insider who you know, I like a lot was taken this view. A few weeks ago, Jonathan Weissmann, whose I think the deputy editor and the New York Times, is washing bureau. What was also, making it carnies viewpoint on this, so its influence. Very mainstream coverage. Am I just, I think it's you point to be clear about what kinds of exercises there are. If you ask me
in our view, you semi Millyard matt- is the middle class going to be paying higher taxes in twenty twenty seven than they are Today I would say to you: I am really not sure and if they are paying higher taxes, the reason that they are paying higher taxes is probably because a democratic a landslide somewhere in the middle caused, to put a medic care for all plan in did, like it is true that it is not likely that he's going to happen, is that this bill will be fully implemented as written. That said, it's simply hard to forecast. It's going to be happening in twenty twenty seven wait. Ten years ago was two thousand seven right If you were gaming out, two thousand seven, if you knew the Obama, was gonna win in a landslide into eight, but then Republicans will come roaring back, take the house in twenty ten and then the Donald
was gonna. Feel exuberant. Haven't congratulations to you if you correctly forecast the past ten years of political events. I do not think that I can forecast the coming ten years and in political events, what I can, tell you is that if you want to judge the bill by these stated intentions of republican Party leaders, Poor. Why? It has been very clear that he wants to extend the tax cuts and put federal revenue lower than a spell says, and he wants to pay for that with draconian it's in government support to low income, people and the elderly so like that's. What Paul Ryan once right is bigger tax cuts than this bill. puts into law and steep steep cuts in the social safety net. That aren't, labelling Then there is the question of what is in the bill. What is in the bill is, ex increases on the middle class, then a third hypothetical which is like Maybe the
Paul Ryan wants won't happen and also the taxing the that could happen. Relegate anything is for grabs in future electoral outcomes, but I think too, is that journalists can solidly characterize are what does the play some say, and the legislation says that the middle class tax breaks will expire and fifty three percent of people will pay higher taxes and you can characterised What are these stated governing intentions of the Republican Party and those intentions are steeper. Bigger tax cuts paid for by gigantic cutbacks, such as Canada, Medicare Medicaid food stamps, etc, etc. Then, there's like politics like will happen and twenty twenty seven will be driven by who wins the twenty, twenty and twenty thousand and eighteen elections, and so like good for you. And the twenty twenty two and twenty twenty four and twenty twenty saying there's like with like seventy problem instead republican line, which is their like, People are whining that the Pope
has been misled to believe that they will be paying higher taxes, and that's why the bill is unpopular. The reason that suppose These tax hugs won't occur. Is they are so unpopular. you know so a. I agree with the analysis that the unpopular tax hikes that are in legislation probably won't come to pass because they are so unpopular, but like also that by the bills unpopular. The bill says that these taxes should go up, and it is true that Republicans would be well advised to reverse and change the bell, but like they could change the bill tomorrow, a taxi driver tomorrow, but if they want to criticise them, we're having it, popular bill fishing written a different bill that had different more popular provision. So I'm a couple doubts on this one on the roll journals here with it, which you touched on. I Do not like the tendency and political journalism to get to a knowing like what I
like. Everybody knows journalism words like well, The bill says this. The politician is saying that, but everybody knows that they're, lying or everybody knows it. Something else will happen later because, like we are smart, political, prognostic, haters and you now have the of evidence behind us. I mean I'm going, you know it happens in all kinds of ways. Right like I was part of the everybody knows. Donald Trump can't win a republican primary weird. happens in american politics. Nobody knows a socialist was not gonna almost when the democratic primary, but he in that world. I would you be so sure you can raise taxes on people offer one thing so Something to the everybody knows is a way of excusing really terrible political misbehavior, one thing that often gets built in jaded baseline is like politician. The Scum alike, we think are doing, is a lie and, like worse Margaret and like on dvd jig and, like all those voters are not back, but so we're like knock it off. Then too much time, reminding the voters of, like the Ridable bull, shit, being blocked
pull on them, because, like we're smart, only us look on savvy till I take her. At their word and pretend like this whole games on the level where right, we want to show that we are savvy players not like an expert Do people what is happening in the game at the wheel, I really don't like that. I think that's bad. I think it is like not what we should be doing our jobs and number two. A little bit about this forecasting question, because it It's me of something that happened during Obamacare, but happened in law early, the reverse way with the river surveillance. So One thing that is built and actually number things that are built into Obamacare are a ton of different form of triggers of things that are to happen later on. There would be hard to keep from happening, but if the bill doesn't enough money or even if it does save enough, money are going to come into play to break in. Popular way too to make,
this is like a like on tax. I had like TAT, which is designed for twenty eighteen, the Independent Payment Advisory Board Ipad, which was a Medicare board to cut spending which would happen. I forgot the sugar year, but it would happen if Medicare growth was I believe it was over JP plus point five percent, but something like that. There are a bunch of these. And so one thing Republican said during this wise, oh no light. This bills way less fiscal responsible than people say. It is because all These things at a written into law won't happen and better, I said no, no, they will happen like or laughter play. Some was something else, but, but you know the written into other gonna be hard to change like if there either out of what some of you will have to act to do that and by the way. I think that the legitimacy of me later on. There was a Bernie Sanders having ultimate eloquent into a backlash against Cadillac stuck her. Where would have gone if they had one power, but but there is something but a lot of things in the bill that in the way
they were built there had meant to make it more responsible. The idea was egg Democrats working to defend those things and is actually Republicans who ultimately, began, trying to unwind a lot of them like the end Payment Advisory Board, which a public into decided. They hate you, being a similar thing happened here, but with the reverse thing, instead of the port passing this bill with a sort of her possibility triggers in it and saying, like you, look. I know this may look a little bit. We are to you, but like we intend this building not cost more than one point: five children on the deficit on the debts, like that's how it's gonna be there saying we're gonna do everything we can down the road to make sure these figures we have put into the bill ourselves fall. The rules we have set for fiscal responds we do not happen, it is just that crazy, making thing like why David, just give themselves more room on that day. or why they legislate repeal the whole fuckin reconciliation rules altogether. I don't really know but but the whole thing is just interested why all the as like
a way of just thinking. Ethics breathing european american governments governance, so it. really bad. I just, I think that It is almost very hard to appreciate on both the processing and politics and policy level, just like how they designed and sort of framed and explained. This bill has been how much lying. There has been on it. You had a nice thing in your post today about oh Paul Ryan setting out these tweets. It have like all these things. A bill does, and none of them are. The main thing is another five policy highlights of the bill and he doesn't mention the corporate tax cut right and one of his five policy highlights is that he doesn't repeal the mortgage tax deduction I mean which is true it because if it it weird policy highlight rarely get also it isn't it think about the endangered species status of tiger citizen. I, like this, all connects back. I want to go back to the pen I put in Bob Corker, so here we have this bill bought, Corker
he would not vote for this bill if it added a dime to the deficit, a dime one time So that's many times, I'm not really sure help Haiti dimes are in a trillion dollars, but many, and not only that, but the way the bill. Is ten trillion dies? A fuck you met takeover, had added a south so the bills also designed at a certain point in future to become worse than that to add some unclear. more onto the debt, and Corker has. Changed his wrote to before the bill. change is put before the bill. One, I think they got discovered was Look at unclear forgot added to the bill or had been in the bill. Nobody noticed it but the path for provision was structured so that, if like a real estate magnet and you had no employees, you could structures pretty easily as a pastor and get a massive tax got so now, look there.
Well been changed with Bob Hooker personally richer and had changed. His vote her said? No, he changed his vote for unclear reasons on a bill that he applied. Those that not change it in any way to become less like a bill that he would oppose, but had not personal Read this provision or knew anything about it busy all the Republicans and said they didn't understand this provision on his bill. They were all already signed on to vote for the whole thing has been such a wild. Exercise in bad faith, that it is hard to City ass, anybody, the hills vesting to suggest that this is why corporate changes vote, since everybody knew Corker, hadn't Fred. This provision- and we just like it so Remember- read the bill after Obamacare big of a deal that was in republican circles. They laws they like put out like Things were in order to pass a bill would have to be around. I would have to prove a red it or central. Asia is a fascinating. I it's fine with me of membership We don't want to read the bells
to you is, I haven't, read the bill as a defence for for a bill that has bad provisions, seems Bobby, Michael after possibility find out. What's it pragmatically, speak egg if one were to want to read every bill, that what votes on the reason to do that would be sufficient. Blindsided by criticisms like how come you voted for a bill that gave yourself a giant tax, get personally, you can turn or how could say. Why did read it? It turns out in perhaps defensive Bob Corker that there's Actually like a lot of senators who benefit personally because he's a weird thing read, so a wider senators are rich and you can't really like operate a business while being a senator. So a good thing to do. If you like, Senator who needs to park his wealth in some kind of potentially shady situation is,
kind of passive, real estate trust, and this tons of examples actually of set senators. Real estate investments do curiously well over the years and in financial terms, and there's always a lot of good questions to ask about how exactly they arranged that and it's definitely of the real scandal is what's legal kind of situation in a lot of ways, but suffice it to say that multi million dollar real estate holdings that don't have employees is it in business structure among Senate Republicans. So and also among the present to the United States and his son in law clear that there was like any one guy who, as I go, I want to give myself a million dollar attacks got here. So much is like, confluence of interests between the a lot of people wanted to make sure that a particular kind of business that benefits them all at would get a tax cut here, even though it you're obviously can boost hiring by giving attacks cut to a class of businesses.
there's only eligible for it if they dont have employees. So I don't know exactly what to say but I think as long as we're talking about the sort of small scale responsibilities here, it is what pivoting too, that sort of the big I don't understanding and cost was a notable to me about reaction to this bell? Is a wider should have Obama era. People who are now active on Twitter are very, like Madam line in the in the capital. Letters sense about the deficit impact decision. But in a in, this actually use curious, they're, not saying the deficit in Does this bill we'll have a catastrophic impact on America? Like you would interesting to me to see Obama people being like adding Two trillion dollars to the debt is going to cause a financial panic. Kind of stuff republicans said about them down. We're gonna become Greece. Instead, there going in the like triple irony back flip away, where it's like next time,
don't crowds govern we're just not going to pay for anything, and that also the Republicans, The question is like well if that's a good idea, and we think they should definitely from the question of, should you pay for programmes or not if you shouldn't pay for programmes Nick I'm Democrats when Congress they shouldn't pay for programmes and if he should pay for programme sticks, I'm Democrats from Congress. They should pay for the programmes like past bad behaviour. By Republicans, I don't see how it can possibly have anything to do. Let's zoom out then to actually so we're. Not car the triple backlit version of this either yea. I like it admitting it's always time for some game theory, Lebrecht, put the game paid aside. Should programmes be paid for by Sousa matters, I think they sometimes matter, and you sometimes should pay for thanks, though I wanna back this out abnormally now, so I of the theories here is that internally, the dominant theory in the late
send sort of early teens I would we on the spirit was, The vote will be alarmed at the Obama. What the problem you said was it. We were headed for a fiscal crisis. The debt crisis acquiescing in Greece, They said this a lot. This was like the main thing that Paul Ryan, like rose to a republican, prominent saying it was, I get all of it like. It is constantly crises and there was a push back from a couple, different directions: one direction of push back was what I might call the like. The fiscal hawk push back with. where I put the Obama administration, which is they said. Yes, we do We need to worry about dead in deficits. We need long term fish. consolidation right long term, you bringing down are our debt. Right now we're in a recession like we need to spend. So it's really a question of sequencing. Where am I, debate they were having with Republicans, is really about sequencing. Then you and also about bound and also about balance
and then there was a another group bit said: like this is ridiculous. Like Erika is not going to have a fiscal crisis I get you can make argues back and forth, but then in deficits, but we just can't have that I had on my report here's your Concho ipod criminal last week and I had stuff about this. It's very hard at you. Try and tell a coherent story about how that this alleged debt crisis can even happened. I've been through this given presentations at the I M F, where I say look, I believe, for a country that looks like the United States, a debt crisis, mentally, not possible and people will say. Well, I can't quite false your logic here, but I don't believe it so it really is a really is more about a gut feeling that it is about any kind of theory. So that's a question. I would ask you like to start Matt like D: do you agree with Krugman? Can America have a debt crisis? I think you're, pretty clear.
can't, and I mean the wizard funny thing I was speaking to somebody I know who does does I m F country reports and she's? She never can the United States. But she heard that interview and she wanted to complained to me and she was like yeah. I mean, of course, pause like everybody knows that, like this in think you can really see themselves, as you felt like the imo was getting about was getting louder. It could be a dead guy. Exactly, I think, if you look in Japan You see this really really clearly that the japanese debt to GDP ratio is like catastrophically higher than America as in every once in a while these. Like this, I get a joke in finance circles right in his. the widow maker Trade and its when some rich american looks at your bans, debt situation and there This is unsustainable and they make some giant leverage. Bat, unlike Japan's gonna defaulter, is gonna. Be thing, and you always lose money people than losing money on this for decades and it works
a fundamental misunderstanding of how a modern economy work Japan borrows, can most. From japanese people and Pan is also the world's only source of yen and they can cause, yeah and instantly in infinite quantity is and so there is no burrowing. If you, if you use the currency names right, it's like p. I can't run out of gin rated It doesn't make sense of Greece. Can run out of euros right because Greece doesn't make Europe. The United States can't run out. dollars. The Bahamas, which also borrows money in dollars, can run out of dollars. You could ask yourself like all, why doesn't the Bahamas just print up some money in the Azores? Nobody wants that money. It's like shit.
behaviour in money and they even have a local currency there, but it's it's a literally like Disney dollars, like tourists come in and like as a sucker, you get some local money that can help people will take, but you can't like by imported But U S dollars are like that's a good thing to have people really want them. We have a mighty army. We haven't I arrests and you can imagine different things happening in which the door or becomes less valuable and currency. I mean exchanges, go up and down all the time right that the Eu S dollar surged during the financial crisis, and then it tended to float downwards during during a bomb is time. So that's not it's not a made up worry to say if we do this the dollar decline and international exchange rate markets. But then you have to ask yourself like What exactly is the worry there like? What's the problem with that, and it could be right mean, I think, with anything in life. You dont want to push it too far
to say that, like I, don't like eating a sandwich, won't kill. You isn't to say like? You should go and all sandwich die at any ten sandwiches a day and Bobby Babar, but like Would it be bad if the value of the dollar went down? Slowly, but surely I don't? I knew not what people think will happen where I think there's an intuition that if you into the well. What more of our dollars cause We have so many creditors here and we have dollars and we get to print them by pressing the button on a computer or would only need to print them with this move them around and in digital currency form. They'll, be inflation, maybe they'll be hyperinflation. Maybe this hyperinflation they'll be well worth. You know, like yeah, yeah spin off into that, so so why, then is inflation? Not the You know I mean inflation could be a concern to me that the moment inflation has been running below two percent for a long time. If we had more inflation, it would be at two percent, which would be the target
if we badly overshot inflation, would go up to four percent, which is where it was when Ronald Reagan was president. if, for some reason, we reached four percent and then just like kept going then, like you, might get really high, like ten percent like as in the seventies which, that was legitimately bad people were really upset by it. American, look, it's a american society collapsed. You know there wasn't, like. I don't know like mad mad, type scenario I what happened was: was they needed tighter monetary policy? It was a bad thing, but that is to say a its survival and be there's a lot of road maps on the way you know and this view that we could somehow accidentally go from one point: eight percent to live. Zimbabwe that that's the crisis idea
right, that there might be some kind of sudden the eggs agitating there. This is what I think Krugman was saying, and what he's right about is that you have to try to show people a model in which not like. If the an continues forever. The inflation Prob slowly but steadily gets worse and worse, but a scenario in which our blue there's, just like a cry this from nowhere that, like right now in force, Hence low, but somebody next week its cat extravagantly high, and I don't think you can draw any scenario in which they are so no debt crisis by blood stock more about these sort of slow, yet you know keeping into a position. We don't want to be because here's what I think people mean conceptually when they talk about the idea of fiscal responsibility. Yes, of course,. any given Congress any given year any given presidential administration. Probably not gonna spend
so much or do anything so crazy that, like future can they wouldn't be able to pay it down? That said, if you do think it might be us a case where continuously not paying, for things mean somebody in the future has to pay it down. Well, that's it the thing to do to like future Americans right, shity. Things to do is often spoken about in terms of like our children, but it may well be us right, but whatever it is, like maybe happens during a recession. Right like when you is actually in a new editing paper that you read about in the aids the Weeds newsletter, I should say from Greece David Romer Roamer that showed that societies it go into recession with high debt to GDP ratio, and I think it was low interest rates end up having. much worse output- yes got collapsed. Yeah. They decided to go on with low debt to GDP and and and high interest rates, and the book None of that,
I don't really know if what is binding on that is like societal, moors right that the people in a recession. They simply get like that. Becomes a signal of things being wrong. Soon. They politically constrain leaders from Adding more did that even less what they should do, or this economic like play, happening there that there is some kind of constraint that that is acting, but to put a few you're societies. Future governments in the position of having to pay down the mistakes of the past or not. Having so did the fiscal I or power they need to deal with the recession or whatever. B a shitty thing to do and an responsible society wouldn't do it would pay for things. It went along alike, keep every solid and might be risk averse end. You know and try to turn
hand over the country's fiscal condition as good or even better than it found a way, and this is where I think you just need to take a broader view of responsibility. Right, sponsible society tries to hand off a better situation, its sons and daughters rather than a worse one and there's a fiscal aspects to that, but there's so much more. life than that and if you think about legal, a large corporations that trying to endure over time right No business, I'm aware of just like avoids borrowing Why me at all costs- and in their say I didn't want to go to analogy between these things, but it depends what you're doing right, I mean to borrow money, went indoors it's her low to build yourself. A gigantic office building can be a really good thing that really sets your company up in the next generation for more success right because you have an office building its good people can work there. You can sell it you're, not.
Rent on all the spaces, and that's really convenient alternatively, going deeply into debt to buy a factory that just makes garbage nobody wants to buy like that's really bad up, but also building a shitty factory is a terrible decision, no matter how you pay for it because like who wants a shitty fact, Read like that's, not that's on beneficial, you would have been terrible in the early nineties forties if the Roosevelt illustration had decided that we owe it to our children to let Hitler conquered the world rather than burden. Future generations with a lot of bond holding. as it turns out paying off war bonds was like not that big. Deal, it wasn't really challenging mobilizing like all of society to defeat the greatest you medical evil of all time was really difficult, and it was. It was good that they pulled that off. And this is where you get back
two about your weeds history lesson for the day, I think it's important. I agree to think about the mobilizing of society's resource school. This is why I think all of you do want to pay for things at it too. Serious about red if we were to say: ok, we're gonna, give free medical care to everyone, There's a lot of resources involved. The real things have to happen for that to take place and probably going to be more effective to make, that mobilization happen on both the tax and the spending some red you'll, be like China. You know like steer with only making left, turns or or something like that, to just say, like we're, gonna we're gonna. Do borrow a print all kinds of money and do whatever you going to want some some taxes. But then you got to think about what kinds of taxes do you want, and so you might text wealthy people to say
Society is gonna, have less consumption of luxury goods and more provision of medical care, or you might tax things that are unhealthy right. You, my tax, soda, junk food and things like that union's zig, zag he's gonna, have less consumption of unhealthy foods and more provision of medical care. You might say both of those things you might say these can be some broad based taxes. But like everybody is going to make do with slightly few fancy gizmos, but more security that their basic health care needs will be taken. Unlike those are the social choices that you're making, You trying to say like what are we? What do we want to do here right, and what Republicans are safe, either under the scenario where you raise middle class taxes or under the scenario where you just borrow my
is that they they want to make America much friendlier to people who own profitable business strike. They think I like a big problem in american society, is that if you invested money in Facebook and Facebook is now really really profitable, that too much of that Profit is going into the government's coffers rather than your pockets and like, if only there were some way to make it the case that having Facebook had paid off for you, we could have glorious. wonders. I dont believe that to mean that doesn't make any kind of sense right, the problem there is that it's like building a garbage factory. It's not that there's debt court on quote Democrats are thinking about their plans, you know it's like they should think about. Are they doing something worthwhile? Like suppose we had abundant clean electricity from
some giant solar panels scheme and we solve the storage problem and the grid problem and, like all the million other problems, we'll be really good right, even if even grandchildren had to like pay back some old bonds having completely anchored. Energy scarcity and pollution. Would be a big favor to our children, our grandchildren and, I think, like they would live with it. Just like we're. Ok with the World WAR, two dead, if we bent a ton of money on, The useless they'd be pissed off pass through tax rate, but they re pissed off, no matter how you financed it right oh good away to finance a bad idea, is no bad way to finance an amazing idea. This is where I do think. The dead game theory does come back into play. A little bit want one of the odd things about this period. Is that all the players involved do believe that debt and deficit are real.
Orange for America, they leave interest rates, will hike at some point in the future. They believe, if the government Prince money to pay down its debt, that there will be some kind of bin, one problem that there are all kinds of hypotheses eyes the ills, but they do believe in them, my I take them at their word and we are dead finally, and during a place, Republicans are very much kicking off where as a matter of of like that, in theory, but get does make sense for Democrats to come in and on not it's not really is a matter of spied. It's a matter saying were now Gunnar gets a tip today. These are not just lobbies, But it's like a kind of guy like like a consequences, issue right: leg they do not want to have their governance forever hampered by pay, down: republican death. It's it's a game of chicken a little bit like ok, everybody's, are so afraid of debt like at some point there gave just fuckin figured out and pay for it. Has Democrats don't want to act under
they haven't you the old, while the Bush tax cuts created a bunch dad and so like now we have to figure that out and do unpopular tax increase in Spain cuts, and now the Trump tax cuts created a bunch of that, unlike on and on, and on down the road of Gozo, democratic, I think in a way that is polluted, equally. Rational want to teach Republicans lesson, but Democrats and Republicans is rising, Adele believe in a much more severe form of leg, debt backlash and debt and debt consequences, and Oh, it's a pretty irrational, collective way for everyone to be governing, amend its particular sulphur Republicans, who you know it would have been interesting, I think, if they had tried to pare their massive tax cuts with gigantic spending cuts, but they did There's a reason they didn't do that like they could have built the whole thing to to work that way they did not want that I too am whatever their saying now. I still think they don't want that fate, and
you know we're just gonna worry we're gonna see how plays out the thing that is tricky here, that that is hard to forecast. is one thing we are learning is. The Democrats are Much more! Really! Personal vulnerable to critiques at their due. Governing badly, doing governing irresponsibly than republicans are so you go back to two thus intended as an eleven. There is to be hoped that crazy people, freaking out, like people on the Sunday, shows you're talking about it and what happens, is not that democratically like loose Elections based on debt, if anything, they probably better and twenty pan if they had like not paid for Obamacare by cut Medicare spending rhetoric that was the most popular public and attack, add not like some out about the debt, but Democrats fell a lot of constraint from at and Republicans. We do not feel at a constraint on this they they do not feel like email people are complaining about the dead and there being called hypocrites. Unlike their work,
you're being thrown back to them? They don't care there. like the honey badges of politics, if we do not give a fuck about any of this and that proving in a way to be an advantage. We interesting question, as I do Democrats take a lesson of this- that kind of sanction, this kind of pressure doesn't matter so long as you don't admit it matters or don't believe it matters, or is there something structure within the democratic coalition? Were they care more, they do not want to be criticised by economists where their friends, and so there is just a kind of a structurally approached governing what happens within the two parties in it? stained way? I don't know the answer to that. Speaking of structure speaking of sustained ways the structure of the frontier then this is an interesting, a really interesting paper that Samuel Botsey, Miss, say. I've known you say that we'll Botsey, Martin FISH, pine and miss it gibberish Selassie? I really apologise if I butchered that, is it so difficult name,
if even interesting paper looking at the long legacy of the frontier in the United States said the Census Bureau use have this concept of a frontier county. There was like a place that now people have done and They look at counties like stayed in the frontier for an unusually long period of time, and then they assess how those counties are different from other other places it in the United States, and they show that there's a there's, a lot of short of idiosyncratic attributes. They continue to have unusually male skewing sex ratios. They have more people give unusual names to their kids, like this less conformist mentality, and they have basically right wing political viewpoints, survey characterize this is rugged individualism, which I am told by sort of historians. after that look. This is an economics paper, a lot of historic
and seem to really object to their use of the rugged individualism concept. I think the statistical work can survive just sort of packaging that they so that people who live in former frontier counties have much more scepticism of a broad set of government regulations and of redistribution of ski and they vote for Republicans in our numbers. They vote for Republicans in part as a, consequence of that, and who knows yes, any you don't really counts for an interesting sort of thing. If, if you look like old electoral maps, you can see that in a lot of ways the parties and groups which their geography right- the democrats- usually the party, the south, the Republicans you see the Party in New England. but the like corridor of like nobody, here. States outrage, realign and leg was republican in both sets of of dynamics and you can think of this thesis as explaining that right that allow
of american politics has pivoted around race, there's like another thing going on in the Ex frontiers own, that not about race, but is about frontier, so one of the things that I find interesting in in this paper in papers like this and analyses like this as you say that, but the authors find is a set of values. Re that is more. Scepticism is really redistribution more. What you would call like. Traditionally individualistic answers to survey questions. And also more republican support. Now over time, the tube Cities have really changed super dramatically across a pretty wide range of issues. The Democratic Party stringently been some more redistribution S for sure, but there's a lot of depending on how you code ideas of individualism, the parties can flip back and forth There are a lot of things that, depending on how you code scepticism of government party,
they work when you get in questions of national defence of civil liberties, where the parties flip back and forth, and I'm always interested by the ways in which these vow, use create stained allegiance to one party or the other, even as parties allegiance to these values is much more contentious, and that's why I Sergio thriller when it is, I who knows it they become report. cancer it become break again, bracket, rugged and ragged individualists, because One possible mediating answer here is that the motive reasoning supplies like the Middle Ray the people. They like already they feel party represents vows, and so, when the party begins to stray from that, they sort of figure out a way to we tell the story. Is the other ways all but harder to understand, rapid, but that's away I find papers like this confusing, because I dont really look at the Republican Party in a lot of ways and see pretty over time
so much more individualism in it. I see a lotta tough going on, but it has complicated. The parties are very complicated. You could completely imagine, for instance, how question of reproductive rights. Could it be coded totally differently american life right, like the governments copy intruding on, but I do with my own king body is a perfectly good govern skeptical answer ray, while also unhomelike five factor psychology ride like Democrats score as the the open too experiences party. I work, whereas republicans of responding to hierarchy, which like the opposite of this individual claim. I think one interesting thing is that the actually, if you think about what the historians are arguing about right, would you character moving to sparsely populated portion of the plains too,
work alongside fellow white people and the U S Army, to commit genocide against the native population and steal their land would you characterized that process as rug? individualists making it on their own or what You characterize it as genocide in collective expropriation. I think you would see a pretty sharp partisan divide that question right like much more. The republican thing would be to continue to romanticize the frontier and cowboys settlement, whereas its Democrat, who would get into like all kinds of woke, internecine battles about what Whether we can really celebrate that different here and the settlement at all and the to me seems like much more compelling in terms of like how Ellie, today, we will be anchored into different party parties that, like
Republicans are much more likely to put forward a heroic vision of like american history. General and this particular aspect of american history? In particular, As Democrats are the party that's like wants to complicate everything and like make everyone field at about, I totally agree: that's a very today! Thank you. I, like you, go back and Democrats some real aunt, I native American how'd, you know I'll write a hundred percent. No, no, I mean I just. I just think that if you want explain. You know lots of people lots of Groups of geography has switched partisan alliances and if you wanted me to just like hypothesize connection between like frontier mentality and the Republican Party. I would just sit positive, much more direct, One than one, that's mediated by individualism that its when its mediated by like who
who is going to say that these Friday or places are part of a hurry. I try tribe and status stories. Yeah, a hundred percent the thing I disagree, there's a lot of fascinating work that shows in different ways and in ways that are clearly pretty complicated, various Herod ability of political opinions has long term Herod ability of like political tribal allegiance is so their bunch of interest Box on Albion seed is one of them. American nations is another them that are sort of looking at ways in which America, was settled by different groups, had a lot of different groups in it and that those the initial differences in even with in people who we just sort of like all over, as Americans have a huge effect on our politics terror. The sort of fighting scotch irish- and you know you ve- got that the descendants, Quakerism these things do seem to have pretty interesting long term effects and As much as I think, it's an interesting question of how those long term effects are mediated, unlike how they see
Dana Party politics, which are much more volatile, then the than heavy issues themselves and even a democratic party. Like the Republican Party, initially like an anti slavery party and is now like a party of white Nationalism, and yet there consistency, travel agents is there in a way. That is, is fastening Democrat. Of being very races to being more or less. to being the more woke party in and again a pretty consistent set of allegiance is successful. Fascinating is happening in the psychological allegiance building there, but even So I This Herod abilities interesting, and it does clearly help explain. Things are happening in american life and things that we don't no always how to talk to or talk about, because we don't know how to track. We don't know how to divide the the country this way, but yet are our past, as our present. Here I mean although I will always Some of these things are a book I read recently was William. Lay Bob's dialect
diversity in America, the politics of language change which attempts of this kind of analysis and the big point that he makes is is this- a strong correlation between certain great area dialects and a particular set of college, educated white people who were much more damage, attic leaning in their voting allegiance is that other non college educated by people and then the boy engages in some like big spinning out of the like profound, you know trees, long routes, and it has to do with different kinds of barn, design and settlement trajectories. A great book like it was amazing. I recommended each other people and then we know what happened in twenty. Sixteen is that exactly this group of people who used to be relatively more democratic leaning than other sort of probably similar by people voted for Donald Trump, and that was like the whole pivot twenty sixteen election and
I mean maybe there's some fascinating theory about the Amish, Barnes and and hath have played into that, but it also just shows the dislike is less a different kinds of people in America and this only to political parties, so like ultimately allowed this politics. and partisan tribalism mines it being like, like more reductive and like dumber than the like, rich nuanced share of american life, and get it really matters right at me, like it's all fine to say, like it's so much more complicated than just two parties, but like that actually was only two parties and it makes a big difference. Who's who's. geography and it's a m I don't know you can talk about electoral systems, but I just on some level. I think one can over think what I always say. Thank you. We should think hard about what's going on in american society, but american politics is like actually kind of crude and simplistic.
It's a good ways I think, has american politics crude and simplistic. I think there's always turn our engineer. Peter Leonard and producer Penal entered pillar does lots of stuff on the show his grey and we'll be back next week,
Transcript generated on 2021-09-12.