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Personal Finance For Women

The Real Story of the US Economy: How the Last 40 Years Gave Us the Next Four

December 4, 2024

Economy


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How have the last 40 years of American history—starting from the Reagan era—delivered us to where we are today? I wanted to explore Reaganomics and its continued implications on the economy, what Bidenomics really was (versus what it attempted to be), and what we’re likely to see over the next four years under a second Trump presidency. I also wanted to dig into some of the questions I’ve received since the election about whether our financial strategies need to shift.

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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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Katie:

The presidential election was a month ago, and like many of you, I think I’ve been trying to form a cohesive story about how we ended up where we are now and what’s going to happen next. Donald Trump was reelected 47th president of the United States, and while the election felt like a lot of things, a referendum on gender relations…

JD Vance:

We’re effectively run in this country via the Democrats via our corporate oligarchs by a bunch of childless cat ladies.

Donald Trump:

Women are poorer than they were four years ago. Much poorer, are less healthy than they were four years ago, are less safe on the streets than they were four years ago, are more stressed and depressed and unhappy.

Donald Trump:

I’m going to do it whether the women like it or not. I’m going to protect them from migrants coming in. I’m going to protect them from foreign countries that want to hit us with missiles and lots of other things.

Katie:

To a country in disagreement about what constituted fascism…

Anderson Cooper:

Do you think Donald Trump is a fascist?

Kamala Harris:

Yes, I do.

Bill Maher:

He tried to do dictatorial, fascist things.

Megyn Kelly:

Joe Biden actually did and he was stopped.

Joe Biden has flouted the law when it comes to these student loan giveaway programs. Really? You talking? He’s flouted the law, Supreme Court opinions that told him he didn’t have the right to do it, and he openly said, I will get around the Supreme Court. He did it with respect to rent abatement programs, the same exact thing, and then he and Kamala Harris unleashed this department of justice against their political enemy, Donald Trump, their number one chief rival for the presidency.

Bill Maher:

Okay, well, we’ll…

Megyn Kelly:

Is it funny because they did it. You want to talk fascism? That’s fascist.

John Kelly:

Certainly the former president is in the far right area, certainly an authoritarian admires people who are dictators. He has said that. So he certainly falls into the general definition of fascist for sure.

Katie:

In the end, it was one issue that seemed to determine the outcome, the economy…

News Clip:

But perhaps the area that American voters said they were most persuaded by is the economy from enacting tariffs on foreign goods to slashing taxes for both individuals and businesses. Trump’s vision of economic populism is about to be put to the test.

News Clip:

To say the economy is playing a role in this election. That is kind of an understatement. It is playing a massive role. We have talked about this subject specifically inflation, unemployment, the way voters feel about that a ton because it is so important, right, Brian? I mean, we see it topping so many polls as the top most important issue, and that’s across generations. That’s across genders.

News Clip:

The economy.

Yes.

Did you vote on the economy?

I voted on the economy.

Katie:

Now, the economy is not a separate issue from gender relations or questions about authoritarianism, and in many ways I think culture and cultural issues flow from our economic reality, not the other way around. But looking at our economic picture specifically does offer a useful passageway into our current sociopolitical moment. What do you know? Money is political today.

I want to do a few things. First, I want to talk about how I think we got here, and I don’t mean just the last four or eight years, but the last 40 years, because I think that context and that historical reference really allows us to have a more interesting conversation about what’s happening right now. Next, I want to do a deeper dive into what omics was, why it ultimately felt like a failure and why it failed, because I think it’s very important to understand who actually holds the power to make changes in the society that we live in today.

And finally, I want to talk about what’s probably going to happen next. I have had conversations via email over the last few weeks with people who are thrilled about the election results and people who are devastated. And I have to say both have been illuminating, but for different reasons.

So today I want to share the conclusions that I am reaching informed by data specific to our current economic moment, yes, but also connecting the dots with honestly a lot of the work we’ve been doing over the last few years. As always, we’ll be looking at the intersection of where your personal financial situation, your individual choice, meets the economic and political and why I think this lens, our lens, is worth considering. Welcome back to the Money with Katie Show. Let’s get into it. But first, let’s start back—way back—because the beginning of this story wasn’t 2016, it was 1981, or maybe more broadly, the era following the women’s and civil rights movements in the 1970s when America first began to embrace what some have called an economics of aspiration.

Reagan Promo:

Ronald Reagan for president, let’s make America great again.

Katie:

Gee, that sure sounds familiar, doesn’t it?

But following the global oil crises of the 1970s when Reagan became president, both inflation and unemployment were high. By 1980, inflation was at 13.5% and unemployment clocked in around 7.5%. So suffice it to say the country was receptive to major economic change, and it wasn’t a coincidence that this just so happened to coincide with a period of racial tension and gender resentment with social unease about the social order. Here’s American historian Kevin Kruse being interviewed about the role that the 1970s played in ushering in the Reagan era.

Soledad O’Brien:

Talk to me about when resentment and anger starts to breed around a sense of economic inequality and how women and women going to work in the 1970s kind of fit into that picture.

Kevin Kruse:

It starts right away in this period, and I think one of the things that we push back against in the book and that part of it is the common misconception a lot of people have that feminism meant women suddenly decided to go to work, and it’s the other way around. It’s women find themselves forced to go to work by the economic crisis of the time. By 1976, only about 40% of jobs in America pay enough to support a family of four on them. You have to have both parents work. And so women find themselves going into the workplace and as a result of that, whether they were a feminist before or not, they confront gender discrimination. They confront the unequal pay, all the things of a job, sexual harassment of course, and so then that mobilizes them to speak up from those outside of that perspective. They see this just as women are looking for a job just because they want to for fun, they don’t need to, and they resent them. They see that this is taking a job away from a man. There’s a whole set of, and it applies in race, it applies in politics, applies in economics. There’s a zero sum mentality that really sweeps across the country in this period. You can see it in a variety of spots, and certainly this place of women in the workplace is one where it really comes to the fore.

Katie:

So the social order was changing and the zero sum mentality began to dominate political attitudes. And what do you get when you believe the pie is zero sum? You embrace the idea that your individual welfare is dependent upon your ability to compete with your fellow citizens.

Now, as we get into the Reagan era, the crude blunt object of tax cuts sort of became Reagan’s primary economic policy. We started cutting and we didn’t stop the marginal tax rate for the highest earners lowered from 50% in 1986 to 37% where it is today, and I’ll just take this opportunity to note that in the 1950s, which is the era that I think most Americans objectify with this Americana nostalgia, the top marginal tax rate was 91%.

At the same time, high earners were able to hold on to a much greater share of pre-tax income. Beginning in 1987, the corporate tax rate also began lowering steadily from 46% in 1986 to 34% by 1989, where it remained at 35% until 2018 when it was cut again to 21% as part of the Tax Cuts and Jobs Act. So that’s where it is now, 21%.

So over the span of around 40 years, the corporate tax rate was more than halved. The idea was that this would increase prosperity for everyone. That was the narrative, right? That was the story because if corporations have more money, they’re going to create more jobs with it, they’re going to pay their workers better with it. But much of that money was used for little more than increased financialization.

Also under Reagan, SEC chair, John Shad, really loosened the rules around stock buybacks, which is a way for companies to repurchase their own shares on the open market to do a few things. For one thing, it increases earnings per share, which means it enriches shareholders. This is a controversial practice because money that is spent on stock buybacks is money that is not being spent on r and d or paying the labor force. And here’s the other crucial point. The executives of these companies who are often compensated in stock usually stand to benefit most of all.

Clip:

Stock buybacks, a phrase that may mystify the public. But for those in finance, it’s a superpower. We are tracking stock buybacks. The comeback of the buyback. Chevron plans a massive $75 billion buyback. The buyback, it was juicy. Everyone was excited about the buyback. You’re stepping up buybacks. You’ve laid off 10% of the workforce.

Katie:

So taken together to take advantage of lower capital gains taxes, corporations began paying out their higher after tax profits to executives and shareholders by repurchasing stock. In 1982, less than 5% of corporate profits were paid out this way, less than 5%. Between 2003 and 2012, over half of all corporate profits were used in stock buybacks with this increased financialization and incentive structure that clearly favored corporations, shareholders, and income derived from capital rather than labor.

The labor share of income in the US began trending downward. So the labor share of income is basically calculated by looking at the money that was earned by workers during a certain period and dividing it by the economic output produced over that same period. So it’s a way of answering the question, what percentage of the value that is being created went back to the labor force in the 1950s.

Again, this period of American nostalgia between around 64% and 66% of GDP went to the labor force responsible for producing it. Today it’s around 58%. Now, globalization was definitely a big factor in these changes to be sure. But given the incentive structures that exist today, even if more production moved stateside, it seems to me there is little reason to believe that real labor share of income would increase following the great financial crisis, which is a period when many of these trends came to a head for the first time.

A “dual economy”, which is a phenomenon typically observed in developing nations, emerged. In a dual economy, a country’s economic system is, according to Science Direct, characterized by “the coexistence of two distinct sectors, a modern sector and an informal low productivity sector.” In a dual economy, the modern sector can experience rapid accumulation and high investment rates while the informal sector serves as a source of labor supply. So this is a phenomenon that you typically only see in developing nations, and it was starting to show up in the United States. How does this culminate? Well, one analysis from phenomenal world described the American economy as “unable to provide basic public services at full employment,” which is just like, damn, they really clocked us, didn’t they?

We’ll get right back to it after a quick break.

So that’s how I think about the real world consequences of Reaganomics, how the ideas and the policy that were set forth in the 1980s have influenced and sort of put us on the trajectory that we have been on since then and really dominated the economic theory and thinking, but what was omics and more importantly, why didn’t it work? What happened?

So here’s an interesting connection point. Another phrase that can be used to describe this dual economy phenomenon is K-shaped economy. Maybe you’ve heard that phrase. It’s probably feeling familiar. Named for the way different parts of the economy diverge like the arms of the letter K. K is in Money with Katie Show, am I right? Okay, so this is a phrase that Biden began using in 2020.

Debate moderator:

We’re now moved to you, as I said, posing the question. The president says it’s a V-shaped recovery. You say it’s a K-shaped recovery. What’s the difference?

Joe Biden:

The difference is millionaires and billionaires like him in the middle of the Covid crisis had done very well. Billionaires have made another $300 billion because of his profligate tax proposal, and he only focused on the market. But you folks at home, you folks living in Scranton and Claymont and all the small towns and working class towns in America, how old are you doing? This guy paid a total of $750 in taxes.

Katie:

So after he became president, the administration proposed new tax and spending legislation in April, 2021 for fiscal year 2022 and beyond. Now, the proposed legislation, the original proposal included the American Jobs Plan and the American Families Plan.

The American Jobs plan put $2.3 trillion of spending toward highways, bridges, water systems, and long-term care reform. The American Families Plan allocated 1.8 trillion to tuition free community college, universal preschool, Medicare expansion for dental vision, and hearing 12 weeks of paid sick leave and expanded child tax credits altogether, it was estimated to cost around $4.1 trillion over 10 years. So if you were to take $4.1 trillion and you took that spending and you charged every American perfectly equally for it, that would be about $1,200 per year over those 10 years. But that wasn’t how they planned to pay for it, to pay for these things.

They had planned for $3.8 trillion in new revenue from the Made in America tax plan. So this made in America tax plan prescribed increasing the corporate tax rate from 21% to 28%. Now, bear in mind this is still 20% lower than where it was for the 1990s, the 2000s, the 2010s and 40% lower than it was in the 1980s, putting a minimum 21% tax on offshore profits, a 15% minimum on reported profits, closing exemptions and deductions for fossil fuel income, raising the top marginal tax rate for earners, making more than around $600,000 per year from 37% to 39.6% and ending 1031 exchanges, which is effectively a subsidy to real estate investors. All the real estate investors in the audience are probably like, hold on, wait a second. You can’t take the 10 31 exchange away.

But all of that taken together was how they intended to raise the money to pay for this. They also wanted to close the carried interest loophole, which allows professional investors who work for hedge funds, private equity firms, what have you, who earn millions if not billions, yes, literally a billion dollars each year to pay just a 20% tax rate on their income.

So the carried interest exemption loophole allows for that 20% tax rate on that type of investment income. It is largely used by extremely, extremely wealthy people to pay lower taxes, and they wanted to close that loophole. So let me summarize and again contextualize this. We are talking about the most unequal United States we have ever experienced, right? We have never been more unequal than we are now. It has never been worse. It was proposed that corporate and high income tax rates, which are at historic lows, be marginally just incrementally increased. And here’s where the pushback came swift and hard.

Clip:

We don’t want to have a system that punishes people for being successful. So you were talking about, oh, get all this money. Look, the top 1% in America, the richest 1% of Americans pay half the income tax. Is that fair? Is that fair? That one out of a hundred should pay 50% of the tax?

Katie:

This rhetoric of punishing success appeals to that aspirational economics concept that I mentioned at the start of this episode. According to the Institute on Taxation and Economic Policy, 65% of the federal tax cuts that have occurred since the year 2000 went directly to the top 20%. Now, this rhetoric, which is often invoking ideas about meritocracy, frankly, I think it pretty flagrantly ignores the fact that any tax system that taxes labor but not inheritance is not and cannot be a meritocracy. But I digress. Okay, we’ll stay on topic here.

Ultimately, the Biden administration expected to run at a $41 billion annual deficit over 10 years. Now, for context, we added about $138 billion to the deficit in 2024. I think these proposals sound pretty damn reasonable. You’re talking about universal preschool, you’re talking about free community college. These are things that are going to help a lot of people.

But the American business community mobilized against this agenda and these tax increases saying they would make the US a uncompetitive place to do business. Yes, that’s right. A slew of low wage employers: Walmart, Target, Albertsons, you name it, joined forces with Disney, with the Carlyle Group, which is a private equity firm, Bank of America, AT&T, FedEx, Toyota, and more to express their hard line opposition to these proposals.

And in response, the White House delayed its push for higher taxes in order to pass the infrastructure spending parts of these plans, they removed the parts that would increase corporate taxes and to flip the 11 Senate Republican votes they needed, they also removed the $400 billion for long-term care, the $424 billion in clean energy tax credits, the $326 billion for affordable housing in public schools, and the $566 billion for domestic manufacturing and R&D.

So later that year, the House Ways and Means committee comes back with its own legislation for fiscal year 2022 called the Build Back Better Act. And again, the lobbying groups sprang into action. The pharmaceutical industry, the American Dentists Association, Cigna, Blue Cross Blue Shield, and more spent hundreds of millions of dollars between Q3 2021 and Q1 2022 lobbying against legislation that would do things like expand Medicare coverage so seniors could have dental insurance all in the name of, what is it again? Oh, yeah, not punishing success. Right. So ultimately Build Back Better, that failed too, and the big post pandemic push for a government that actually took real steps to provide services to its population lost steam.

But the real death knell to these efforts is what came next. Soon thereafter, inflation replaced all of this talk about K-shaped economies. And under-investment in infrastructure as the most urgent issue facing the domestic economy, inflation at this point was 6.9%. Now, here’s the thing. In response to the emergency social safety nets erected during the pandemic and more than a million Americans dying, the labor market was tightening. We were seeing upward pressure on the lowest wages and low wage employers were sounding the alarms in Congress that they wanted the worker reliefs that were provided by the CARES Act, which was a Trump-era stimulus bill passed in March, 2020. They wanted that shit to end and end fast.

And so where does that leave us? Well, a powerful narrative emerged that all that government spending was the reason for the inflation. So even though the inflation was largely due to supply chain shocks and observed globally, not just in the United States, the connection between government helping citizens and runaway inflation calcified in popular sentiment, and this narrative swiftly put an end to the efforts for more radical change.

Now that we have even more credible reason to believe via the work of economist Isabella Weber, that at least one third of the inflation that we experienced in, I believe 2023, was actually just attributable to corporations taking advantage of an inflationary environment to raise prices over and above their own cost increases. It is especially frustrating that these very same corporations lobbied so hard to block even incremental tax increases that would have paid for all of the things that would make inflation less painful for average people.

And so what we ended up getting instead was a neutered hodgepodge called the Inflation Reduction Act. Now, the compromise, in my opinion, ended up being pretty damn anemic instead of robust additions to social programs, what we got instead was mostly business subsidies to expand productive capacity. It ultimately shook out to $369 billion in tax credits offset by $313 billion in revenue. It added back the corporate minimum tax that was repealed under Trump’s Tax Cuts and Jobs Act, but at just 15% instead of its previous 20%, and it added a 1% tax on stock buybacks. It did not raise the corporate tax rate. It also accomplished Medicare gaining control over a small set of the pharmaceutical industry’s prices, and that we would basically subsidize the semiconductor industry.

So a pretty huge concession from the original goals of the legislation that I described at the outset of this episode. And to really twist the knife, US Senator Kyrsten Sinema insisted that Congress retain the carried interest loophole, which allows hedge funds and private equity firms to pay lower taxes than regular Americans do. When she was asked if she was worried about her electability in the future because of this, she told Mitt Romney and I quote, “I don’t care. I can go on any board I want to. I can be a college president. I can do anything.” **** you, Kyrsten Sinema, and I mean that from the bottom of my heart.

Alright, so to sum it all up, “Bidenomics converted a program for raising taxes and social spending into deficit financed corporate tax credits for targeted growth of existing profit centers rights,” wrote Andrew Yamakawa Elrod. Alright, so that’s how Bidenomics ended up playing out. But maybe the more important question comes back to narrative, to culture, to rhetoric. All of this is going on in Washington, but what were people feeling during this time? We’ll continue after a quick break.

Okay, so it’s my belief that the most salient explanation for the economic anger that Americans felt in the runup to the 2024 election was a twofold story. Number one, Democrats went into office in 2020 and they promised to make things better. There was a lot of momentum following the big social safety nets that were introduced by the CARES Act. And for a second, there had really seemed like things might change. There was a recognition of the K shaped economy, the fact that people kind of live in two different Americas. You had Bernie Sanders presence in the Democratic primaries of 2016 and 2020, which really pushed the party leftward toward these universal programs. And those universal programs pulled really well. They had a lot of popular support, but when push came to shove, I think they tried, but they didn’t try very hard. Right?

When big business Republican lawmakers became obstacles to things like raising taxes for corporations or raising taxes for the highest earners above their current rates, which are again the lowest they have been since what, 1940 and strengthening social safety nets, they ultimately rolled over and the urgency of global inflation derailed more serious conversations about radical economic change.

I think you could also probably blame the filibuster for a lot of this, but I’m trying to keep it big picture here. The second part of this story is that inflation really was painful. And I would say in no small part because of the aforementioned dual economy, I think it’s fair to say that a society with a broader base, one that is less top heavy, probably would’ve been able to withstand the inflationary shock that we saw and metabolize it as little more than an annoyance and not like an all hands on deck emergency. So that’s why my grand unifying theory for why Americans were so mad about the economy was not because of the last four years, it’s because of the last 40. And to quote Bernie Sanders, they’re right, they should be mad. Here’s representative AOC talking about her supporters who also voted for Trump:

Alexandria Ocasio-Cortez:

There is universal frustration in this country. Much of it, I actually think justified that is raging at a political establishment that centers corporate interests, billionaires and puts their needs ahead of the needs of working Americans. And we know that we can either channel this righteous rage because there are people whose snap was cut off their child tax credits were cut off, but they’re seeing people like Elon Musk getting tax breaks and kissing up to Donald Trump in order to do so. But they vote for them.

Katie:

So why vote for Elon Musk and Donald Trump? And so here’s the part where I don’t even know how to classify this, but I genuinely think there is less separation on a lot of these specific policy issues between Trump voters and Harris voters then meets the eye.

Consider Missouri. Okay? This is a state that went 58.5% for Donald Trump, which voted almost as decisively to raise the minimum wage. 57.6% of Missouri voters voted yes on raising the minimum wage. They voted even more decisively not to increase funding for police. 61% said no, no increases to funding for police. And they voted to remove Missouri’s abortion ban. 52% wanted to add abortion and reproductive rights to the Missouri State Constitution.

And so this is why our sources of information, our media landscape and the role that they play is so critical. The corporate media is instrumental in doubling down on or obscuring the facts of things like tax increases. Rather than saying, Hey, look at all this stuff. You’re going to get universal preschool. You’re going to get free tuition for community college. There’s going to be long-term care reform. We’re actually going to fix some of this stuff that we should have fixed 40 years ago. And oh, by the way, here’s how they’re going to raise the money to pay for it. The headline is Biden’s $4.7 trillion tax hike. And so of course, regular people hear tax hike and they think, oh no, I already am struggling to get by. I can’t be taxed more.

Something that I think a lot of people don’t believe, I have a feeling there’s going to be a lot of pushback to this statement, but I’m going to stand by it, okay, is that traditional media is not liberal. It is not liberal, it is not conservative. It is corporate. That’s why you had Fox News headlines claiming that Biden’s proposals would crush the economy and are dangerous. Why they invite hacks (sorry but yeah, I stand by that too), hacks like Kevin O’Leary onto their show to coach their listeners about how to fight back against claims that the rich aren’t paying their fair share.

Fox News:

The more he taxes, the less growth they’ll be, and that’s the risk.

Kevin O’Leary:

So the other risk is making people think that Rich don’t pay taxes right now. The top 1% account for almost half the taxes collected. And by the way, a lot of people say, well, they are also rich. They make a lot of money, but that’s double the amount of wealth they represent in this country. So they are paying that part, but this is something that politically sticks. So how should they respond? How do you think those who are against this notion of just taxing the rich or taxes period should respond

Fox News:

To get rich? They had to be wildly successful. Let’s just take a Bezos or what’s happened with Elon Musk, they’ve created hundreds of thousands of jobs.

Katie:

Sorry, but I just find that so insulting. Half of Fox News viewers earn less than $50,000 per year. And when you present information in this way, you are implying that your viewer’s interests are aligned with that of a man like Kevin O’Leary who is worth $400 million and not in radical direct opposition to the interests of a man like Kevin O’Leary. That is just ridiculous. And that segment, by the way, that was about the capital gains tax increasing on households with more than a million dollars in annual income.

So again, you can see how media narrative framing rhetoric, how all of this kind of bleeds into culture and scrambles people’s perceptions of what is going to help them and what is going to hurt them. This is why I think there was such a divergence in a lot of the economic data that came out that was like, Hey, the US economy is actually doing great, you guys. Why does everyone think it sucks? Everything’s fine. And so when that data says the US is very rich and the US is growing and unemployment is low, and blah, blah, blah, blah, blah, all of that stuff, it’s not wrong.

But as I wrote in an essay a few weeks ago, the metrics by which we are measuring our collective wealth. So things like GDP thinks like unemployment. These are not useful for helping us to understand whether this wealth is translating to a sense of broadly shared and broadly felt prosperity measuring. GDP growth does not tell us that. So when the headlines claim something will hurt growth, your average American is going to metabolize that as hurt me. But the general fact of overall growth belies the reality that we have experienced a four decade long upward redistribution of that growth. So again, you have this corporate media apparatus that is presenting information in a way that is extremely misrepresentative of what the real world consequences of these decisions are going to be.

And that’s why I say Americans are not stupid. Many can see and feel that something is wrong, something is off. But American culture has so fully internalized the logic of neoliberal economics, free markets, deregulation, shareholder primacy, that it has become an almost invisible force. It is the mental framework that we filter all of this information through.

And so the conclusion that I would draw is actually probably the most obvious one. The problem is corporate power, plain and simple. The problem is that corporations own the American government. We have allowed them to become far too powerful.

Now, I would say the micro cosmic example that we’re seeing of this right now is Elon Musk becoming the first buddy or whatever the ****, we are watching the dystopian case study of richest man on planet Earth decides he wants to control everything play out before our eyes. It doesn’t matter whether you love Elon Musk or hate him, the fact that one man can single handedly bankroll his candidate of choice is a sign that things have gone very, very wrong.

We are living in a corporate nanny state, and any attempts to improve the status quo that do not address that fact, that leave those corporations in power will fail. This is why I think culture war stuff is so important and so useful to those in power. I think this is why you have seen such a huge ramp up in divisive culture war topics in the last few years because it keeps everyone distracted and pointing the finger at one another. Culture war is used to deflect class recognition and class war. If you feel like you identify more with Elon Musk than a trans person who lives down the street from you, you are controllable. You are in their pocket.

So to the question about why people who see billionaires getting tax cuts would then turn to those very same billionaires for help, I have a loose theory and it is also a simple one. Trump’s campaign messaging is very simple. He says, I will fix it when the monolith of the establishment has worked to extract as much as possible from you for 40 years. Nobody should be surprised that someone who promises to burn the whole thing down is going to find some purchase. And importantly, he’s willing to offer someone to blame. And I would say the people that he and the media apparatus that surround him blame are often the people in our society who have the least amount of power curiously, but he’s willing to point the finger at someone.

And on a deeper level, he is a man that represents this economics of aspiration, perhaps better than anyone. He is like a poor man’s vision of what a rich guy is. Golden mansions, supermodel wives, right? While Bernie Sanders is saying, hey, billionaires should not exist. Donald Trump will make you feel like if you vote for him, you could become a billionaire.

But what’s more interesting to me than the superficial rhetoric of the campaign and this idea of routing the establishment is how big of a wrench JD Vance throws into this picture. He is someone we haven’t really talked about up until this point. Now, I find JD Vance’s views and comments about women and his overt chauvinism to be abhorrent personally. But it is funny because he sounds a little lefty sometimes. Like when he complains about corporate oligarchs, for example. I’m like, yeah, agreed. On November 3rd, Politico published a piece about how business leaders are really worried about Vance. It wrote, “Vance has consistently bashed big business, expressed antipathy toward corporate merger activities, sided with labor, and emphasized his support for costly tariffs. He has spoken favorably of the Biden administration’s FTC chair, Lina Kahn, who is universally viewed as a thorn in the side of major businesses. And Vance has forged unlikely alliances with progressives, including Massachusetts Senator Elizabeth Warren.” Okay, so I’m like, cool, we’re siding with labor where into antitrust we are skeptical of big businesses. That sounds awesome.

And this is a notable departure from Reagan era conservatism, which believed that the best markets were unregulated ones and that the social responsibility of corporations was to increase profits. So I don’t know whether or not someone like JD Vance is going to actually do anything with those beliefs now that he has this power, whether he’s going to act on his distaste for the so-called corporate oligarchs. I don’t know. It has seemed so far like he’s embraced Musk, but I think they certainly tapped into something very resonant with that rhetoric, which is worth keeping an eye on.

Alright, so what happens? Now? Where do we go from here? Trump has won the election. Part of what’s challenging I think at this stage is interpreting his policy intentions can be hard because I don’t know. He’s a figure that I think is kind of hard to know when to take him seriously or take him at face value.

Debate moderator:

So just a yes or no, you still do not have a plan?

Trump:

I have concepts of a plan.

Katie:

So for example, his comments about abolishing income taxes altogether, that sounds more like the political version of locker room talk than serious policy proposal. And I think even those close to him will say, oh, he is saying he’s going to do things using it as a negotiation tactic, right? So we aren’t really sure, but what we do know is that we have all been living under Donald Trump’s tax regime since the Tax Cuts and Jobs Act passed in 2017, which was the last time that our income taxes changed. They were set to expire and therefore be open to more changes or extension in 2025.

Donald Trump:

I took taxes from 39% to 21%. You know that better than anyone? It’s the largest tax cuts in the history of our country. And that was great. That’s why we became so successful.

Interviewer:

You think we can do that again?

Donald Trump:

Yeah, I think we can go lower. And I’ll tell you what I’m doing. I’m bringing it from 21% to 15%, but you have to manufacture your product here and then you pay 15%. And then I’m going to put tariffs on countries so they can’t come in and steal our business so that our businesses now can be competitive.

Katie:

Now for a while it was anticipated that the tax cuts and jobs act would be extended if Trump were reelected and that even more tax cuts might be coming to which I say we’ve tried this before, guys. We’ve been cutting taxes for 25, 40 years. Things aren’t improving, right? Maybe it’s time we try something else, but okay.

Ignoring the net impact of the tariffs thing for a moment, based on the plans we have seen so far, the lower 60% of the income distribution, so approximately this is everyone earning less than $94,000 per year as of 2022 would see their incomes rise by between 1.7% and 2.6%. While those in the top 10% who earn an average of $277,000 would theoretically see the biggest tax cuts with their take home pay rising by more than 6%.

Alright, so a little inside baseball, I tried my damnedest to only source data and commentary for this particular section, not from my little lefty magazines, but from fiscally conservative voices. Now, one such voice is Oren Cass, a conservative public policy commentator and political advisor. He wrote on November 12th, “One of the most consequential policy fights of the coming year will be over taxes. Most parts of the Tax Cuts and Jobs Act or TCJA or more commonly, the Trump tax cuts, which became law in December, 2017, are scheduled to expire this year.” He writes, “Conventional wisdom long held that if President Trump were back in the White House and Republicans controlled Congress, they would extend the expiring provisions on mass. But that looks increasingly improbable for the simple reason that we cannot afford it.”

On November 19th, Bloomberg reported the same writing, “One of the first orders of business in 2025 for Congress and the incoming administration will be the extension of President Donald Trump’s signature 2017 tax law. The TCJA, most of whose individual provisions are set to expire late next year. There is just one problem. America’s debt trajectory is unsustainable. Even if the TCJA isn’t extended US debt would reach 122% of GDP in 2034 exceeding the nation’s prior peak of 106% in 1946 just after World War II. But if Congress does extend the TCJA without finding ways to pay for it, the problem becomes even bigger with debt rising to 133% of GDP by 2034. And that’s before any tax cuts Congress tries to add.”

Now, alright, honestly, I think at this point, most people, the primary pushback here is like, well, that’s a spending problem, which okay, yeah, but I think something that I would point out here is that the conversation that I had with Grace Blakeley a couple months ago about where the federal budget is going and the extent to which so much of it is flowing back into corporations, I am all for spending differently. I am all for reallocating things, right? But I think we have to be very, very careful about painting with a broad brush and describing government spending in general as a bad thing. Because to that earlier quote and that earlier point, the US is the only high income nation on earth that at full employment cannot provide basic social services to its populace. So Cass writes, “Historically, Republicans might’ve pushed ahead with claims that tax cuts would generate enormous economic growth and even pay for themselves. But at issue here is a specific set of tax provisions that was already sold once on these grounds and found sorely wanting the decline in federal revenue after their adoption is plain for all to see from 17.1% of GDP in 2017 to 16.3% in 2018 and 2019 and post pandemic still at 16.5% in 2023.” So basically this idea that when you cut taxes, revenues rise, he’s saying that, alright, yeah, we tried that. They didn’t rise. You can’t really sell that same message on these same provisions twice because we already have years and years of proof that didn’t happen.

So given what we know about how hard corporations are going to push back against their taxes going up, I think it is fair to say that if more tax revenue is to be raised, it’s not going to come meaningfully from them. Which brings me to the tariffs.

I think the conversation about tariffs is frustrating on a few different levels. Tariffs do raise tax revenues if we want more tax revenue, tariffs will do that because they are a tax paid on imports by the importing business. So for example, if I am buying T-shirts from China to resell to you, I would pay the 60% China tariff on the product as a tax to the US government. And then I would raise the price that I am charging you to recoup the 60% that I just paid to the US government. And T-shirts are actually sort of a useful example here, because 98% of our clothing is imported from outside the United States.

A tariff is a consumption tax. And the general consensus around consumption taxes is that they tend to hit low and middle income people who spend most of their income on goods and services the hardest. Now, the long-term gold tariffs is reshoring work to the United States. And in theory, this seems like a plausible way to create more jobs in America and maybe to drive wages up. But it strikes me that this logic assumes that the economy’s current size or these company’s current revenues are not already sufficient to pay fair wages to American workers. And I guess I would point to the declining share of labor income and say, well, we know that that is just not true. We know what they’re spending their profits on. Why do we think that giving them higher profits is going to lead to higher wages?

Maybe I’m oversimplifying, maybe I’m overly cynical, but I don’t know that that would directly fix this problem. Now taken together, if they moved forward with extending the TCJA and cutting taxes even further, they would have to raise tax revenues elsewhere.

And theoretically they would do so with tariffs. The center-right think tank Tax Foundation, which is an outfit that’s usually pretty friendly to Republican tax legislation proposals and holds positions like the “Super Rich Pay Plenty of Taxes Already” published a report on November 8th featuring 17 different analyses of universal tariffs. Every single one projected negative economic growth as a result. And again, I would say that’s not necessarily a bad thing. Economic growth slowing is, I don’t think on its face necessarily a bad thing, but they did find that blanket tariffs caused prices to rise in the short run and lead to lower incomes and lower production in the long run. To reiterate, the general and most charitable interpretation of something like a universal tariff is twofold. To raise tax revenues by taxing US consumers on imported goods and encourage domestic production by making the goods that come from outside the US more expensive.

Now, I would say point back to my comment about it being frustrating. This is why it is a weird economic policy to answer complaints that groceries are too expensive. Everything from out of season fruits to almost the entirety of America’s supply of coffee is imported from somewhere else in the world that has a different climate. Maybe that’s why the tax foundation warns that lower standards of living typically follow tariffs. So like I said, we will have to wait and see what happens. I don’t think it is out of the realm of possibility that the tariffs conversation is being used as a bargaining ship to angle for something else.

But in the meantime, where do we go from here? So I’ve been following a lot of punditry really closely over the last month, and I have a few takeaways to share. Ezra Klein, whose show I normally really enjoy, joined Pod Save America in the weeks after the election to talk about how the Democrats tried the progressive stuff. It didn’t work. And I appreciate that Ezra often has really in-depth historical knowledge because he has been paying attention to and covering politics for way longer than I have.

But I have to say that sentiment does not ring true to me at all. And a lot of liberal commentators like Ezra have suggested that the Democrats have given people what they want and people aren’t voting for them. So his conclusion is like, well, we need to lean more into, I would assume, the neoliberal policies that people want. And I just don’t agree. Let’s be real. What did we ask for? What did the people want that they got over the last four years? Did they get higher wages? I mean, sort of. Did they get healthcare? No. Did they get childcare? No. Elder care? No. Did they get elder care? No. More labor protections? Four day work weeks? Paid family leave? No, no, no, no. Across the board.

And so I say it’s been frustrating to hear the explanation that these progressive and name only outcomes is what lost Democrats this election when right wing economic populism won. But I think my bigger and maybe more productive takeaway surrounds this idea that I have heard a lot over the course of my lifetime, but also in that Pod Save America election retrospective, which is that people don’t want “handouts”. And I think the almost thoughtless framing of universal policies as handouts at all is the most enduring piece of Reagan era culture. And I think the US has exported that attitude elsewhere. But we are definitely patient zero. So much so that I fear we don’t even question the validity of that framing anymore.

But nobody in Norway views their healthcare system as a handout. They think of it as something that they all pay for together because it benefits all of them. That is the benefit of universality. And if anything, all of this just proves to me that there is a messaging challenge to position these programs not as handouts, but as things we all collectively own and collectively benefit from, which is going to be a tall order in a society that is as deeply obsessed with class status and aspiration, individual achievement as the us. I follow an economist on TikTok who made a video about this idea the other day. It’s a little long, but I think she is very sharp. So take a listen:

Keds_Economist:

Listen. Why should I pay for somebody else’s children? This is the most common comment I get back when I talk about any type of policy that helps kids, helps them eat, helps ’em have better healthcare, helps ’em have better education or childcare or afterschool care or summer care. It is always, why should I pay for somebody else’s kids? This comment has a cousin, which is don’t have kids you can’t afford. I will talk about that next. But why should I pay for someone else’s kid?

I have two things I say in response. The first thing I point out is that this is an economic investment that you benefit from, and not all economic investment has to flow through you. There is a bridge in Minnesota that my federal tax dollars paid for that I’m never going to drive over. I am pretty certain I’ll never drive over it, but I benefit from the economy that is stronger when goods and people can move freely and quickly through the Midwest, there has been a hurricane that has hit various parts of the US in which my tax dollars have gone in to help people rebuild their homes. I don’t live in those homes, but the economy is better when people have the security that if disaster strikes, they will get help to rebuild.

There’s so many parts of our economy that I don’t directly benefit from, but make the economy stronger, and that’s okay because that’s how we have a good economy. I think most people would judge the strength of an economic policy of whether or not it flows through them. Is it a good policy? Well, I don’t get it. So it’s not a good economic policy where they’re gauging their personal benefit rather than the economic return that comes from the investment. I think that this is complicated by the fact that the majority of Americans would tell you that they’re in the middle class consistently in polling. The majority of Americans say they are in the middle class, wrote a column and made a video earlier in this year in which I say there is no economic justification for the mortgage interest deduction.

It is a tax policy that helps the richest filers reduce their tax burden by subsidizing a home loan, a home loan that that person would be able to afford even without the tax subsidy. So I said, it’s bad policy. We have so many problems with housing, take that money and spend it on another part of housing. I got back the nastiest comments like, why do you want me to be homeless? Why do you hate the middle class people like you? Or what’s wrong with America? Because if you got the mortgage interest deduction, it is the most important housing investment that the US makes. And having me cold-hearted mean economists point out that pretty much every study of the mortgage interest deduction found that it does not help people buy a house. It helps people afford a larger mortgage, and it isn’t a barrier to home ownership, it’s just subsidizing home ownership for a separate set of people.

Well, you don’t want to hear that the investment made in you isn’t really a worthwhile investment. You benefit, it’s great. You don’t benefit. It’s bad. I can understand that. And I don’t demonize it. I don’t. I try not to condescend towards it. I think it’s a really natural reaction, but at some point it takes a little bit of empathy to say, you know what? I don’t benefit from it, but it just might be better for the economy. And having healthier and better educated children come of age is better for than the economy than the alternative.

Katie:

That is @Keds_economist, @Keds_economist, check her out.

But alright, onto our last section, which is called Now what in my notes, what do I do with my money? So we’ve looked at the high level political and economic picture. We’ve talked about the media culture that those conditions produce. And in the last few weeks I have seen in the financial space especially a lot of conversation about how to adapt your personal finance situation going forward. What could I do with my money? What should I do differently with my budget, my investments? Should I be investing differently? And this is the level of engagement that I think we’ve been trained to activate on the self as the default unit.

And I want to be clear, I don’t think this response is wrong. I don’t think it’s unnatural, but I do think it’s evidence of the broader challenge we face in this position that we are in. To explain what I mean, consider this example. I think so often about the French reacting to their government trying to raise the retirement age from 62 to 65. They went out in the streets, they protested, they rioted:

News clip:

Protesters in the streets of Paris and other cities across the country overnight setting fires, some of them damaging buildings. And we have seen images of riot police using tear gas to break up those crowds. Police arrested more than 300 people overnight, mostly in Paris.

Katie:

That was over retirement age. And I don’t say that to imply that people in America aren’t coalition building. I mean there are people who have devoted their entire lives to activism, but the general posture of your average American has sort of become this learned civic helplessness. We have almost stopped expecting anything to change. I think it’s because we’ve lived in this regime for so long where we don’t feel like we have a voice. We feel like we are at the mercy of these giant lobbying groups and we don’t trust our politicians. We know they’re corrupt. We know they’re paid off most of them. And so if the retirement age got raised in the us, I feel like it would’ve hardly be a news story by comparison beyond the CNBC headlines like here’s how to adjust your allocation for the new retirement age.

And the way that Americans used to be aligned with one another via unions or the workplace associations or other community groups that have really fractured. I think because we’ve lost that connective tissue that aligned regular people with one another in a more formal capacity and gave them more of a collective voice, we feel atomized to the point that the only solution is to individually fortify and burrow deeper into competitive and selfish tendencies. That is in many ways the most rational response to the situation that people are finding themselves in.

But I also think that it is shortsighted, even just thinking about it from a purely economic standpoint. Take the business of health insurance for example. If you raise your premiums every year by 8%, 10%, that’s kind of average for the big health insurers and everyone just keeps shifting things around in their budget to afford it, cutting down on other things to be able to pay for health insurance, you’re just going to keep raising the premium. You’re not going to stop and be okay, I’m content now with what we’ve, no, you are going to push it as far as people will continue to pay for it. If you are allowed to do it, you’re going to do it as long as people pay, you’re going to keep raising the price. You will push people until they break. So continuing to just individually accommodate I don’t think is really going to get us anywhere.

That’s not to say that managing money, knowing how to manage money isn’t important. In fact, given the circumstances, it is critical and it is especially critical for women. But it is something that I haven’t been able to stop thinking about in the weeks after the election and just in what I’ve observed online. So on that note, I would say the best practices of personal finance have not changed. If you are already working on your money, you got a plan, you are saving, you are investing, you can rest easy. That on a personal financial level, there is not some hidden action plan that you need to be enacting right now beyond staying the course.

You can and will continue to make progress. And the work that we do here year round is in service of teaching you the things that you need to know to be good with money. But at the same time, I feel like the fact that the framing of so many of the solutions that I’ve seen in the weeks following the election felt somewhat indicative of why we are in the position that we are in right now. The thought processes, the posture, or maybe put another way, it’s the consequence of the position that we’re in. I’m not quite sure yet what the causality is, but the type of financial chatter that I have seen in recent weeks has reached satirical levels of dystopian grim, for example…

News clip:

Well, one of the biggest winners on Wall Street from the Trump victory is a Boca Raton based private prison company that investors think is poised to benefit from massive federal arrests and detentions of immigrants and the need to transport and house millions of people.

Katie:

Alright, so I’m telling you, your financial plan does not need to change. You don’t need to be scrambling to buy private prison stocks or who knows what. But financially, it’s also worth noting that we might be in for higher prices, a volatile market and maybe higher income taxes. If Oren Cass’s predictions come true, we will see. So what I’m telling all my friends now is if you already have your own personal finance oxygen mask on, let’s assume you have your plan in place. You are following your plan. You are making automated dollar cost averaged contributions to your investments every month and you’re chugging along. Let’s start looking at other actions that we can take outside the realm of individual budgeting and saving. These are a few things that I have come to believe are genuinely radical in light of the cultural context that I just laid out. So in a couple weeks, we’re going to be joined by Chelsea Fagan and burn a knot for a rich girl round table to dive more into some of the ideas that I’m touching on today. But they have been useful for me, so I want to share them now.

The first is resting. I know rest. Rest is the same thing as resisting the idea that you are only valuable when you are being productive. This idea of rest as resistance comes from the activist Tricia Hersey. And it’s not just the productivity element that matters here. It is the idea that rest allows you to make decisions from a grounded and clear-eyed place. And when you are angry, when you are activated, when you are frazzled, when you are heightened, it is much harder to think clearly. Anger can be a useful spark for action, but it is not a sustainable source of energy, like it’ll burn you out. So rest is crucial.

The second is community support. This includes giving and receiving help in your community for free with no strings attached. This is otherwise known as mutual aid, and it’s another act that can kind of feel small and insignificant in the moment, but directly undercuts this insistence that we should embrace wholesale, zero sum competitive individualism and consumerism. It rebuilds the connective tissue. So we are moving soon to a place that we’re finally going to be planting roots moving to Denver. And so in preparation for our move, I was googling Denver Mutual Aid and I found a great Reddit thread that lists all sorts of opportunities. And these are great. Again, whether you are in a position to give or receive help, and both the giving and the receiving makes our ties to one another stronger

 The next thing is opting out of consumer culture wherever you can. And I know this one has the unintended benefit of allowing you to save more money. So if you’re really hankering for personal finance tip, there you go. But I’ve been pretty disappointed in the onslaught of articles I have seen from popular publications with headlines like Trump’s tariffs are going to make everything more expensive. So shop now, buy buy buy. And I understand to some extent there is a thought that there might be things you’re going to buy year that they’re saying, okay, we’ll buy it now in case the price goes up. I understand the practical applications of this and I get the impulse. But there is something about this response to a political environment, to a political event that was more or less ushered in as a downstream effect of corporate money and corporate power interfering with politics and interfering with our lives that says, Hey, go give more of your money to those corporations. So for that reason, I am saying opting out of consumer culture wherever you can is radical and is something that you can do on the individual level that makes a difference.

Okay, this one is similar to mutual aid, but it’s a little squishier. So to the extent that you can, again, remember this is if you have your oxygen mask on already, engage in a little more informal redistribution of your own. So something I started doing this year that I’ve had a really, really positive experience with was sending money aside every month that I would kind of save to give to someone who needed it. So one month I met a woman in a random situation while traveling. Her dog needed surgery and she couldn’t afford it, so I gave the money to her. I just Venmo it to her another month. A friend that lives in Asheville was raising money after the hurricane, so I Venmo the money to her. It might not feel like it makes a difference. It is so small, right? But it is an extremely direct and immediate way to give help to people who need it.

I got this idea from a friend of mine named Elizabeth. Now, Elizabeth has this combo plan with her husband. They’re retired and because of their saving and investing over the years and their social security, they have more than they need. So every year they designate one place that they give 10% of their spending to. So this year they’re giving it to World Central Kitchen, but then beyond that 10%, they have this deal with one another that if either of them ever sees a situation where somebody needs help, they are both authorized up to $500 to just give that person the money that they need. There is no limit to this, and it is not subtracted from the yearly giving that they do. So again, they are in the financial position to do this. They saved and invested throughout their lifetime. They have their social security, their needs are met, and so they are personally giving money away to people that they encounter who need it. Again, I think that is radical. That flies in the face of the idea that you should be accumulating and hoarding and hoarding and hoarding as much as possible.

And finally, support candidates in local races who operate outside the two party system and are not affiliated with or funded by corporate interests. The Working Families Party is a great example of this. They fund and train and help people in local races get elected without taking money from corporations and Run for Something is another organization that does this. Run for Something, as the name implies, will help you if you want to run for office and you want to make more of an impact locally.

At the end of the day, money is political. The way that we use our money, our time, our energy, our resources, it has real impact on the world around us, or it can. And I hope that in some small way you feel like you have the information, the knowledge, the energy that you need to move forward and make a positive difference and start to seek out connections with one another. Because at the end of the day, those connections are really all we have.

That is all for this week. We will see you next week for a conversation about money and couples money and relationship featuring a guest named Ramit Sethi. 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 as our chief content officer and additional fact checking comes from Scott Wilson.