Why Economist Kathryn Edwards is Optimistic About America’s Future

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2025’s financial news cycle feels like a broken wind-up doll, where recession indicators, unemployment numbers, inflation data, and tax cuts are #JustTheTip of an unsettling iceberg. So, this week, we’re joined by economist Kathryn Edwards (aka Keds Economist), and I got to ask her about:

• The no-brainer policy with a huge ROI that nobody’s talking about 

• ✂️ The fundamental flaw with using tax policy (read: tax cuts) to stimulate growth

• Her honest POV on America’s economic outlook and “recession-proofing” a household

• The limits of “empowerment” rhetoric, which often tries to use cultural or social nudging to solve problems that simply require money

RICH GIRL NATION IS HERE. GRAB YOUR COPY.

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Our show is a production of Morning Brew and is produced by Henah Velez and Katie Gatti Tassin, with our audio engineering and sound design from Nick Torres. Devin Emery is President of Morning Brew content and additional fact checking comes from Scott Wilson.

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Mentioned in the Episode

• Kathryn Edwards’s new podcast: Optimist Economy

• Keds Economist on TikTok

• “Republican Stunned by Simple Answer to Childcare Question” (YouTube)

• Kathryn Edwards in front of the House Means and Ways Committee

• Personal Finance 101, Investing 101, Financial Independence 101 courses

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Transcript

Katie:

Can we live in unprecedented times again, please?

Kathryn:

Yeah, I would die for some unprecedented times. But you know what? The precedent that we’re coming out of, I’m tired of it. It’s been hard living through some really tough economies. We’ve been in an economic fever dream for the past five years, but I am ready for that unprecedented that goes my way. The unprecedented every worker has paid sick days. Every worker has paid family leave, every worker has a reasonable shift in schedule and the right to request one. Every kid has two meals a day at school. I am ready for that unprecedented time, and I will fight with every word that I have to get there.

Katie:

Today, we are speaking to a woman who knows a thing or two about standing on business. Here she is addressing Congress, speaking on behalf of regular people who are tired of being told that tax cuts are going to solve all of our problems:

Sen. Kennedy:

You reach the point where you say, we can’t do everything. So the fair question is where’s the money going to come from, doc?

Kathryn:

The majority of federal revenue comes from taxes. So if you need more money, you’ll have to raise taxes. I’ll remind you, sir, that we have had two massive trillion dollar tax cuts in the past 20 years, and they have done nothing to make childcare more affordable. They have done nothing to help the casualty and property insurance that you are talking about today. They have not been invested in children and we have not seen that return. I mean, the 2001 tax cuts have now had 22 years to prove that they could solve the social issues that you and your fellow senators say that are a priority. And I don’t think we could point to evidence to say that they have worked.

I would love for you to give taught childcare 20 years. I would love for you to say, let’s take two decades of runway, invest it in young children and see what kind of return that I could get. But we’ve never given children or the childcare sector as much runway as we’ve given taxes. And I’ll remind you that the estate tax exemption right now is $13 million.

Sen. Kennedy:

Well, let me say thank you for the honest answer.

Katie:

Folks. I’m Katie Gatti Tassin and I… am in love. That was Kathryn Edwards, also known as a Keds Economist, and today she joins us here on The Money with Katie Show to help us make sense of our current economic moment. Will the tax bill pass? Are we going into a recession? Are we already in a recession? Why does it feel like we keep having to talk about recessions every year? What’s the most obvious highest return economic policy that we should be instituting nationwide that nobody’s really talking about? This might be one of the most fun and widest ranging conversations that we have ever had on this show.

Kathryn got her PhD in economics almost 10 years ago, and she currently works as a columnist for Bloomberg and an economic policy consultant for the US government, which gives me frankly, a tremendous amount of relief.

Because her expertise and her research chops are clear in her writing. But she has a way of communicating these ideas to people like me who barely passed Econ 101 (and in my defense, okay, Econ 101 was a very trickle-down-economics sympathetic course. So I like to think that I was just maybe a little bit ahead of my time).

She used to work for the Rand Corporation, which is a very well-respected and influential think tank known for rigorous and evidence-based analysis. And one major theme in her work is the difference between policies that are good for you as a person and good economic policies, which is a distinction that I think we’re sorely missing in the US. This is a conversation about the economy, yes, but maybe a better way to define economics is the study of power and how power imbalances shape our lives, culture and country. Who has power in the modern economic system and how did they get it? How do we think about things like individual freedom and personal choice in a life dictated by the bounds of our disposable income? And why is the US government so ****ing obsessed with tax cuts? All that and more in this conversation with Kathryn Edwards right after a quick break.

Okay, Keds, may I call you Keds? Is that cool?

Kathryn:

Of course.

Katie: Okay, well welcome to The Money with Katie Show. I would like to start with a softball question, which is capitalism. What’s it all about?

Kathryn:

What’s it all about, Alfie?

Katie:

What’s it all about? I would love to engage your wonkish side for a moment, which is that there are two ways that we know to measure income inequality. You can look at the before intervention numbers. So these are like if left completely untouched by government taxation or any sort of redistributive policy, what would our economy look like? What would our world look like?

Then you have the after intervention numbers which represent the way that things shake out after the government intervenes. And you’ve written in the past that you see the core of this problem as the fact that we are actually producing too much inequality and that is not an inevitable outcome. That is a choice. And so often we debate about how much and how the government should be intervening to, okay, well this is really bad, so this is how we should decide this group or this is what this group should get. But I thought your point actually reframed this question really nicely, which is why does the system that we have produce outcomes that require so much intervention to fix and the first place, if it is a choice, what are the choices that we are making that is creating this reality?

Kathryn:

Well, we live in a capitalist economy and the reason why we live in the capitalist economy is because it is the economy that has proven throughout the history of time to produce the most income and wealth for the people who live in it. So if you look at the world before capitalism, which is really the world before the industrial revolution, we’re all poor and we die pretty quickly.

Katie:

This is like feudalism. Slavery.

Kathryn:

Yeah, this is really up to the 1800s. We had self-sufficient farming, we had limited markets where people sold their wares. But when you think of capitalism in the historical context, what it really is is the introduction of the firm, that you would have someone who specializes in a production that they can produce it at larger volumes than just, say, one guy alone in his shop making shoes. You’re going to go from someone who makes shoes in their kind of small ware studio that they sell at a market to a firm that employs people to produce shoes, and that that’s the difference between a market economy and a capitalist economy is how production is utilized by a firm.

So what we found or what has been proven true in history is that capitalism creates income and wealth that moves us from we’re all poor to we’re all mostly not, but it has a catch and the catch is inequality. It does not distribute income, it does not distribute wealth that equally or that fairly through an economy, even though it’s very good at creating it. And so the role of government systems in a capitalist economy is to basically rein it in so that it isn’t left to its truly unfair devices.

When we talk about how to do that on the production side before the government steps in with the tax system, we’re talking about things like regulating workplace safety, regulating how much you’re paid and how long you can work. And when we’re regulating things like how easy is it for you to unionize? Can you ban together with your coworkers to demand better wages? Is that protected? How well do we protect that? So much of the worker protections that would give workers the power to wrestle that income and wealth from the owners of capital has eroded over the 20th and 21st century. So what we’re suffering from now isn’t necessarily capitalism run amuck so much as it is workers left unprotected, and on our own we’re not really a match for the ownership class.

Katie:

Workers left unprotected. Okay, this is interesting. Are you familiar with Grace Blakeley? She is in the UK. She’s a journalist, but she also is very, very well versed in the economy and she wrote a book called Vulture Capitalism, which essentially argued that it’s not just that government intervention is failing, but that it is intervening on behalf of the ownership class. Now it is consolidating their power and effectively fueling it with the legitimacy of the state and the power of the state.

So kind of the classic example here would be 2008, we get this kind of grand socialist intervention, but it’s socialism on behalf of the bankers, and hopefully it’s all going to trickle down to everyone else and we know exactly how that plays out. So that would be my only, I guess, addition or question there is, do you agree with that characterization and do you think that then redirecting the power of the state toward labor power is a remedy for it?

Kathryn:

It’s certainly a remedy, because economic research and evidence will tell you it is the only thing that has successfully reduced income and wealth and equality in the United States is the power of unions. A group of economists based out of and led by an economist at Princeton used historical data on union participation, which peaks really in the 15 years after the National Labor Relations Act and accelerated during the unionization of war production during World War II, found that when you have unions, income inequality I mean not just decreases, it nosedives. This was what we call the golden middle of the 20th century. From around 1940 to 1980, you saw the bottom 50% of income earners in the United States take home more and more and more of the pie.

And around 1980 that went the other direction to the point where we’ve retrenched to have greater inequality than we did before the National Liberations Act. I mean, we’re kind of living in the 1928 “not a great time to be associated with” era. That’s the type of inequality that we have.

Now for my part, I don’t know how malicious this turn was. I think that there were really good if misguided motivations around wanting to make sure that job producers remained in the US. The idea that businesses, if they were faced with too much regulation, wouldn’t produce as much in the US wouldn’t have as many jobs here, and they were correcting for what they saw as a different problem.

And I think that it’s less a lot of evil men sitting around a table a la like the stone cutters of the Simpsons where they’re taking that toast and they’re like, “Gentlemen, to evil.” Right? I don’t think it’s that. I mean there’s surely malicious people out there, but I think a lot of policymakers and a lot of people who created this vulture system were overcorrecting for what they saw as a risk to our whole system, which is that firms didn’t have the freedom to operate. They had a lot of regulations they were facing. I mean, I think now we can kind of look back and be like, wow, was that overblown? I mean, did you react at a hundred to maybe a problem that was at a three and we’re all suffering for it, but I think that they weren’t as maliciously motivated and that you shouldn’t lose faith in humanity over what has progressed.

We make mistakes as a country and as an economy, and it matters that we learn from them. What did we learn from the 20th century? Empowering workers and having strong unions lets us wrestle some income and wealth for the bottom, disempowering them and putting too much power and control at the hands of the top leads to gross income inequality and not enough government intervention on the bottom’s behalf. So we don’t need to do that again. I mean, you can choose to do that again, but I prefer we didn’t. Right? So we just have to move forward with this knowledge. I’m going to say it’s not a good look. She makes a point. It’s not a good look, but if you believe that we want to do better for our economy, the solutions are there.

Katie:

What I’m hearing when you’re saying this is there wasn’t some grand conspiracy ushered in by Milton Friedman and Ronald Reagan tapping their fingers together going, “Yes, yes, we’re going to make all the CEOs very rich and everyone else very poor, and it’s going to be very fun for us.” I appreciate the optimism you bring to this of the answers. We know what the­­—we kind of did it before, but that’s where I would say, and I’m very happy that people like you are policy advisors and are actually in a position of leadership and influence that gives me great relief and helps me sleep at night. I think that what I would counter with from my conspiratorial pessimism doomer side of things is it concerns me that it does not feel we’ve learned this lesson very well.

Kathryn:

I think one of the things that we’re all in right now is in the moment of cataclysmic change. And we can see that every day when we read the news. And I think that the election of Donald Trump was in some way the anger about what has happened to the economy. The real wages of US workers for the bottom 60% have been, for all intents and purposes, flat for almost 50 years. I mean, we’re suffering from an economy that has not seen a very good labor market, very high wage growth. We’ve had three brutal recessions this century, and that catches up to people.

And I felt like the electorate in 2024—in some ways I was just so grateful to see that they were finally mad about this, that the economy and the lack of vitality and success in the economy was the issue. I am not making it and I need to see some change.

I try to keep the momentum and the perspective forward looking to say, look, we’ve been told unequivocally what the problem is. The electorate has said this is the priority now, and the guy they picked, not exactly a man of the people or the working class, but that means that the solution is yet to come and that the more he destroys, the more we have to build, but we can build it. So I try to keep that level of optimism.

Katie:

Yeah, that’s fair. I think that there’s also the side of this that’s like had the country taken a different path, it is more than likely we would have just gotten more of the same.

Kathryn:

Yeah, it could be. I mean, change is hard.

Katie:

Change is hard.

Kathryn:

And inflation from a historical perspective, inflation breaks people’s basic budgets and it pushes a lot of people over the edge where you’re standing on a cliff and inflation is the strong wind at your back that can push you over. And it reorganizes our economy in some way because it takes people who maybe had things in their economic life that were not working, that they were stretched thin, and it just kicks ’em right over the edge and it makes them demand something different and something more, we saw this happen in the late seventies, which that inflation was much worse than what we went through.

It ushered in this era where people essentially blamed the big government regulation for a lot of their woes and they wanted to see government out and markets in and they wanted, we deregulated every industry we could think of and then some. And when we ran out, we just kept going. If we’re going to pivot in a correction, historians would probably say, this is about the time when it happens.

Katie:

Wow. Oh, I just got chills. Oh, good. We’re living in a historical moment. I know. I’m like, oh my God, aren’t we so tired of it though? Can we live in unprecedented times again, please?

Kathryn:

Yeah, I would die for some unprecedented times. But you know what? The precedent that we’re coming out of, I’m tired of it. It’s been hard living through some really tough economies. We’ve been in an economic fever dream for the past five years, but I am ready for that unprecedented. That goes my way. The unprecedented, every worker has paid sick days. Every worker has paid family leave, every worker has a reasonable shift in schedule and the right to request one. Every kid has two meals a day at school. Every kid has childcare and afterschool and summer, and we start taking the privilege out of childhood and putting the fairness back in. Like I am ready for that unprecedented time and I will fight with every word that I have to get there.

Katie:

You’ve left me speechless. I want to talk about sick days for a second then.

Kathryn:

Oh yeah.

Katie:

Because something that you said recently actually gave me a lot of hope, which was how could America’s economic future not be brighter if we don’t even have paid sick days yet? And you meant, this is such a basic, basic, table stakes good economic policy that we do not have, and if we don’t even have the basics yet, how could we possibly say that our best days are behind us?

And so a little bit of background, one in five private sector workers do not have any paid sick time, but the numbers jump up dramatically to almost one in two if we’re talking about part-time workers or we’re talking about people in the bottom 25% of the income distribution. So I’m curious, if I am someone who has paid sick time already and I’m like, yeah, but I’m good. Why should I still care about this? Why does this still affect me?

Kathryn:

It makes the economy bigger. What I would tell people is sometimes you just are moved by the people who would benefit from it, like universal school lunch, like kids don’t go hungry at school. Be sympathetic enough towards children that you want them to have not do worse in school because they’re hungry.

So that’s about the kids, but maybe you like low-key hate, part-time, low paid workers like leisure and hospitality, customer service, retail sector. They don’t have that much education. They’re working dead-end jobs and maybe you truly just don’t care about them. That’s fine. You don’t have to care about people for the economic policy to be right. And what we know about providing sick days is that it helps people retain their job because it’s not just that they’re not paid for sick days, they can be fired for taking one.

So what happens is that you have people who work in these really precarious jobs where something happens, they get sick, or more likely their kid gets sick, they can’t show up to work, and then they lose their job and then they have to find another one. And that period of time that they spend out, that hurts the economy to have people not maintain their jobs, to not maintain their labor force participation.

The economy wants all its little worker bots working all of the time. One study of mandated paid sick leave in sick days looked in particular at the benefits to women who didn’t have a college degree. Women are very vulnerable to not having sick days because they’re the caretakers of children. And while humans get sick every once in a while, children are sick literally all the time. I mean, the CDC says it’s normal for a kid to have five to 12 colds a year. They’re always sick and they can be sent home.

But what they found was that when you had the right to paid sick days and you could accumulate paid sick time women of this particular category, they earned $2,000 more a year. They didn’t take $2,000 worth of sick days. They were able to maintain stable employment that resulted in $2,000 more in earnings and their labor force participation was higher. It is a simple equation that our economy is a function of the number of people actively working in it or as this parallel.

The other side of the coin is our economy is a direct function of how much households have to spend. So when you fire people for being sick, you limit their work and their income. And those are both bad things to do in an economy. So give them sick days.

And what I’ll point out is $2,000 a year is the size of the child tax credit. So you’re putting a lot of weight on your tax-paying shoulders because you’re letting employers getting away with not paying money that these workers deserve. So if you think we shouldn’t have to reward people through the tax system, I’m with you, man, I think employers should have paid them that in the first place. I mean, it’s not a small amount of money that’s at stake for certain people.

Katie:

There are some real use cases or real studies that we can look to in the real world of towns or states that implemented sick days and we could see what happened. It did not cause joblessness. There weren’t these negative economic outcomes that you might be warned would happen, because there’s this supposedly very rational, Pareto optimal lever where if you pay people more, then jobs go away, or if you do this, then this happens. And that really wasn’t what we saw.

Kathryn:

There’s two objections. One of them I think is theoretical and it was very much insider baseball, how economists talk about things, and the other one is a bit more political. So the theoretical one is that if you make workers too expensive, firms will use them less. So something like requiring people to have paid sick days, a classic economic argument would be, well, you’re making them more expensive than their productivity to the firm, so the firm won’t employ them. And so anything, this is the same argument against the minimum wage. It’s the same arguments against retail shifts or paid family leave, is that if you make workers too expensive relative to what they add in value, you’ll demand them less and therefore you’ll have fewer jobs.

Katie:

This is basically saying, you bleeding heart people, you think that you’re helping these people by forcing these policies, but you’re actually hurting them. The thing that you think is going to help is actually going to have this unintended consequence that’s going to make their lives worse and you just don’t get it.

Kathryn:

Yeah. I was talking to this really prominent conservative economist in an off-the-record meeting, and he was like, I just think Democrats don’t care about the poor. And I was like, so how do you feel about paid sick days? And he’s like, well, exactly. You want to make those people lose their jobs. How heartless are you? And then I was like, he believes this to his core, that we are the bad guys for making these people more expensive.

And the theoretical argument against this, like you are making workers marginally more expensive than their marginal productivity to the firm is that they’re already not paid their productivity and that they don’t exist in a competitive labor market in which they’re paid what they’re worth. They’re in an uncompetitive labor market where workers have a less power and employers have concentrated power, and they use that to pay people less than they’re worth. That really comes down to how competitive markets are and how you think that’s absorbed by policy changes. And that’s the theoretical argument.

What comes up a lot as the actual objection expressed by industry is this will make us close. If you make me pay paid sick days, I’ll have to shut down. Two things about that. The first is one of the most insightful newspaper articles I have ever read was a story in the Washington Post almost 10 years ago about a leaked internal presentation from the Chamber of Commerce. It was reporting on polling of its members where it found, I mean, the headline was more than 80% of Chamber of Commerce members were for raising the minimum wage. The Chamber of Commerce is the number one opponent of minimum wage increases. They have been against every single labor law that has ever been a proposed in the United States back to child labor in the Fair Labor Standards Act of 1938. Their members don’t agree with this, but essentially their political strategy is that if one member is hurt, they’ll close ranks around the minority as opposed to the majority.

Katie:

Oh my God.

Kathryn:

Yes. So when someone says, I’ll shut down, I’m like, I don’t know. The other part of it is firms close a lot, and to the extent that when you talk about economics, you have to have a little bit of heartlessness to you, what is the cost to our economy of orchestrating all of labor policy around the protections of 170 million workers around keeping a fringe set of establishments open in substandard conditions?

There have been studies of the minimum wage, like the end of the tipped minimum wage, and what that did to restaurants. You have to pay all workers, including the ones that serve you food, the minimum wage and the minimum wage is going to go up. Did restaurants close? Yeah, they did. What was fascinating is that in this study where they looked at the effect of the wage, the restaurants that closed were the ones that had the lowest Yelp reviews.

Basically the really good restaurants, the ones that were five stars, they did great. They were fine. In fact, they kind of increased their business. And the people who were at the margins of staying open, they were the ones that were closed that went out of business. And so it sets up for you. The question is not, is it okay that a firm closes, but what are you willing to sacrifice for workers in the economy just to subsidize businesses that are not performing—

Katie:

That aren’t very good.

Kathryn:

Yeah, and it’s hard to say, but y’all, businesses close all the time.

What year is it? 2025. Katie, what year were you born?

Katie:

1994.

Kathryn:

1994. Oh my God, that’s so cute. So I was born in 1985. So how many businesses around in 2025 were around in 1994?

Katie:

Oh my God, probably like six.

Kathryn:

Or 1985 when I was born, or in 2001 when I got my first job. Workers will live much longer than the firms that employ them.

Katie:

And isn’t the whole point of capitalism that this is the calling process that’s supposed to happen? You’re supposed to have the archaic ones kind of die out and the new innovator upstarts come in. That’s the whole point of the system I thought.

Kathryn:

You’re putting your thumb on competition in support of the people who shouldn’t be there. Now, that sounds harsh for businesses, but it’s important to remember that we live in one of the most business-friendly economies that the world has ever seen. And if your business fails, congratulations, you get to start another one. There’s no law or no rule that says if you had a business that didn’t succeed, you never get to have a business again.

And in fact, if you talk to people who run businesses, they will tell you there is a reason why most people’s first business can only get financing from friends and family. Because even banks know the first one’s not going to be great, and then they’re going to learn and then they’re going to move on to financing.

And so I don’t say casually let ’em fail, but that is the system that we live in, and we put a lot of resources and benefits to workers to keep people open with questionable economic returns. I mean, the economic returns of sick days are unquestionable. The economic returns of not having sick days to subsidize businesses that are not profitable enough to pay them is questionable.

Katie:

Bars, dude.

Kathryn:

Especially when they get to start another business.

Katie:

Bars. Last week, we were talking about Milton Friedman. I kind of made a joke. You were kind of walking me through some of this and I was like, oh, man, I wish I could go back in time and tell Milton Friedman, “Yeah, what he got to say about that dude. Like, oh, intervention has actually helped. Interesting.”

And you kind of were like, yeah, there’s actually a lot to Milton Friedman in his ideas that are misconstrued or misunderstood today. There are nuances and caveats that actual person in history had and made that have been sanded down the sides of this free market purist ideology that he often gets ascribed to him. And so I wanted to take a second, maybe the only time on this show where I will say, defend Milton Friedman from the jokes and the digs.

But I do feel like it kind of matters because I think there is maybe a superficial or misguided understanding of when we’re even talking about free markets or intervention, what that even means or what that originally would’ve meant by the people who supposedly championed it.

Kathryn:

Yeah. I would wonder if other economists agree with me if I say in little ways, he’s a caricature of himself. He had a big personality, he had big ideas, and I think that he got very much adopted and idolized of, “Markets are perfect, markets are perfect, markets are best. We need to have markets.” I mean, he is the intellectual father of high financialization and deregulation—

Katie:

Going super well.

Kathryn:

Going super well. But he was also someone that said markets aren’t always good. And in fact, he’s associated with a lot of ideas of overcoming ways in which markets are not successful or in which markets fail. They weren’t always good, they weren’t all winners, but he was someone who was for a type of policy intervention that was left a smaller government footprint—not that government didn’t need to intervene, but that the footprint could be smaller. And he tried to argue for sophistication in government intervention as opposed to a big footprint. And some of those ideas were very popular, salient, appealing, but they weren’t a purist of markets and nothing else.

So one of his probably most popular ideas was the negative income tax. The economy produces too many people that do not have enough money to live, and they don’t have enough money to buy things that they need to buy housing or food or healthcare. The government comes in and starts to provide those services themselves. He thought that a simpler way to do it would be to have an income below which you would basically pay a negative income tax and the government would just give you cash as opposed to services. A recognition of the fact that the labor market and all these capitalist markets didn’t result in people having enough money, but a solution that was trying to get at like let’s throw more money at the problem directly to people and not have it go through government. So another one which is a little bit more obscure, has to do with student loans.

Katie:

Interesting.

Kathryn:

Again, the government stepping in—

Katie:

Seems a little ahead of his time there with that one.

Kathryn:

Yeah. The government stepping in and saying the market for student loans is not sufficient sufficiently provided by the private sector. So the government will both finance the loans and regulate them, but also guarantee them. Well, he thought that’s too much interference on financialization on the government side.

And one way to go about it would be to have basically reverse loans so that rather than pay upfront, you pay after you leave through a garnishment of wages. So everyone who graduates from your school pays 5% of their earned income back to the school for a set period of time. And that would incentivize schools to put kids into good jobs. So they would outline their, basically align the goals of the person, incentive—

Katie:

Align the incentive.

Kathryn:

Align the incentive of the person who wants to have higher income and goes to college to get a better job with the school itself to make sure it produces productive people. And in fact, there was a period of time in which Yale tried something similar. These are actually getting a second life, and this type of inverted financing has its own industry today. But again, it comes down to it’s not like he thought markets could solve the problem of people are unable to afford the down payment on a human capital investment like school that would garnish get them higher earnings in the long run. He just tried to think of an intervention that had as least government interaction as possible. So yeah, you end up with these purists who were getting Friedman tattoos and putting on there like, oh, well, the government can’t do anything. I mean, for what it’s worth, none of his fixes were ever really adopted the same way his critiques were.

Katie:

Oh, that’s a bar too, Keds. Geez, God, I feel like wind blown right now. You’ve got so many good. Oh my God.

Kathryn:

Oh my God, thank you. I’m blushing. Y’all stop. No.

Katie:

Now kiss.

Kathryn:

You can’t compliment a southerner to their face. I have to. I’m like, all right, I’m going off camera.

Katie:

You’re literally moving away from the microphone. You’re backing away. The body language is like, oh no.

This is really the role of economists, I suppose, or the role that we’ve given them is that it is assumed— the underlying assumption of all of these things is that we are optimizing for productivity, we’re optimizing for income, we are optimizing for wealth. And I think it’s worth asking the question, I mean on that student loan idea, it’s like, is that a creative solution? Sure. Would that align incentives for maximizing income? Yeah, that’s what it’s designed to do.

But then there’s like, but is there a role for, do we want the role of education in society to be all about making sure people make as much money as possible? Is there value in education that does not come down to, because I think what you get in that situation is sort of like the obsession with STEM jobs in the 2000s and 2010s, which is like, **** the humanities, **** literature, **** critical thinking, we just want to make you need to become a developer.

But is that really the world that we want to live in? These are all questions that I think it’s worth questioning the underlying assumptions of what are we optimizing for here? What kind of society do we want to live in?

Kathryn:

It’s an alignment of incentives, but a particular incentive of what schools provide. For my part, I think universities have been living off the fat checks of the middle class for a long time and they’re bloated and they’re way too expensive and they haven’t really been punished for it, but they’re about to be. And the next 10 years—

Katie:

Say more about that, about to be. Why?

Kathryn:

Well, the college-going aged population has peaked, and we’re right at the peak of it now. So as we know from the baby boom, birth cohorts, which is the number of kids born in a calendar year, they’re not the same size fertility in the United States started to crash with the Great recession. Now, fertility always goes down when the economy is bad, but it never recovered. It just kept going down in the kids who are turning 16 now are followed by 15 years of smaller and smaller birth cohorts. I mean, we’re missing millions of children.

Well, if your business model is built on an endlessly growing supply of endlessly increasing income coming from the middle class, you’re about to be met with a really hard day. Because not only are you pulling from a smaller set of people, but you are pulling from a smaller set of people that are growing increasingly disenchanted with college. So I don’t like to make predictions because I think it goes against my personal belief that policy always has the ability to intervene. And when you make a prediction, in some ways you’re giving up on trying to change something or prevent something.

But I will say in the next 10 years, we will see colleges hits pretty dire financial straits. And if left on their own, you’re going to see a lot of colleges and universities close.

Katie:

Oh man.

Kathryn:

That doesn’t mean there’s not room for them to do something creative to get around it, but they’ve built themselves into a truly unsustainable business model.

Katie:

Sometimes I feel that way about our entire economy, to be honest with you.

Kathryn:

But when that reckoning comes, I mean again, there’s always room for policy to make a difference. Alright, spitballing, if you’re a university and your population is declining, what are you going to do about it? After World War II, the GI Bill sent a lot of people to school. But what I think is lost in that kind of common knowledge is that those kids did not want to go to school for four years. A lot of them, they were coming out of the army. They weren’t all 18. Some of them were in their twenties or in their thirties. They were married, they had kids and they wanted to get a college degree, but they didn’t want to spend four years of their life on it. And so a lot of colleges designed accelerated degrees specifically for the GI Bill to get the kids basically the minimum amount of education to get a degree in the shortest amount of time possible.

So I want to say if memory serves, HW Bush, future president and father of future president, this is what he did. He got out of school, he got out of the Army and he went to Yale and was like, I’m not spending four years here. I’ve already got—Jesus, the guy had six kids.

Katie:

So I feel like that’s more of a reason to spend more time there. I’d be like, yeah, I’ll stay for eight actually.

Kathryn:

Yeah, but I mean they adapted their curriculum and their offerings to meet the demand that was coming out at the time. Colleges haven’t done that in a really long time.

Katie:

They haven’t had to.

Kathryn:

They haven’t had to, so I think, yeah, something bad might come because their fundamental business model is about to come up with a brick wall of failure. But that doesn’t mean we won’t see things get really creative and that policy can’t, federal policy can’t help support that. I mean, there’s a lot of people whose jobs will also become obsolete in the next 10 years.

And if there is a way to marry, I don’t know, a really high capacity for education that is currently poorly financed and not accessible to people once they turn 19 with the need for reeducation and re-skilling that can’t take four years. Maybe there’s like, I don’t know, feels like we got something—

Katie:

A little bit of synergy.

Kathryn:

A little bit of synergy here. So I mean, those are the types of things. This is why I don’t make predictions because I’m never going to give up on a good solution coming.

Katie:

Okay. I want to talk about a different type of intervention now I want to talk about taxation and tax cuts.

Kathryn:

Sure.

Katie:

Since 2000, Congress has cut taxes four times, which totals around $7 trillion lost to government revenues. And right now we’re looking at another $4.5 trillion dollars tax cut, which includes an extension of the Tax Cuts and Jobs Act. It’s in the works. And you said recently, economically there is almost no justification for doing this. Why not?

Kathryn:

How long is this show, did you say? We have three hours and people just want to hear about my taxes? Great. I’m so glad that we’re doing a special half day episode. Oh God. Okay, so let’s do our cold heartless economist coming in.

Katie:

Sure.

Kathryn:

What does a tax cut do? It gives everybody in the US a little bit of extra money. Now, what are the economic situations that would warrant that being the answer? What problem does that solve, that we just need people to have a little bit of extra money. It’s actually a very particular circumstance. When the economy is in recession, people pull back on economic activity. Well, two thirds of the US economy is the spending of households. So in order to prop up household spending, you want to basically give people some money that feels like a bonus with the hope that they go out and spend it.

Katie:

Interesting.

Kathryn:

That is the economic impetus for tax cuts.

Katie:

Okay.

Kathryn:

Now it sounds fine. Two problems with it. One, most of the time people immediately spend it on debt, right? If I told you the unemployment rate is 8% and here’s $2,000, what did you do with it? Pay off whatever debt I can and save the rest in case something happens. I’m not putting that into the economy. No, sir.

Katie:

Yeah.

Kathryn:

That’s problem one, is that it doesn’t work as intended, even for its best intended use, it doesn’t work as intended because it’s not targeted. And that is the fundamental flaw of tax policy as economic policy is that it’s not targeted. If you want to give a tax cut to helps people spend, you’ve got to give it to 130 million people or 150 million people, and they’re not going to do the same thing with it. So some people, you give them a tax cut and they’ll save a little bit, they’ll invest a little bit, they’ll spend a little bit, maybe they’ll hide it, take it out of circulation and put it underneath their couch and then sit on it. All of those have different economic consequences, which means as a policy, unless you don’t care at all what people do with it, it’s really not that good.

If you want to, to stimulate spending in the economy, a much more efficient way to do it would be to say, send a $100 check to everybody on food stamps. Those are people who live hand to mouth. They don’t have enough money to afford their life. If you send money to someone on food stamps, that money is gone before the end of the day. They will absolutely spend it.

So the government has means of duplicating the intent of a tax cut in a much more effective and therefore cheaper way. You know who else spends money really quickly when you give it to ’em during a recession? Unemployed people, if I’ve lost my job, even if I’m on unemployment, I’m at most getting half of what I earned, but probably closer to a quarter of what I used to earn. If you give someone who is unemployed $500 bucks, that money is gone.

So rather than send 150 million people a tax cut to incredible expense, you could give it to the 30 million on food stamps, or maybe the 10 million who are collecting unemployment. It’s a lot cheaper and a lot more effective. That means that the only economic justification for pursuing tax cuts is economic policy, and it’s still not the best way to go about it. It’s like the fourth best option we have for stimulating the economy during a recession. That’s why I say there’s no economic justification for tax cuts because even when they’re economically appropriate, they’re still expensive and ineffective relative to alternatives. That’s part one.

Katie:

Let me ask a question then on part one before we jump to part two, because I know that we said we don’t think that there is a cabal of people like the people in the Simpsons cheersing to evil making these decisions.

But I’m like, I’m sitting here and I’m just like, yeah, and you know what? So then why are we doing this and why do we keep doing this? And the only thing that I can come back to is, well, because who benefits the most from a tax cut nominally it’s a rich person, they’re getting the largest amount back because the percentage of income. Do you see what I’m saying? And a rich person is actually though inversely to what I just said of who’s benefited the most, it means the least to them because they’re already rich.

So if there’s no justification and it’s going to cost the most to give it to the rich people who are going to benefit the most from it, I am having a hard time coming up with a rationale other than, well, we just are very, very excessively friendly to rich people. And to me, that’s about as close to the “cheersing to evil conference room table” scene that I can think of here. Push back, tell me—

Kathryn:

I’m going to make you optimistic. You just wait.

Katie:

Tell me why I’m wrong. Tell me why I want to be wrong about this.

Kathryn:

This is the most economically thing I say is that you can be right and wrong at the same time in this economy. And I think the economic justification for tax cuts, it’s also helpful to remember that a lot of people, including your elected members of office, they don’t know that it’s not good policy. They’ve probably been lobbied to say—in their mind, taxes are crippling the US economy.

And even though we’ve cut $7 trillion in taxes, if we don’t cut more the vitality of the US economy’s at state, and even though there’s no evidence behind this, they’re deeply committed. So last year on April 15th, I actually think it was on tax day, I testified in front of the house Ways and Means committee about this tax cut that they’re debating right now. This is as I would call it, an away game, because it’s a Republican majority. So there’s four Republican witnesses, bunch of dudes, me at the end in a bright blue, stunning blazer. I look amazing. It’s like they’re all in black. It’s like these four guys that are all in muted suits and red ties. And then there’s me in the end and I’m like, why don’t we just embrace that we’re the democratic witness?

But that hearing—it was in their core, if taxes went up, the US economy would go into free fall. And it was so hard to shake them of this belief, and at various points they would say things like, do you think it’s fair that the top 1% pays 45% of all income taxes?

House Ways and Means Committee:

Dr. Edwards, let me ask you just a couple quick questions. We’re talking about the not fair share—when the rich are not paying their fair share, so they pay 47%, the top 1%. What percent would you think is appropriate for them to pay?

Kathryn:

Y’all, I don’t decide fair.

House Ways and Means Committee:

No, I mean that’s what we hear all the time. Pay their fair share, pay their fair share, and when the top 1% pay 47% of the tax burden, I want to know what a Democrat witness say is the fair share.

Kathryn:

Well, speaking as an economist and not as a Democrat, what I would say, sir, is that the top 1% have also seen the accumulations of income over the past 20 years. Part of their outsized burden of how much they’re paying in taxes is also a fact of how much faster their income has grown over the past 40 years. And the top 1% income share is now at a 70-year high. It’s not just the rate that sets the share, but also the total amount of income they earn relative to the economy.

House Ways and Means Committee:

And I am not going to disagree. Their facts are always your facts and my facts, and that’s just the way life happens.

Kathryn:

I was so frustrated that they didn’t want to learn. I also am struggling to come up with the bright side of people who are committed to both not educating themselves and doing some damage, but at the same time, this is kind of like the destruction you see from the Trump administration today of you are just proving to everyone that you don’t know how to solve a problem because you keep dipping back into that same solution. And you may be doing it earnestly. You may be doing it motivated by love of country, but you are ineffective.

Tell me one problem that $4.5 trillion of tax cuts will solve that the first $7 trillion—it doesn’t exist. Whatever problem you have, they don’t have the answer because the only answer that they have had for 20 years is tax cuts. At some point, hopefully the electorate realizes that.

Katie:

It’s like that meme where the guy’s sweating, with these, the two buttons, but both buttons say tax cuts.

Kathryn:

Both buttons say tax cuts. They genuinely think that if you have more tax cuts, that people can start more businesses. And there is an argument that if you lower taxes, more people will work because you’re increasing the returns to work. I mean, no proof that ever worked, but I mean they really love it.

Katie:

Yeah, yeah. Well, is this not like Laffer Curve thing? Not that more people will work, but that the end result of tax cuts will actually magically be higher revenue because more work will create more tax revenue.

Kathryn:

Kind of. I mean, Laffer is basically saying that at some point your economic potential is clipped when you have too high of taxes. This is saying specifically it has to do with income and substitution effects from an extra dollar of if you have a different amount of money that you’re getting from work because you have lower taxes that you pay on it, are you going to work more? The labor income argument for tax cuts is that if taxes are too high, you’ll pull back on the work that people will have because the return is lower. And so because you’re increasing the return to work by decreasing taxes, it will get people to work more.

Again, this is kind of like using tax cuts to stimulate the economy. It is the most expensive, least effective, least targeted way to do that. If you wanted to get more people to work, you’d offer free childcare. It would cost a lot less money. The 10 year cost of universal childcare, even if you were going to be generous of whatever they’ve estimated before, double it. We could have universal zero to five childcare in the United States 9x for the cost of this most recent tax cut, because it cost about half a trillion dollars when this tax cut’s going to cost $4.5 trillion.

So you could just take nine universal childcare programs and stack ’em on up, and that would get more people working than this tax cut—so I think this is the problem, is that there’s this shred of economic logic behind tax cut that it propels them onward. Because sometimes when you believe something, you just refuse to let it go, and the more effective, better economic policy is there, but they don’t want to see it. So yeah, they’re probably going to pass this tax cut.

And these past two months, I have found myself saying over and over again, I’m so glad their cards are all on the table. They can’t disavow their actions. What did you do on January 20th, 2025? The US was at a 4% unemployment rate and CPI, PPI, and PCE showed us that inflation had fallen below 3%. You were gifted a strong economy ready to take off, and you came in with the promise that you were going to help American families. And what did you do with it? You started a trade war that will likely cause a recession. You fired the federal services, you fired people enough to increase layoffs economy wide, and then you gave four and a half trillion dollars of government money away and none of those problems that elected you into office. None of them are being addressed.

Katie:

We did it, Joe.

Kathryn:

We did it, Joe, we did it. But I think on some of them I’m like, good, put your cards on the table. This is how you helped people by hurting the economy. So I don’t take pleasure in that, but I do feel empowered with the knowledge that double speak in election goes away when you’ve got a voting record and a policy record.

Katie:

On that note, you mentioned recession. You’ve mentioned that you do think that the tax cut will go through.

Kathryn:

Since the election, they have been promising we are going to have a tax cut and we’re going to introduce a “one big, beautiful bill”. They cannot seem to get it to the floor because it is going to be almost entirely debt-financed. So there’s two kinds of fights happening within the Republican party about this tax bill. One is, should it be merged with a border bill? The Senate would like to separate a border policy immigration bill with the tax bill, and the House wants to do it all together as one estimated cost is that it’ll be $4.5 trillion dollars. They would like to pay for it through a trillion dollars of other spending cuts. And they have focused on Medicaid. The backlash is—even before they’ve announced how much they’ll cut Medicaid, the backlash is already mounting. So if they don’t cut Medicaid, they’ll have to borrow $4 trillion in order to pay for it.

Katie:

Oh, that’s why we’re firing the park rangers. Right?

Kathryn:

That’s why we’re firing the park ranges.

Katie:

That’s—why we’re going to do it, folks. The Photoshop licenses and the park rangers.

Kathryn:

This is their conundrum, is that tax cuts, both the ones we’ve had in the past and the one that they’re proposing devastate the federal budget and they absolutely raise the debt. My understanding is they haven’t brought it to the floor because they haven’t figured out how they’re going to pay for it and they can’t pay for it because it’s so large and because people hate Medicaid cuts.

Katie:

But you do think another tax cut will come.

Kathryn:

I will say that over the past 25 years, it doesn’t matter what the economy is, it doesn’t matter what the state of the national budget is. It doesn’t matter if people like it or if they don’t like it, they don’t care. When Republicans get in power, they pass a tax cut. The tax cut in 2017 was polling even lower than the one that is now, and they still passed it. They didn’t even hold hearings on it. They just got it through as fast as possible.

So my confidence comes from the fact that they said they were going to do it. Trump wants them to do it, and this is the one type of legislation that they’ve proven effective at passing for the past 25 years. But this moment is getting increasingly hard for them to justify such broad scale economic destruction because the president’s doing that in a lot of other ways.

Katie:

Okay.

Kathryn:

So I think they want to get this passed. They don’t know how to justify it because borrowing $3 trillion when the deficit is already running over a trillion per year makes it expensive.

Katie:

And it’s not a good look. Like you said.

Kathryn:

It’s not a good look and it’s not like people are calling them demanding it.

Katie:

Yeah. Well, because people know that you’re not. You’ve seen the charts. I’ve seen the charts. It’s like for most of the country we’re talking a couple hundred dollars back per year.

Kathryn:

Yes.

Katie:

You can’t pay for childcare with that. You can pay for one trip to Costco with that.

Kathryn:

Even for people who are at the 75th percentile, so that means that they’re richer than if you were—every income tax paying unit. So just houses, joint filers units. I mean sometimes I talk like an economist and I have to be like, so if you think of tax units, AKA people, I guess humans, people and houses. I dunno, what are they called? Fumlees? Oh, families. You’re right. Families. I’m sorry. I’ll get there.

If you think of tax filing units, aka families, if you line them up from the highest amount of income that they report on their taxes to the lowest amount of income, and you were to say, alright, what is the top cutoff for the bottom 75? Those people at the 75th percentile max over the past 25 years, they’ve seen a $2,000 reduction in their tax bill. So if you make less than the 75th percentile, you’re going to see less than $2,000 back every year. So I mean, you tell me if that helps you afford rent and childcare and gas and food and health insurance.

This is a very, I said before cataclysmic time and there is part of me that has something like hope that this is such a bad idea that they won’t be able to do it. I don’t know if that’s going to happen, but there is something to watching them try to do it cutting Medicaid to pass a tax cut that is robbing from the poor to give to the rich. And I think what a lot of members of Congress are being educated on—

Katie:

What’s more American than that?

Kathryn:

But they’re learning how many people are on Medicaid. I think in their mind, Medicaid is a fringe issue and that we don’t need it. 77 million people are on Medicaid.

Katie:

And half of them are kids.

Kathryn:

Yes. Then there’s a lot of people in old folks home. It’s a lot of elder care, assisted nursing, home assisted living is a lot of Medicaid, so I don’t know if it’s going to pass. I know it won’t be good and no matter what, we’ll have to reverse it.

Katie:

Yeah. It’s like where you’re kicking the can down the road.

Kathryn:

Sorry, someone in a few years is going to have to be responsible and make up for the $11.5 trillion dollars of damage we’ve done to the federal budget. We are not going to do it, but somebody’s going to have to do it. We’re going to wait, bide our time, and then try to pass a $4.5 trillion dollars tax cut. Keep your eye on the ball of who is failing whom.

Katie:

Yeah. I know that you mentioned recession. I know that this has become kind of a hot topic. I actually have not used my phone this week. I’ve just kind of had it off in another room because I realized I needed some space away from the push notifications of breaking news, breaking news.

But I did see a couple comments come through of people being like, can you please talk about what we should be doing with our money right now? Because everyone who’s just acting like things are normal is really rubbing me the wrong way, and I hear that critique and that complaint big time. We’re not in a normal moment. I’ve heard you reference more than once in interviews and in your column maybe the economy is standing on the edge of a cliff with the wind at its back. It’s one strong gust and that puppy’s going over, and so I think it’s very easy to hear things like this and feel alarm.

I would like to address that for the class, for the group, for the friends here with us today, and basically say, it’s not that there is some secretive magical financial strategy you should be enacting right now. It’s all the best practices of personal finance that we always talk about with a little bit more panache, with a little bit more throwing your back into it.

All the same things go for periods like this. It’s figure out where the money’s going. Cut back where you can. Keep the resume buffed up. Make sure the emergency fund is good. And I recognize that sometimes that advice is kind of like, oh, good, save money. Thanks. Didn’t think about that.

But we do have the Personal Finance 101 resources. We do have the Investing 101 resources on our site for free. You can spend a weekend doing and give yourself that sense of, okay, I know the steps that I need to take, but I recognize that it can be scary to hear things like this of like, yeah, they’re probably going to cause a recession. Yeah, we’re kind of standing on the edge of the cliff.

But I do think that where I take some level of optimism from you, and maybe you’re just rubbing off on me now that I’m saying this, but I do think that something was going to fundamentally break either way, and the faster it breaks, the faster we can start rebuilding it in a way that actually works for everybody.

Kathryn:

And I would tell your listeners that the—recessions are scary, and markets go down, firms pull back. It’s a very, in some ways, not uncertain, but certainly scary. And what I would point out, and I say this knowing that it sounds a little bit casually cruel, for the most part, recessions affect a pretty small group of people and that’s the people who get laid off.

And there’s really two paths through the recession. The people who are laid off and the people who aren’t and the people who are laid off. That’s a really small group of people relative to the overall economy. I mean even at their worst, you’re looking at possibly 8% unemployment, which that’s not great for those 12 or 14 or 16 million people, but that means that another 155 million have kept their job. The scary thing about recessions is that the pain is so concentrated and it’s a concentrated upon the people who lose their job.

And even then, hiring never stops in a recession. It just slows down. The familiar beats of a recession from the labor market’s perspective is there’s an uptick in layoffs that sends a lot of people into the unemployed and unemployment. It goes up at the same time. There’s a slow down in hiring. So while you increase the number of people in the unemployed, you’re a lot slower to pull people out of it and then it’ll eventually reverse and hiring will pick up and the unemployment rate will go down and the economy will recover. And how long that takes really just depends on the strength of the economic recovery.

But even for people who lose their job, it’s not the end of their economic life. And even for people who have a hard time getting hired, hiring never goes to zero. It’s a lot of concentrated pain for people that puts them in a bad situation. But even that bad situation does not mean forever doom. And if you lose your job, apply for unemployment insurance, ask about severance, do everything you can to support yourself.

Not for nothing is recessions is when we see a lot of people start new businesses, because they lose their job that they didn’t love anyway, and they try to start something else. And so remember that you live in an economy that is very big, that is very creative, and there’s more than one way to thrive here. And if the rug gets pulled out from under you, you’re not a business. You get to come back.

Katie:

Thank you for that. That is needed, that level of reassurance, I think. On the note of labor power versus the power that employers or businesses have in this particular labor market right now, I do think that this sense of precarity and all this talk of recession does kind of go hand in hand with businesses sort of flexing their power after the last couple of years when maybe the workers were starting to gain a little bit of power and ability to be selective and to demand more pay and to demand more benefits.

And so something that has come up recently is this return to office mandate and that this is in some ways like businesses saying, yeah, fun’s over kids. We’re going to show you who’s boss now. We’re flexing that power and that leverage that we have over you and that it’s kind of becoming more of a bargaining chip now.

Kathryn:

So the pandemic sent everybody home and the lucky ones were able to work from home. And even though the first lockdowns were hellish in so many ways, a lot of people found that they wanted to work from home, that they liked it not having to commute, being able to be flexible for the needs of your family, it became an amenity that a lot of people valued on their job. And in surveys of workers, they love it. They don’t want to be in the office five days a week, nine hours a day. They like having the ability to work from home that they feel more productive at home, that they are in fact more productive at home.

So this is an amenity that employers gave away for free. I think all they’re doing now is just calling it back. What I’ve been looking for is data and reporting on whether or not the gate entry actually went down at these five day a week return to office announcements like JP Morgan Chase or Amazon says, you have to be back in the office five days a week, nine to five, or people don’t really change that much, but they’ve renegotiated their contract. So maybe they took a smaller pay raise in order to have it, or they said everyone has to come back nine to, but for certain people they were like, tap on the shoulder. You can still work from home three days a week.

It’s just taking a bargaining chip that you gave away from free and you’re bringing it back. Does it actually change the number of people that are showing up to work? I mean, that remains to be seen. If it goes to a hundred percent that at every one of these firms goes back to office five days a week, that’d be one thing. But I don’t even think we’ve seen that yet. I think it’s just taking that little chip of power that you gave workers and bringing it on back so that now you have it to negotiate with.

Katie:

Do you think that we’ll see employment rates among women or disabled workers go down as a result of this?

Kathryn:

Yes. Yes.

Katie:

Yeah. Something that I’ve kind of casually noticed recently on the note of women work from home, et cetera, is the fact that it’s becoming more common among lifestyle influencers of varying degrees of religiosity to have three, four, sometimes five children. And that strikes me as notable during a time when a very predominant narrative among young people is that, well, having a family is too expensive. I can’t have kids because my life is not stable enough for that.

And so I’ve noted this as kind of a shift of having a big family sort of becoming a status signal or a signifier of upper class status, at least online. It just brought my attention to this idea of the way that we talk about that decision in America, which is “Don’t have children that you can’t afford.” That is kind of the default posture about the decision to have kids. And I’ve just been thinking a lot recently about the fact that what does that mean in the long term if we are just slowly and slowly, fewer and fewer people can actually afford to have kids?

Kathryn:

Yeah, that one, you have to clap back so hard of, “You classist. I can’t believe you would actually say that family is a privilege in the United States,” that we like to put a little income test on it. If you show up to your OB, they’ll be like, well, show me your W-2 and we’ll decide if you can have children.

But I think to me, it ultimately represents the failure of policymakers to readjust and regulate our economy so that family isn’t a privilege and you’re basically adopting their failure as part of your identity. Like, hey, man, childcare costs more than a mortgage in college tuition in almost every state. And your answer is like, “Don’t have kids. I fixed it.” I don’t think I’ve ever seen such lazy thinking on proud display.

And then someone says, “Don’t have kids if you can’t afford them.” I’m like, this is who you want to parrot. That’s the mindset that these people are so bad at their job, that children have become a privilege, and you’re going to double down on that with a smug little, “Don’t have children you can’t afford.”

Children are expensive, and so they are becoming a privilege and larger families are a sign of wealth. I think all that is happening, all reversible through good policy. The casual disregard that society has towards women and their struggles will always be hard to swallow just this, don’t have kids you can’t afford. Thank you, sir. What a great idea. You’re so good at your job. What’s your answer for unemployment? Start a farm. I mean, come on. Come on. I mean.

Katie:

Yeah, the callous disregard for people generally, but women specifically is really frustrating. And I wanted to talk to you about the limits of “empowerment” rhetoric, because if economics is a study of power, I think this empowerment rhetoric is often aimed at motivating the group that just occupies the lowest ground and who does not have the upper hand. And so something that it feels like we should be very clear about when we discuss about this nebulous idea of empowering women is that the US has never pursued an agenda to give women equal economic footing to men. They have never tried to do that. They just tossed Lean In at us, they sang Chappel Roan’s “Good Luck, Babe” at us. And they slowly backed out of the room.

And something that you have pointed out before that I find incredibly telling is that you actually can’t throw a rock in Congress without hitting someone stressed about pouring billions into bringing back manufacturing jobs. But when the subject is raised of stagnant pay and worker shortages among teachers or nurses or childcare workers or these fields that are traditionally staffed by women, sometimes low income women, this pink collar work, it’s like, oh, well the market’s efficient. It’s going to solve this problem. What do you make of that?

Kathryn:

I think women are really good at internalizing social failures, but they’re really good at internalizing policy failures too. And we have this industry that’ll tell you how to fix yourself. I mean, you could do all of that and you still wouldn’t have paid family leave.

Follow every New Year’s resolution, ask for more, ask for a raise, meditate, be grateful. Lose 10 pounds, gain 10 pounds. Make time for yourself, fight for a better work life balance. Spend some time exercising, take up a new hobby. I mean, do all of those things. And honey, you still won’t have paid family leave. You still won’t have childcare or afterschool care or summer care.

And I think we get a lot of make work thrown our way because in some ways it’s just feeding the beast. We have so much on our plates. We are so desperate to make our lives better. That being told, sorry, you have to wait for Ted Cruz to come around on this. That’s not very satisfying.

Katie:

Well, he’s in Mexico, Keds, so he’s actually in Cancun right now on vacation.

Kathryn:

There’s a kindness to the amount of empowerment narrative that we’re fed of, “Hey, it’s a bad situation, but you can still make the best of it for you.” And that’s a kindness, right? That’s telling someone don’t let other people define your life and your happiness, but it’s also a get out of jail free card for the people who are actively hurting your life and your happiness by not having good economic policy. We just need to swing the pendulum back and be like, Hey, every fourth meditation of gratitude needs to be an angry ass phone call to Congress of saying, where is paid family leave? This is barbaric.

Katie:

Now we’re going to empower you to do your ****ing job.

Kathryn:

I’m going to send you a great article about practicing gratitude. I think for whatever reason, the gratitude one really gets under my skin. I don’t know. I’m not very good at the empowerment lifestyle stuff. I think part of the reason why this argument kind of came to me naturally is, I mean, I don’t like yoga. I don’t like meditation. The stuff that gets fed to you of here’s a skin cream. I also think most beauty products are a lie. None of that stuff is going to appeal to me. And so I think I just register its volume. It’s just wow, is this a lot.

Katie:

Yeah, your bullshit meter is like this isn’t solving anything. You’re kind of pointing to this tendency, which is like you mentioned, internalizing social problems, but also internalizing economic problems that we’re internalizing them. But then we’re also trying to use cultural or social nudging to solve economic problems. So there’s this idea that by encouraging or coercing people to get married, women to get married, that that’s the best way to solve problems like inequality. And there’s a really fascinating theory that Melinda Cooper writes about that basically ties the proliferation and preservation of neoliberal economic ideas to social conservatism because the idea is, well, if individual men will just support individual women and individual women will allow themselves to be supported, we actually won’t have any of these problems and we won’t have to do this job anyway. The government won’t have to provide any social services if they’ll just shut the **** up and marry rich guys.

Kathryn:

Okay so let’s throw some of their advice back at them, like lean in and ask for a raise. Do women make 85 cents on the male dollar because we’re bad at asking for raises? No, no, no. That is not why we don’t make as much money. We make as much money because there’s a massive motherhood penalty at leads to a 10% to 30% reduction in our lifetime earnings. And the gender wage gap almost doesn’t exist before you have kids, and then it blows up afterwards so that this whole idea that women earn less than men is truly that mothers earn less than fathers or non-parents a motherhood penalty, not a women penalty. I mean, yeah. Is it just that those moms didn’t ask for raises and they need to be better?

Katie:

No, I think that there’s also, I do like Claudia Goldin’s work on this because she emphasizes the motherhood piece and there is a piece of this, I think probably, I don’t know, a quarter of the wage gap could be attributable to in low-wage work, and then that gets into the chicken or egg of like, well, is it low wage? Because women are doing the jobs that also, I think you can draw a line between this idea that, well, it’s the occupational segregation that the person doing the job impacts how we perceive that job’s value.

Kathryn:

And then to kind of go back to this internalization of why don’t we just marry rich, that you have this kind of social conservatism meeting and economic conservatism, to me, I always view this through the lens less of women and more of poverty.

Katie:

Oh, okay.

Kathryn:

The women argument for me is the failure of economic institutions to create a fair economy for women. We don’t have these very necessary things that families need, and so women bear the loss. But when it comes to social, and I see that as just an economic failing. We don’t want women to be equal, or at least we could have tried this view of women need to marry rich comes down to how America views poor people.

So I teach a class on poverty in the history of social policy as it relates to poverty in the United States. We’re halfway through the semester now, and what it comes down to is whether or not you want to fix the problem or fix the people. And so much of our policy as it relates to poor people is that we want to fix the people. And it just so happens that the poorest group of American is single moms, but it’s that we don’t approve of them.

What’s really hard? Increasing wages for the bottom 55% of earners. There’s 60% of earners that haven’t seen a big wage increase in doing so in a way that doesn’t jeopardize our economic growth through making it hard to run certain businesses or hard to provide certain services. And we need to move that forward so that we have good strong jobs for the economy versus they should get a man. And the temptation to fix people is so high, and the difficulty of fixing institutions that failed him is much higher.

And so you’re going to just opt to fix the people every time, and in some ways, because of the overlap of being a poor person and being a single mom in the United States is so high, it expresses itself as an anti-parent policy. But you know what? They would give parents a ton of money if they could find a way to not give it to single moms.

Katie:

That is a really interesting interpretation of that challenge.

Kathryn:

This is probably—of my economic policies and beliefs, this one is by far the most radical one that I have almost.

Katie:

I mean, I would not classify it as radical. I just think it’s astute. I think it’s spot on.

Kathryn:

I mean, we have a child tax credit in the United States right now that you have to be rich enough to get, so the vast majority of people who get it are two-earner households.

Katie:

You have to have enough income to get a tax credit—

Kathryn:

It’s not a refundable tax credit.

Katie:

Gotcha.

Kathryn:

So if you owe the federal government $1,000 and there’s this $2,000 tax credit, it can reduce your tax bill to zero, but you won’t get the overage.

Katie:

I didn’t realize that. I thought the child tax credit functioned like a cash payment if you didn’t pay income tax.

Kathryn:

That is the earned income tax credit, not the child tax credit.

Katie:

Oh, I thought they worked the same way.

Kathryn:

The earned income tax credit is for single moms who have earnings, and only if you have earned income on your income tax can you get a refundable tax credit should you be a very low income family, which is often single moms. But the earnings part makes it a work requirement, so we’ll help you through a tax refund if you work enough.

The child tax credit is just a $2,000 per kid gift that the federal government gives, but they only give it to people who have a positive tax liability. So a lot of the women who would say maybe didn’t work enough or didn’t work at all, they don’t get it. I will get the child tax credit this year and have every year that I’ve had kids, and I couldn’t tell you where that money goes. It comes out on the wash. I get $2,000 came off my tax bill. It didn’t go to kids. Maybe it did. It went to me. It went to my family’s bottom line.

Katie:

Your economic unit’s bottom line.

Kathryn:

Yeah, my joint filing economic tax units bottom line. But when we had the refundable child tax credit in 2021, that sent the credit out in advance monthly to families, the people who benefited from the expansion weren’t people like me. I had always gotten it. It was people who had low enough income or no income that they got it for the first time and that was why it was so effective at lifting children out of poverty. 3.1 million to be exact is because it went to families that had really low earnings.

And at the end of 2021 were like, wow, this is amazing. We found a really effective way to get kids out of poverty, so we should probably stop. We did. We took those 3.1 million children and we just tipped them back into poverty. In the meantime, we had surveyed their parents, we had surveyed households. We had looked at spending, we had looked at their bank accounts and we had every piece of evidence we needed to know that when you give poor parents money, they spend it on housing, food, utilities, and their children, but that didn’t matter.

I’ve never been subject to any behavioral tests because I’m a rich woman who’s married, but if I was a poor woman who had kids, I’d be subject to every kind of behavioral performance test manageable, and most of the times, it wouldn’t matter if I passed, they weren’t going to give me the money anyway.

So we’re about to pick work requirements on Medicaid. The earned income tax credit is a massive work requirement. Medicaid is going to get work requirements. Food stamps already has work requirements. We basically ended welfare by making the work requirements so severe. We are trying to fix these people because it’s them, not us, and the problem is them, not our economy.

Katie:

You, in a video, said that this mentality can be best summed up by poverty is caused by poor people. And you had spoken about how over a four-year period, 34% of Americans fell below in the poverty line at least once. Only 2% of the population is actually chronically poor. But poverty is not a disease, it’s not a permanent state. It is a risk that between 34% and 40% of Americans face, depending on the timeline that you’re looking at. I had no idea. That actually really surprised me. I would’ve assumed it was the opposite, that you had a more stable, chronically poor situation and then a smaller number of people that were maybe cycling in and out. That I think is a really powerful statistic to—it’s not that I don’t think people care, but I do think you’re right that there is this underlying, not just with our legislators, but in general, there is this idea that poverty can’t affect me. I’m not subject to that.

Kathryn:

Yeah. Well, I’m a hard worker, so I would never be poor, and if 30% to 40% of the country could fall into poverty, is that because they’re all lazy, or because the economy dealt them a bad hand? I mean, this goes back to the start of our conversation of what is our capitalist economy producing right now? It’s producing a pretty high risk of poverty, and we have kind of backed ourselves into this rhetorical and moral corner of like, well, it’s their fault. :Poverty is caused by poor people” is just one half of a coin the other half says, “Don’t have kids you can’t afford.” What’s causing poverty is that people who can’t afford children are having children as opposed to our economy is dealing out economic risk and insecurity to an incredible degree, and we don’t do enough to protect people from it.

Katie:

Who do we call and what do we say? Let’s talk phone numbers. Let’s talk messaging.

Kathryn:

Y’all, stay focused and don’t get distracted and stay fighting. Before we started our interview, I was saying to Katie that I think the biggest risk out of all of this is apathy. That you just get so burned and so cynical that you don’t think anything you will do will matter, and that is the opening that they are dying for you to give them. They are dying for you to look away and let them run amuck and as long as you pay attention, and there’s a balance here, right? Yeah. The news is horrifying as it comes down, but we also know that there are good solutions and you’ve got to have this yin and the yang of like you are messing up and there’s a better way to do this. I know both and I am not turning my head. You are going to have to answer to me.

At the end of the day, I don’t have much faith in Congress, but they do have to run for office and they do have constituent services, and I don’t know. I can’t tell you how much your voice matters, but I can tell you it matters not at all if you don’t say anything,

The only way to guarantee that your voice doesn’t matter is to stay silent. So risk that phone call risk that letter, send it. Your silence is their victory. Your apathy is their victory. Your cynicism is the ultimate victory for them. So just don’t give them the satisfaction, and certainly don’t reward them with your silence.

*Katie hums*

Katie:

Well, I told you that we were going to go all over the map today. I feel like we delivered, and part of me feels like we should just make Keds our Washington correspondent, and force her to come back every quarter to break down the economic news for us.

But in the meantime, that is all for today, and we’ll see you next week.

Our show is a production of Morning Brew and is produced by Henah Velez and me, Katie Gatti Tassin with our audio engineering and sound design from Nick Torres. Devin Emery is President of Morning Brew Content and additional fact checking comes from Scott Wilson.