Our Post-Neoliberal Moment (w/ Mike Konczal)

Jacob Shapiro: 00:00:01

Hello listeners.

Jacob Shapiro: 00:00:02

Welcome to another episode of the Jacob Shapiro podcast.

Jacob Shapiro: 00:00:04

Joining me today is Michael Conal.

Jacob Shapiro: 00:00:06

He is the Senior Director of Policy and Research at the Economic Security Project.

Jacob Shapiro: 00:00:10

He also, from 2024 to 2025, was the Chief Economist and Special Assistant

Jacob Shapiro: 00:00:14

to the President for Economic Policy and National Economic Council.

Jacob Shapiro: 00:00:17

So because of the level and tenor of our political discourse, I have

Jacob Shapiro: 00:00:21

to begin with this disclaimer.

Jacob Shapiro: 00:00:22

Uh, if you are.

Jacob Shapiro: 00:00:24

On the right, you will disagree with many of the things that you are about to hear.

Jacob Shapiro: 00:00:27

I trust that my listeners come here, not because they're gonna get exactly

Jacob Shapiro: 00:00:30

what they agree with all the time, but because they're going to get

Jacob Shapiro: 00:00:33

different perspectives and that they are going to use those perspectives

Jacob Shapiro: 00:00:36

to formulate their own view.

Jacob Shapiro: 00:00:38

So you should know going in that Michael Conal, he has served, um,

Jacob Shapiro: 00:00:42

he served with President Joe Biden, like, gave him economic advice and

Jacob Shapiro: 00:00:45

he is gonna come from that viewpoint.

Jacob Shapiro: 00:00:46

And I would ask you if that.

Jacob Shapiro: 00:00:48

Sends a shiver down your spine.

Jacob Shapiro: 00:00:49

That's all the more reason to listen to this episode.

Jacob Shapiro: 00:00:52

You have to listen to people that you disagree with if you're going to get

Jacob Shapiro: 00:00:54

ground truth about what's going on.

Jacob Shapiro: 00:00:55

So thank you so much to Mike for making the time and sharing his views.

Jacob Shapiro: 00:00:59

Um, I learned a lot.

Jacob Shapiro: 00:01:01

I hope that, uh, listeners learn a lot too.

Jacob Shapiro: 00:01:03

Um, otherwise, I think that's all that I have.

Jacob Shapiro: 00:01:06

Um, take good care of the people that you love.

Jacob Shapiro: 00:01:08

Cheers and see you out there.

Jacob Shapiro: 00:01:13

Uh, most listeners will not be able to see the picture of FDR behind

Jacob Shapiro: 00:01:17

your head, but that pretty clearly telegraphs to me who your heroes are.

Jacob Shapiro: 00:01:20

Mike, thank you so much for coming on the podcast.

Jacob Shapiro: 00:01:22

It's good to see you.

Mike Konczal: 00:01:23

Thanks for having me on.

Jacob Shapiro: 00:01:25

Uh, you know, I was prepping for the podcast.

Jacob Shapiro: 00:01:26

I wanted to talk to you about the economy, the one big, beautiful

Jacob Shapiro: 00:01:29

bill of market reaction, tariffs.

Jacob Shapiro: 00:01:31

I mean, we're recording on Tuesday, July 8th.

Jacob Shapiro: 00:01:32

We'll probably get this out in the next couple of days.

Jacob Shapiro: 00:01:34

Who knows how many new tariffs or new letters we will have from President

Jacob Shapiro: 00:01:38

Trump by the time our listeners hear this, but when I was doing

Jacob Shapiro: 00:01:40

my research on you, I found your substack, and it's called Rorty Bomb.

Jacob Shapiro: 00:01:44

And I assume that's an illusion to Richard Rorty.

Jacob Shapiro: 00:01:46

Am I, am I making a mistake there?

Mike Konczal: 00:01:48

No you're not.

Mike Konczal: 00:01:49

It's a, it's a very old economics blog.

Mike Konczal: 00:01:51

I started in the Ts, actually, especially around the financial

Mike Konczal: 00:01:54

crisis of 2008 and 2009, and it just picked up steam and I kept writing,

Mike Konczal: 00:01:59

and now I professionally talk about the economy for a living, which is.

Jacob Shapiro: 00:02:03

It is amazing.

Jacob Shapiro: 00:02:04

I sort of feel the same way about geopolitics, but you, you took me back

Jacob Shapiro: 00:02:07

to my college days because my college roommate was obsessed with Richard Brody.

Jacob Shapiro: 00:02:12

He made me read Achieving Our Country just so that we could like

Jacob Shapiro: 00:02:14

have arguments, uh, over in the chapter house at Cornell University.

Jacob Shapiro: 00:02:18

The chapter house has since burned down, which is really, really sad.

Jacob Shapiro: 00:02:21

And I came at it from a, I was a Leo Strauss fan in college.

Jacob Shapiro: 00:02:24

I like to think I've grown up a little bit, still, still,

Jacob Shapiro: 00:02:26

like some aspects of Strauss.

Jacob Shapiro: 00:02:28

But I'm not, like, did not drink all of the Straussian Kool-Aid, but you

Jacob Shapiro: 00:02:31

can imagine me and my college roommate, him with Rorty on the one side, me

Jacob Shapiro: 00:02:34

with Strauss on the other side, uh, dueling in a bar in Ithaca, New York.

Jacob Shapiro: 00:02:38

So you actually sent me down a little rabbit hole because

Jacob Shapiro: 00:02:40

I spent like 30 minutes this morning reading, like achieving

Jacob Shapiro: 00:02:43

our country and some other things.

Jacob Shapiro: 00:02:44

And it was, uh, it was both a breath of fresh air and also like.

Jacob Shapiro: 00:02:49

Prescient, like I didn't quite realize just how much Rorty got, right.

Jacob Shapiro: 00:02:53

Both in terms of, um, sort of the cultural left devouring, um, the left in general.

Jacob Shapiro: 00:02:59

And also about his warnings about, you know, uh, society turning

Jacob Shapiro: 00:03:02

towards strong men if government can't respond to the ills of

Jacob Shapiro: 00:03:05

globalization and things like that.

Jacob Shapiro: 00:03:07

So before we started, I just wanted.

Jacob Shapiro: 00:03:08

Say, thank you for getting Richard Rorty in my mind and ask if there was

Jacob Shapiro: 00:03:11

anything you wanted to share about that, or, or why you picked Rorty

Jacob Shapiro: 00:03:15

as the namesake for your Substack.

Mike Konczal: 00:03:16

It was literally like an old a IM handle.

Mike Konczal: 00:03:19

I'm, I'm of a certain age, so I was a big fan.

Mike Konczal: 00:03:21

I also was a big fan in college and Red Aton too.

Mike Konczal: 00:03:24

And what I'd say for your listeners is for a person who's dealing with

Mike Konczal: 00:03:26

really complicated theories of truth and ideas and knowledge, in addition to

Mike Konczal: 00:03:31

politics, uh, he's a very clear writer.

Mike Konczal: 00:03:33

Uh, even his academic work is incredibly clear and, and accessible

Mike Konczal: 00:03:36

in a way that I think is both, um, good for a reader, uh, especially if

Mike Konczal: 00:03:40

you don't have a lot of background.

Mike Konczal: 00:03:41

And also I think speaks to his, uh, philosophical commitments, which was about

Mike Konczal: 00:03:45

accessibility and, uh, egalitarianism and a, a lot of the really good stuff.

Mike Konczal: 00:03:50

And so, yeah, and the stuff still holds up very well.

Mike Konczal: 00:03:52

Occasionally you'll see quotes from achieving our country and a few other

Mike Konczal: 00:03:55

of the later works on, on these.

Mike Konczal: 00:03:56

Political questions about right-wing populism and they show up on

Mike Konczal: 00:03:59

social media or on Twitter X and uh, they get shared because they

Mike Konczal: 00:04:03

really do speak to this moment.

Jacob Shapiro: 00:04:05

Well, and, and also fundamentally optimistic.

Jacob Shapiro: 00:04:08

Like, fundamentally like had an optimism about the United States and talked

Jacob Shapiro: 00:04:12

about it and talked about how, you know, the left in particular, but not

Jacob Shapiro: 00:04:15

just the left was losing that optimism.

Jacob Shapiro: 00:04:16

That's why it was such, such a breath of fresh air to, to

Jacob Shapiro: 00:04:19

read him again this morning.

Jacob Shapiro: 00:04:21

'cause it was like, oh yes, like there is this thing called National pride and

Jacob Shapiro: 00:04:24

there are myths that we tell each other.

Jacob Shapiro: 00:04:25

And just because every single norm seems to be busted in front of our faces

Jacob Shapiro: 00:04:28

every single day on social media like.

Jacob Shapiro: 00:04:31

There is, there is an idea here, but before we get too far down the

Jacob Shapiro: 00:04:34

philosophical rabbit hole, um, why don't we start with the one big beautiful bill

Jacob Shapiro: 00:04:39

or I think, what is it, it's official name now, uh, is, uh, something boring?

Jacob Shapiro: 00:04:44

The two oh, the 2025 Tax Act, I think is what they're officially calling it now.

Jacob Shapiro: 00:04:48

Um.

Jacob Shapiro: 00:04:49

You know, there's so much in it and obviously the people who voted for

Jacob Shapiro: 00:04:52

it don't even know what's in it.

Jacob Shapiro: 00:04:53

Marjorie Taylor Greene, uh, from my old home state of Georgia was, you know,

Jacob Shapiro: 00:04:58

saying, oh, I didn't know that these things were in here that I voted for.

Jacob Shapiro: 00:05:01

It.

Jacob Shapiro: 00:05:01

It was like, isn't it your job to read the bill?

Jacob Shapiro: 00:05:03

Uh, but you know, when, when you talk about things like, you know,

Jacob Shapiro: 00:05:06

the biggest Medicaid cuts in history and double what any other previous

Jacob Shapiro: 00:05:10

administration ever cut from Medicaid, when you talk about, you know, cutting

Jacob Shapiro: 00:05:13

snap benefits or getting food to poor people by something like, you know.

Jacob Shapiro: 00:05:18

Uh, 25% or something radical.

Jacob Shapiro: 00:05:20

Uh, when you, I, I had, there was an incredible chart.

Jacob Shapiro: 00:05:23

I think this was Ian Bremmer, but suddenly, uh, somebody posted,

Jacob Shapiro: 00:05:26

um, ICE's new budget versus the world's top defense budget.

Jacob Shapiro: 00:05:29

ICE will now have a budget larger, larger than the military of Italy,

Jacob Shapiro: 00:05:33

the, the military of Israel.

Jacob Shapiro: 00:05:35

I mean, just kind of like mind boggling statistics.

Jacob Shapiro: 00:05:37

Um, so I, I just wanted to sort of, from your, I mean, there's so much

Jacob Shapiro: 00:05:40

we could talk about in the one big Beautiful Bill, but if you only have

Jacob Shapiro: 00:05:43

50 minutes and you're listening to this podcast, like what are the key.

Jacob Shapiro: 00:05:46

Takeaways, who are the winners?

Jacob Shapiro: 00:05:48

Who are the losers?

Jacob Shapiro: 00:05:49

Are there, is there anything positive about it?

Jacob Shapiro: 00:05:50

What would Richard Rorty say about it?

Jacob Shapiro: 00:05:52

Take that question in whatever direction you want.

Mike Konczal: 00:05:54

Yeah, before we get into the deep stuff, I think love it or hate it.

Mike Konczal: 00:05:57

I think you can agree that the name is pretty cringe

Mike Konczal: 00:05:59

and very, very uncomfortable.

Mike Konczal: 00:06:00

And I kind of, it, it's almost an extra level of indignity that we

Mike Konczal: 00:06:04

have to talk about the bill as such.

Mike Konczal: 00:06:05

And you know, it, it was rushed through pretty quickly, especially at the end.

Mike Konczal: 00:06:09

So, um, again, you know, love it or hate it.

Mike Konczal: 00:06:11

Um, you know, the, the fact that it makes such comprehensive changes from

Mike Konczal: 00:06:15

everything from our energy markets to our healthcare markets on such a quick

Mike Konczal: 00:06:18

timeframe, especially at the end, where they were just aiming to get it done by

Mike Konczal: 00:06:21

the 4th of July, um, means that I think we still don't really know, and I think

Mike Konczal: 00:06:25

the Republicans don't know, and, and maybe many of them don't wanna know the

Mike Konczal: 00:06:28

really severe consequences it's gonna have on, on people who aren't even directly

Mike Konczal: 00:06:32

impacted, but will be indirectly impacted.

Mike Konczal: 00:06:33

So, you know, I'd say the bill does four major things.

Mike Konczal: 00:06:36

It's, um, it's, uh, an exte, it's a, a significant.

Mike Konczal: 00:06:40

Extension and rewriting of the tax code.

Mike Konczal: 00:06:42

So it extends, um, many of the tax cuts that were passed

Mike Konczal: 00:06:45

on a temporary basis in 2017.

Mike Konczal: 00:06:47

Uh, in particular, um, it does a lot of, about 80% of those tax cuts go to the top.

Mike Konczal: 00:06:52

Um, you know, top 10% of incomes, it's essentially a trillion dollars for people

Mike Konczal: 00:06:57

who make millions and billions of dollars.

Mike Konczal: 00:06:59

Uh, and it's a cut of, we will talk about the distributional in a minute,

Mike Konczal: 00:07:03

but it's a cut of a lot of programs so that the net effect is actually that

Mike Konczal: 00:07:06

about 40% of Americans, people making $56,000 or less, $50,000 or less will

Mike Konczal: 00:07:12

actually be worse off from this bill.

Mike Konczal: 00:07:13

They'll have less resources either through Medicaid, snap, other, other

Mike Konczal: 00:07:17

provisions, which is very unique.

Mike Konczal: 00:07:19

Um, you know, the Bush tax cuts, the very first.

Mike Konczal: 00:07:22

Donald Trump tax cuts, tax cuts in, in the 21st century, but under

Mike Konczal: 00:07:25

Republican governance, tend to like cut taxes for everyone and just

Mike Konczal: 00:07:28

a lot more for very rich people.

Mike Konczal: 00:07:30

And you can argue with the proportional, uh, you know, basis for that.

Mike Konczal: 00:07:34

But this is an actual reduction, the standard of living for almost

Mike Konczal: 00:07:37

half of Americans, which is just wild given that it also blows out

Mike Konczal: 00:07:41

the deficit about $4 trillion.

Mike Konczal: 00:07:43

So, um, you know, let's.

Mike Konczal: 00:07:45

So, you know, the major things that happen, I, I'd say there's

Mike Konczal: 00:07:47

four when, when is the taxes.

Mike Konczal: 00:07:48

The second is a reworking of our healthcare markets, cutting about

Mike Konczal: 00:07:50

17 million people from healthcare.

Mike Konczal: 00:07:52

Third is reworking our energy markets, taking us off a path towards green energy.

Mike Konczal: 00:07:57

And then fourth is, as you brought up, uh, a real expansion in

Mike Konczal: 00:08:00

deportations and border patrols and, and particularly the funding device.

Mike Konczal: 00:08:04

So, you know, we just talked about taxes.

Mike Konczal: 00:08:05

Let's talk about healthcare for a minute between, um, severe work requirements

Mike Konczal: 00:08:10

and other kinds of cuts on Medicaid.

Mike Konczal: 00:08:12

And between not extending, uh, Biden era premium tax credits

Mike Konczal: 00:08:17

for the Obamacare exchanges.

Mike Konczal: 00:08:18

You know, nonpartisan estimates have between 11 to 17 million

Mike Konczal: 00:08:22

people losing their healthcare.

Mike Konczal: 00:08:23

And if you take the, the totality of all those things I just mentioned,

Mike Konczal: 00:08:25

including the not extensions, it's probably closer to 17 million.

Mike Konczal: 00:08:29

Um, in addition, that's mostly through Medicaid.

Mike Konczal: 00:08:32

Um, Medicaid if, if your listeners are thinking Medicaid's, well that's

Mike Konczal: 00:08:35

really like a safety net program for the very poor, well, no, it's actually

Mike Konczal: 00:08:38

been expanded quite a bit over the last 50 years, particularly since the

Mike Konczal: 00:08:41

mid eighties, but especially under the Affordable Care Act, what is often called

Mike Konczal: 00:08:45

Obamacare, the 2011 Healthcare Extension.

Mike Konczal: 00:08:48

Um, you know, a lot more people get healthcare through Medicaid that are

Mike Konczal: 00:08:52

middle class and working class and people who are fully employed and about

Mike Konczal: 00:08:56

half of births happen through Medicaid.

Mike Konczal: 00:08:58

It's a much broader, more experience.

Mike Konczal: 00:08:59

Expansive program than it was 15 or 20 years ago.

Mike Konczal: 00:09:03

And this really does put a real hammer on it.

Mike Konczal: 00:09:06

Um, you know, they, you know, we can talk a little bit about why it

Mike Konczal: 00:09:10

happens this way, but, you know, these work requirements are really

Mike Konczal: 00:09:13

kinda like paperwork requirements.

Mike Konczal: 00:09:14

And they're done in a, when they have been done in the past, they've been done

Mike Konczal: 00:09:18

in a punitive way to try to like kick people off who can't keep up with it.

Mike Konczal: 00:09:21

And if, you know, you're struggling working two service sector jobs, trying

Mike Konczal: 00:09:24

to raise kids on minimum wage, um, you know, you don't have a lot of bandwidth.

Mike Konczal: 00:09:28

You don't have.

Mike Konczal: 00:09:29

On a personal attorney or accountant to go through this paperwork for you.

Mike Konczal: 00:09:32

And so you know, you could lose healthcare.

Mike Konczal: 00:09:34

And that's what we've seen in the states that have tried to do it,

Mike Konczal: 00:09:36

which they've often tried to walk back and you know, Medicaid doesn't

Mike Konczal: 00:09:39

just help those individual people.

Mike Konczal: 00:09:40

It also backstops a lot of healthcare networks.

Mike Konczal: 00:09:43

So hundreds of rural hospitals are gonna close.

Mike Konczal: 00:09:45

'cause Medicaid is a major funder in rural communities.

Mike Konczal: 00:09:48

Hundreds of nursing homes are gonna close because Medicaid supports people,

Mike Konczal: 00:09:53

uh, who are elderly on Medicare.

Mike Konczal: 00:09:55

To get, uh, people who are poor to get access to nursing homes and

Mike Konczal: 00:09:58

other kinds of, um, helpful care.

Mike Konczal: 00:10:00

So, you know, it's gonna be a really substantial working reworking in the

Mike Konczal: 00:10:04

healthcare market to make healthcare a lot more precarious, a lot less a

Mike Konczal: 00:10:07

sense of a right or something that you've, you know, something that you

Mike Konczal: 00:10:10

work with the government to make sure you can get, depending on your work

Mike Konczal: 00:10:12

status and your income status instead of something that is much more.

Mike Konczal: 00:10:16

I'm say paranoid, but it's so something that's, you're much more likely to

Mike Konczal: 00:10:19

lose something that's much more, the government's much more skeptical

Mike Konczal: 00:10:22

that you deserve to have this.

Mike Konczal: 00:10:23

And it percolates through a lot of other ways in the ways that, you know,

Mike Konczal: 00:10:27

um, how easy it is to get Obamacare exchanges, how easy it's to get

Mike Konczal: 00:10:30

certain kinds of Medicaid funding.

Mike Konczal: 00:10:31

But the general atmospheres of it.

Mike Konczal: 00:10:33

Is the idea that the government should be much more skeptical that you should

Mike Konczal: 00:10:36

get healthcare and after, you know, for people who remember healthcare before the

Mike Konczal: 00:10:40

Affordable Care Act where you could lose healthcare for preexisting conditions,

Mike Konczal: 00:10:44

um, it's a very different world.

Mike Konczal: 00:10:45

It's, it's gonna reverse a lot of the progress we've made against that kind

Mike Konczal: 00:10:48

of barbarism over the last 20 years.

Jacob Shapiro: 00:10:50

Hmm.

Jacob Shapiro: 00:10:51

And what about, and what about green energy and, and, um, and immigrants,

Jacob Shapiro: 00:10:55

what, what are the cliff notes there?

Mike Konczal: 00:10:57

Sure.

Mike Konczal: 00:10:57

So, um, it repeals quite a bit of the, um, uh, green tax credits that were put

Mike Konczal: 00:11:03

in place in the Inflation Reduction Act.

Mike Konczal: 00:11:05

Um, the 2020.

Mike Konczal: 00:11:07

Uh, law that President Biden signed into office and, you know, healthcare,

Mike Konczal: 00:11:11

I'm sorry, energy costs are gonna go up for people like reasonable estimates.

Mike Konczal: 00:11:14

Say maybe even next year, $110 per person very soon, you know, $200 a

Mike Konczal: 00:11:18

person, uh, or households, uh, annually.

Mike Konczal: 00:11:22

Crucially at a point where there's gonna be a lot of new energy demand

Mike Konczal: 00:11:24

from the mainstreaming and extension of ai, which is very mm-hmm.

Mike Konczal: 00:11:28

Data intensive with its data centers.

Mike Konczal: 00:11:30

Um, at a point where, and in a point where, you know, we had started

Mike Konczal: 00:11:34

to make real progress and in both the deployment of green energy,

Mike Konczal: 00:11:37

like solar panels and batteries and, and so forth, and also like.

Mike Konczal: 00:11:41

Rebuilding our competitive industrial edge in those sectors, uh, which was

Mike Konczal: 00:11:45

really important both for fighting climate change, for making sure the

Mike Konczal: 00:11:49

United States is at the frontier of leading 21st century, uh, industries.

Mike Konczal: 00:11:53

And for making sure that it's not just China, um, who is a,

Mike Konczal: 00:11:57

you know, geopolitical, um, you know, frenemy somewhere.

Mike Konczal: 00:12:01

We don't wanna be solely dependent on one country.

Mike Konczal: 00:12:03

I think that's true of any country.

Mike Konczal: 00:12:05

But in particular, we wanna make sure that there's a diversified set of.

Mike Konczal: 00:12:08

Um, resources that, you know, people can, as we continue to

Mike Konczal: 00:12:12

try to decarbonize over the next decade, uh, that's not just China.

Mike Konczal: 00:12:15

And this, I think, really throws us off that and makes it so that

Mike Konczal: 00:12:18

China will really be leading that industry in the 21st century.

Jacob Shapiro: 00:12:22

Yeah.

Jacob Shapiro: 00:12:22

And then there's also the immigration component of this, and I, I have to

Jacob Shapiro: 00:12:25

confess, I, I'm so confused by the voices of some in the Republican party,

Jacob Shapiro: 00:12:30

like Vice President Vance was somebody who, in his past would've been against

Jacob Shapiro: 00:12:34

something like this and knows very well how important Medicaid and some of

Jacob Shapiro: 00:12:37

these things are to rural communities.

Jacob Shapiro: 00:12:39

But when he was on or.

Jacob Shapiro: 00:12:40

On, on Twitter or X or whatever we're supposed to call it.

Jacob Shapiro: 00:12:43

He talked about how the most important thing were the provisions on ice

Jacob Shapiro: 00:12:46

and ending illegal immigration.

Jacob Shapiro: 00:12:47

Because if we don't end illegal immigration, according to him

Jacob Shapiro: 00:12:50

the country, that's what's gonna send the country into bankruptcy.

Jacob Shapiro: 00:12:52

And I have trouble processing that because it's actually the exact opposite.

Jacob Shapiro: 00:12:56

We're, we're a country of immigrants, um, and we've already seen demographic

Jacob Shapiro: 00:13:00

rates in the United States.

Jacob Shapiro: 00:13:02

Edge down to literally historical lows, like they haven't gotten this

Jacob Shapiro: 00:13:06

low in recorded US history really, since we've been collecting the data.

Jacob Shapiro: 00:13:09

This is not to say that we should just open the border.

Jacob Shapiro: 00:13:12

Like Biden I think was dealing with a really.

Jacob Shapiro: 00:13:14

A difficult border situation.

Jacob Shapiro: 00:13:16

And if you look at the, the statistics now at the border, if you could trust them,

Jacob Shapiro: 00:13:19

like we're at, you know, extreme lows of border crossings in general, but that

Jacob Shapiro: 00:13:23

means that immigrants are not coming into the country and that should mean increases

Jacob Shapiro: 00:13:27

in the cost of labor and other things.

Jacob Shapiro: 00:13:29

And you, you're starting to hear from farmers and other, and restaurants,

Jacob Shapiro: 00:13:32

others who rely on that kind of immigrant labor that things are

Jacob Shapiro: 00:13:35

starting to get a little bit.

Jacob Shapiro: 00:13:36

Tight.

Jacob Shapiro: 00:13:37

So, I mean, there's a two part question there.

Jacob Shapiro: 00:13:38

There's one, like what, what do you see in the bill tied to migration?

Jacob Shapiro: 00:13:41

And then two, how do you explain this, this fixation from even people in the

Jacob Shapiro: 00:13:45

Republican party who would not be cool with any of the things that you just

Jacob Shapiro: 00:13:49

talked about, but say, oh no, no, but we need this immigration plank because

Jacob Shapiro: 00:13:53

this is the thing that's the real threat.

Jacob Shapiro: 00:13:54

Like I'm, I'm having a really hard time explaining that move to myself.

Mike Konczal: 00:13:58

Yeah, I, it's, it is very hard to follow.

Mike Konczal: 00:14:00

I think a few things to note.

Mike Konczal: 00:14:01

One is that this funding is not just for border security, and as far as

Mike Konczal: 00:14:05

we know, a lot of the border security build the wall kind of funding is

Mike Konczal: 00:14:09

fungible towards building large scale detention centers and con, you know,

Mike Konczal: 00:14:14

concentration camps and in the literal sense of like concentrating people.

Mike Konczal: 00:14:18

Um, you know, there, there's, what, what I'd say is that.

Mike Konczal: 00:14:23

Lemme pause for a second and ask you to take out that pause.

Mike Konczal: 00:14:26

Yep.

Mike Konczal: 00:14:26

So I can think for one second.

Jacob Shapiro: 00:14:28

I got you.

Mike Konczal: 00:14:34

I'd say three things.

Mike Konczal: 00:14:35

One is that, you know, we have six months of what, you know, immigration

Mike Konczal: 00:14:40

policy looks like under President Trump.

Mike Konczal: 00:14:41

It is very unpopular already.

Mike Konczal: 00:14:43

Given that it was a very strong issue for him going into his second term and a very

Mike Konczal: 00:14:47

bad issue for the Democrats coming outta the Biden administration and he's already

Mike Konczal: 00:14:51

polarized it in such a way that is, is pretty noteworthy and for good reason

Mike Konczal: 00:14:55

because I don't think he's doing the things people thought he was going to do.

Mike Konczal: 00:14:58

Um, they're not particularly going after violent criminals.

Mike Konczal: 00:15:01

They're not particularly going after.

Mike Konczal: 00:15:03

Gangs or cartels or people who have committed serious crimes, you

Mike Konczal: 00:15:07

know, they're literally putting quotas on ice to round up people.

Mike Konczal: 00:15:12

They're going to nannies and parks.

Mike Konczal: 00:15:14

They're going to people outside Home Depot.

Mike Konczal: 00:15:15

They're going to people who are having their naturalization ceremonies

Mike Konczal: 00:15:19

or or, or processes or are part of the asylum process, and they're

Mike Konczal: 00:15:23

rounding up people and they're not just deporting them, they're often

Mike Konczal: 00:15:26

sending them to very dangerous.

Mike Konczal: 00:15:28

Jails in other countries and prisons in other countries, and really punitive

Mike Konczal: 00:15:32

actions far beyond I think what anyone would have rationally expected.

Mike Konczal: 00:15:37

Um, and there's a really important case for border security is a very important

Mike Konczal: 00:15:41

case for making sure people who are violent criminals, um, are not here.

Mike Konczal: 00:15:45

Um, that is not what they're doing.

Mike Konczal: 00:15:46

It's not what they're prioritizing.

Mike Konczal: 00:15:48

Second, um, you know, with the, with the ICE resources they've already

Mike Konczal: 00:15:51

had, they've used it to kind of.

Mike Konczal: 00:15:54

Do political battles that I think are unbecoming to serious concerns about, you

Mike Konczal: 00:15:58

know, immigration and national security.

Mike Konczal: 00:16:00

Um, they're terrorizing communities in Los Angeles because Gavin Newsom, the governor

Mike Konczal: 00:16:05

there is an opponent of the president.

Mike Konczal: 00:16:07

Um, you know, they are not, I. Going after red states in the same way.

Mike Konczal: 00:16:12

Um, they're using as a political culture and like it's pretty

Mike Konczal: 00:16:16

scary that they're gonna get more resources to do that kind of thing.

Mike Konczal: 00:16:19

Um, you know, they do not generally have the level of deportation infrastructure

Mike Konczal: 00:16:24

that they want, and so that's going to, a lot of this funding is going to

Mike Konczal: 00:16:27

go to that, which is to say, building.

Mike Konczal: 00:16:30

Detention camps.

Mike Konczal: 00:16:31

We're already seeing one in Florida, so called the alligator El Alcatraz.

Mike Konczal: 00:16:34

Um, that's really scary stuff.

Mike Konczal: 00:16:35

I think people are not going to like what that looks like and how it affects their

Mike Konczal: 00:16:39

communities where, you know, people might be opposed to immigration an abstract,

Mike Konczal: 00:16:44

but their actual neighbor who's been here 20 years and, um, you know, seeking to

Mike Konczal: 00:16:48

be naturalized who runs a business like that's, you know, when that person's just

Mike Konczal: 00:16:51

grabbed off the street by someone in a mask who doesn't identify themselves.

Mike Konczal: 00:16:55

That's pretty scary.

Mike Konczal: 00:16:56

And then the third thing is, you know, I. I often don't exaggerate or get,

Mike Konczal: 00:17:01

um, you know, I always try to take a balanced view of where President Trump

Mike Konczal: 00:17:04

has been, both in his first term and second term, but the idea of building

Mike Konczal: 00:17:08

a police force that's accountable to him that can act with the way they've

Mike Konczal: 00:17:11

already set up ICE to act is pretty scary.

Mike Konczal: 00:17:14

Um, the sociologists and political scientists, uh, theta scotch

Mike Konczal: 00:17:16

pole, um, had a really great piece in TPM, uh, a website, um, that

Mike Konczal: 00:17:20

talks a lot about politics, about how, um, you know, one reason.

Mike Konczal: 00:17:24

Historically, I think fa fascism hasn't risen or taken hold here, uh,

Mike Konczal: 00:17:28

is because there's no national police.

Mike Konczal: 00:17:30

The police are controlled by counties and cities and it's,

Mike Konczal: 00:17:33

and states in, in different ways.

Mike Konczal: 00:17:35

And that there, there is the FBI and obviously there's the CIA

Mike Konczal: 00:17:37

and there's other things as well.

Mike Konczal: 00:17:40

I. But, um, giving the president this kind of national police force

Mike Konczal: 00:17:43

that they are using in a punitive and political way, uh, on a far expanded

Mike Konczal: 00:17:48

scale, I mean ICE is gonna have the budget of the FBI plus, um, is, is

Mike Konczal: 00:17:51

just crazy and I think quite dangerous.

Mike Konczal: 00:17:53

So though it's not the most immediate thing of people losing millions of

Mike Konczal: 00:17:57

people losing their healthcare and, you know, almost half of people being

Mike Konczal: 00:18:00

worse off for this bill passing.

Mike Konczal: 00:18:01

Um, you know, this political change I think is pretty scary and I think

Mike Konczal: 00:18:05

it's pretty important to watch.

Jacob Shapiro: 00:18:06

Yeah.

Jacob Shapiro: 00:18:07

And again, an an area where, where Rorty was pretty prescient.

Jacob Shapiro: 00:18:10

Um, okay.

Jacob Shapiro: 00:18:11

Well before we get into some more criticism of it, I do

Jacob Shapiro: 00:18:13

wanna try and, and be balanced.

Jacob Shapiro: 00:18:15

Um, and of course I don't think anybody has read this bill from start to finish.

Jacob Shapiro: 00:18:19

I haven't even finished reading the AI summary 50 page AI summary that chat

Jacob Shapiro: 00:18:23

CPT generated for me from the, the 1000 plus pages of this bill in general.

Jacob Shapiro: 00:18:28

D from what you've seen thus far though, is there anything in there that you like?

Jacob Shapiro: 00:18:31

I mean, I know you've got FDR behind your head and we're talking about Rorty

Jacob Shapiro: 00:18:34

and like anybody can look up your bio.

Jacob Shapiro: 00:18:35

But is there, are there any redeeming qualities for you?

Jacob Shapiro: 00:18:38

Is there anything in this bill where you're like, okay, cool, like

Jacob Shapiro: 00:18:40

that, that's actually a good idea.

Jacob Shapiro: 00:18:41

Like, we shouldn't throw this baby out with the bath water.

Mike Konczal: 00:18:44

So I think if, um, you know, if, if, uh, vice President Harris

Mike Konczal: 00:18:48

had won the election in 2024, um.

Mike Konczal: 00:18:51

You know, there she had campaigned as President Biden had campaigned

Mike Konczal: 00:18:55

in that election before he withdrew on keeping the tax cuts for people

Mike Konczal: 00:19:00

making under $400,000 a year.

Mike Konczal: 00:19:02

So they made a real distinction between people who, you know, like.

Mike Konczal: 00:19:07

Vast majority of people, maybe like 90% of the population, and then the

Mike Konczal: 00:19:10

top 10% would have their taxes raised.

Mike Konczal: 00:19:13

Um, I think there's an argument that we should all be paying a

Mike Konczal: 00:19:15

little bit more in taxes to get a little bit more social insurance.

Mike Konczal: 00:19:18

And, you know, the overall bill in 2017 was not particularly good.

Mike Konczal: 00:19:21

So it's not like, um, you know, like going back to the tax code of 2017 wouldn't

Mike Konczal: 00:19:25

necessarily be a bad thing though.

Mike Konczal: 00:19:27

I, I think under.

Mike Konczal: 00:19:28

The political constraints we face right now, it would've certainly

Mike Konczal: 00:19:31

been the case that whoever had won the election would have continued

Mike Konczal: 00:19:35

the tax cuts for most people, which is in there now of those people.

Mike Konczal: 00:19:39

Now they're facing snap cuts, they're facing amp cuts, they're facing

Mike Konczal: 00:19:42

Medicaid not being there if they need it or if they use it, um, they're

Mike Konczal: 00:19:46

gonna have indirect hits from the way their access to healthcare happens

Mike Konczal: 00:19:50

throughout these other effects.

Mike Konczal: 00:19:52

I think that's all quite bad, but I think that extension probably

Mike Konczal: 00:19:55

would've happened no matter what.

Mike Konczal: 00:19:56

Um, it's the, you know, the regressive part of it, both on the

Mike Konczal: 00:19:59

cuts and on the top one, top 10%, top 1% I think is particularly bad.

Mike Konczal: 00:20:04

Um, you know, that's honestly, I, and I, uh, pause for a second.

Mike Konczal: 00:20:11

Lemme just see if I can find something else.

Mike Konczal: 00:20:21

The child tax cut.

Mike Konczal: 00:20:23

I'm sorry.

Mike Konczal: 00:20:25

Cut that.

Mike Konczal: 00:20:26

Okay.

Mike Konczal: 00:20:26

Start again.

Jacob Shapiro: 00:20:27

I got,

Mike Konczal: 00:20:27

yep.

Mike Konczal: 00:20:30

The child tax credit is extended, uh, it's, uh, it's expanded out, uh, a

Mike Konczal: 00:20:34

couple hundred bucks, which is good for parents who are able to claim it.

Mike Konczal: 00:20:37

However, it's not fully refundable.

Mike Konczal: 00:20:39

So for parents with low income or no income, they who, you know, often

Mike Konczal: 00:20:42

young parents have a lot of kids and they're, you know, quite deep in poverty.

Mike Konczal: 00:20:46

Um.

Mike Konczal: 00:20:47

You know, that's not gonna help them.

Mike Konczal: 00:20:48

Very much worse.

Mike Konczal: 00:20:49

And something I think is pretty cruel is that for children who are US citizens

Mike Konczal: 00:20:54

who are born here, but have two immigrant parents without social security numbers,

Mike Konczal: 00:20:59

um, who perhaps undocumented that child no longer qualifies for the CTC.

Mike Konczal: 00:21:04

Um, they do if they have one parent who has social security number,

Mike Konczal: 00:21:06

which was, uh, you know, something that changed over the course of

Mike Konczal: 00:21:09

the bill, which is for the better.

Mike Konczal: 00:21:10

Um, but you know, the fact that it takes away, um.

Mike Konczal: 00:21:14

A tax credit meant to help children, you know, thrive and get outta poverty

Mike Konczal: 00:21:19

and build, you know, build a strong family and a foundation for success.

Mike Konczal: 00:21:22

Kids who are US citizens, um, and whose parents are perhaps

Mike Konczal: 00:21:27

undocumented or immigrants.

Mike Konczal: 00:21:29

Um, you know, I think I find that very cruel and I, you know, I think it more

Mike Konczal: 00:21:33

than sours the expansion of the child tax credit as nobles that might be.

Jacob Shapiro: 00:21:39

Yeah, there's a three year pilot program in the bill that

Jacob Shapiro: 00:21:42

offers basically a thousand dollars from the government for any American

Jacob Shapiro: 00:21:46

child born between 2025 and 2028.

Jacob Shapiro: 00:21:48

You get a thousand bucks that the government's gonna put up

Jacob Shapiro: 00:21:50

to be invested in an index fund.

Jacob Shapiro: 00:21:52

Um, well first of all, as somebody who had daughters in 2022 and 2024,

Jacob Shapiro: 00:21:56

can we please make this retroactive?

Jacob Shapiro: 00:21:58

I don't understand why you have to be.

Jacob Shapiro: 00:21:59

Like past 2025.

Jacob Shapiro: 00:22:00

This is a great idea.

Jacob Shapiro: 00:22:01

Like we should probably be doing this like a long time ago and

Jacob Shapiro: 00:22:04

putting aside nest eggs for children.

Jacob Shapiro: 00:22:06

So just to, for the listeners to think like there are some things in this

Jacob Shapiro: 00:22:09

bill that are, that are not terrible, but anytime you're talking about an a

Jacob Shapiro: 00:22:12

thousand page bill that does all the things that you're talking about, doing

Jacob Shapiro: 00:22:15

it so quickly without the requisite.

Jacob Shapiro: 00:22:17

Level of discussion, like we probably don't even know the things that

Jacob Shapiro: 00:22:20

are broken in the bill and the things that are gonna be there.

Jacob Shapiro: 00:22:22

I want to go through your list of, of four things for a second.

Jacob Shapiro: 00:22:25

'cause, you know, from, from the point of view of the tax code, okay, so wealthy

Jacob Shapiro: 00:22:28

people are gonna get taxed less and poor people are gonna be taxed more.

Jacob Shapiro: 00:22:33

So taking money away from poor people.

Jacob Shapiro: 00:22:35

Number two, like getting rid of, um, you know, rural hospitals and

Jacob Shapiro: 00:22:39

some of these other things with the cuts to Medicaid taking away

Jacob Shapiro: 00:22:41

people's, um, health insurance.

Jacob Shapiro: 00:22:43

I'm, I'm vividly reminded by the way of, um, when people.

Jacob Shapiro: 00:22:47

You know when Trump campaigned the first time, they would go out and

Jacob Shapiro: 00:22:49

interview people and people would say, yes, we want to get rid of Obamacare,

Jacob Shapiro: 00:22:52

and these people would be on Obamacare.

Jacob Shapiro: 00:22:54

They didn't understand that their health insurance was tied to Obamacare.

Jacob Shapiro: 00:22:57

I think this speaks to the charisma and power that Donald Trump has over

Jacob Shapiro: 00:23:00

the natural, the national psyche.

Jacob Shapiro: 00:23:02

We'll get there in a second, but, okay, so more people will die

Jacob Shapiro: 00:23:04

because of this green energy.

Jacob Shapiro: 00:23:06

You're gonna make energy more expensive.

Jacob Shapiro: 00:23:08

Like, look at how much solar China's turning on every single month right now.

Jacob Shapiro: 00:23:13

And it's not just like, like you don't have to be only for

Jacob Shapiro: 00:23:16

renewables or only for hydrocarbons.

Jacob Shapiro: 00:23:18

I would think that the median voter would say, what I want is cheaper energy.

Jacob Shapiro: 00:23:22

I don't really give a crap where it comes from.

Jacob Shapiro: 00:23:24

And so if you're saying, no solar, no win, like we're getting rid of all

Jacob Shapiro: 00:23:27

of these different provisions, you're basically saying, okay, now you're

Jacob Shapiro: 00:23:30

chained to the hydrocarbon market.

Jacob Shapiro: 00:23:31

And it's been relatively low.

Jacob Shapiro: 00:23:32

Recently that's been a reprieve on inflation, but that's

Jacob Shapiro: 00:23:34

not gonna continue forever.

Jacob Shapiro: 00:23:36

And you're basically betting on one horse.

Jacob Shapiro: 00:23:38

And then, you know, expansion of deportation, MI migration, and

Jacob Shapiro: 00:23:42

especially illegal migration.

Jacob Shapiro: 00:23:43

I know that it's something that captures people's minds, but if you get rid of

Jacob Shapiro: 00:23:46

all immigrants, like you will see growth in this country, probably you'll see

Jacob Shapiro: 00:23:50

negative, uh, a negative impact on growth.

Jacob Shapiro: 00:23:52

So we're gonna have lower growth, more expensive energy.

Jacob Shapiro: 00:23:55

People are gonna die, and poor people are gonna have to pay more in taxes.

Jacob Shapiro: 00:23:59

So the question I have is, how is this possible?

Jacob Shapiro: 00:24:02

Like I understand that Donald Trump can say that he's gonna shoot someone on

Jacob Shapiro: 00:24:05

Fifth Avenue and nobody's gonna get him.

Jacob Shapiro: 00:24:06

He's the Teflon man.

Jacob Shapiro: 00:24:07

But for the Republican party and for the congressman and senators who need

Jacob Shapiro: 00:24:11

like show things to their constituents, I don't understand how they could think

Jacob Shapiro: 00:24:14

that this bill is in their best interest.

Jacob Shapiro: 00:24:16

Because if all these things are true, they're gonna get slaughtered

Jacob Shapiro: 00:24:19

in the midterms, aren't they?

Jacob Shapiro: 00:24:20

Or am I missing something?

Mike Konczal: 00:24:22

So here's a couple things on that front.

Mike Konczal: 00:24:23

So first is that the Medicaid cuts don't go into effect until after the midterm,

Mike Konczal: 00:24:28

so at the end of next year, which is, um, and you know, some of the, um.

Mike Konczal: 00:24:34

You know, some of the more mega senators, um, you know, Senator Tom Cotton, for

Mike Konczal: 00:24:38

instance, has emphasized, you know, how much the coalition that they're trying

Mike Konczal: 00:24:41

to build around, uh, president Trump on the Republican side really is, you know,

Mike Konczal: 00:24:45

includes a lot of people on Medicaid, especially this expanded Medicaid and

Mike Konczal: 00:24:48

that, you know, going after it's gonna hurt their ability to kind of like

Mike Konczal: 00:24:51

realign the population and he's right.

Mike Konczal: 00:24:54

Um, and so I think maybe he thinks you can kick it, you know,

Mike Konczal: 00:24:57

in two at the end of next year.

Mike Konczal: 00:24:58

Maybe, you know, if the.

Mike Konczal: 00:25:00

You know, Democrats take the house, maybe they can work with Democrats

Mike Konczal: 00:25:02

to kick it out another two years, but they, you know, the tax cuts happen

Mike Konczal: 00:25:05

right now, but some of the cuts, um, you know, happen in a few years and maybe

Mike Konczal: 00:25:09

they can be kicked out indefinitely.

Mike Konczal: 00:25:11

Um, I don't think that's gonna work because hospitals don't budget and

Mike Konczal: 00:25:15

do their capital allocation that way.

Mike Konczal: 00:25:17

And they're certainly not gonna like, think, well, you know, there's a a 50%

Mike Konczal: 00:25:20

chance this won't happen next year, so we're gonna like, expand right now.

Mike Konczal: 00:25:24

Like we're already seeing some hospitals get caught and we.

Mike Konczal: 00:25:26

Continue to see more so.

Mike Konczal: 00:25:28

Mm-hmm.

Mike Konczal: 00:25:28

I, I don't think that's gonna buy them the reprieve that they think it will.

Mike Konczal: 00:25:32

Second is I think they've, you know, it's interesting that, you know, um, they used

Mike Konczal: 00:25:36

to talk a lot about repealing Obamacare.

Mike Konczal: 00:25:38

That's what President Trump ran on in 2016.

Mike Konczal: 00:25:40

That was what they spent the subsequent two years through 2018 trying to do.

Mike Konczal: 00:25:44

And now they're, they are in fact cutting a lot of medi, uh, of Obamacare, killing

Mike Konczal: 00:25:49

a lot of the expansion of state level.

Mike Konczal: 00:25:51

Uh.

Mike Konczal: 00:25:51

Medicaid, but they're not saying it out loud.

Mike Konczal: 00:25:54

They're actually like hiding from it as much as humanly possible, which tells you

Mike Konczal: 00:25:58

that they know that the politics are bad.

Mike Konczal: 00:25:59

Uh, Senator Tillis is, is, you know, said he's not gonna seek reelection.

Mike Konczal: 00:26:02

He is a moderate belief in North Carolina who, uh, you know, just vote on this.

Mike Konczal: 00:26:05

Bill basically checked out and said, I'm not gonna run for reelection.

Mike Konczal: 00:26:08

They give you a sense of the politics of it, and you know, they, when you do

Mike Konczal: 00:26:11

ask them, and I think it's a. That's all it sounds very poll tested, so

Mike Konczal: 00:26:14

I'm no doubt it's gonna work a little bit, um, at least with their voters,

Mike Konczal: 00:26:18

uh, on this idea that the people, the only people who are gonna lose

Mike Konczal: 00:26:21

their healthcare are able bodied young people who could be working but aren't.

Mike Konczal: 00:26:27

And from that point of view, like there's just not that many

Mike Konczal: 00:26:29

people on Medicaid like that.

Mike Konczal: 00:26:31

First of all, um, it's a very small percentage of the people and you can't

Mike Konczal: 00:26:35

get that level of cuts and the savings particularly that they, that they have

Mike Konczal: 00:26:39

booked, um, with, with the, without.

Mike Konczal: 00:26:42

Um, going into people who are actually working, uh.

Mike Konczal: 00:26:46

People might lose their jobs because they have erratic hours.

Mike Konczal: 00:26:48

Um, you're supposed to work 80 hours a month.

Mike Konczal: 00:26:50

But some people, you know, we see it from um, surveys of, of income that,

Mike Konczal: 00:26:54

you know, people, a lot of service sector workers just have very volatile

Mike Konczal: 00:26:57

hours and maybe the job, maybe the hours just aren't there in a certain

Mike Konczal: 00:27:01

month and they could lose their healthcare just because of the random

Mike Konczal: 00:27:03

coming and goings of their employer.

Mike Konczal: 00:27:05

And so, you know, the idea that only undeserving people

Mike Konczal: 00:27:08

are gonna get hurt by this.

Mike Konczal: 00:27:10

Um, you know, something that they can tell cameras a lot, but I don't think

Mike Konczal: 00:27:13

it's ultimately gonna hold up for them.

Jacob Shapiro: 00:27:15

Yeah.

Jacob Shapiro: 00:27:15

It seems to me just the poli the, the economic shockwaves from this over a

Jacob Shapiro: 00:27:19

period of years are gonna be very bad for the Republican party, and I don't

Jacob Shapiro: 00:27:22

think they'll stick to President Trump.

Jacob Shapiro: 00:27:24

He has shown a unique ability to have water, just, you know,

Jacob Shapiro: 00:27:26

float off him like a duck.

Jacob Shapiro: 00:27:28

But the rest of the Republicans, like I. That this is major change.

Jacob Shapiro: 00:27:31

Like there's a, there's a reason like they didn't end up repealing Obamacare.

Jacob Shapiro: 00:27:34

'cause you know, McCain famously went, went in there in the

Jacob Shapiro: 00:27:36

Senate and put the thumbs down.

Jacob Shapiro: 00:27:37

But, uh, careful what you wish for sort of thing.

Jacob Shapiro: 00:27:39

Um, I wanna tie it to markets a little bit.

Jacob Shapiro: 00:27:41

Markets are relatively muted today.

Jacob Shapiro: 00:27:43

Have been muted for the past week.

Jacob Shapiro: 00:27:45

Um, cousin Marco's been on my podcast quite a few times and one of his talking

Jacob Shapiro: 00:27:48

points has been, look, when the Trump administration first came in for,

Jacob Shapiro: 00:27:52

to start the second term, they were talking about blowing out the deficit.

Jacob Shapiro: 00:27:55

10 to 15 trillion.

Jacob Shapiro: 00:27:56

Now we're talking about three.

Jacob Shapiro: 00:27:58

So what, like the market is like, ah, this is not as bad as it could have

Jacob Shapiro: 00:28:01

been and sort of proceeding forward.

Jacob Shapiro: 00:28:03

And he has even made the case that this is probably the last time

Jacob Shapiro: 00:28:05

that the US government will be able to do this because, you know,

Jacob Shapiro: 00:28:08

eventually the bill is gonna come due.

Jacob Shapiro: 00:28:09

And with you've, when you've got debt climbing to wherever it is and you've

Jacob Shapiro: 00:28:12

got Elon Musk over here talking about a third party based on fiscal discipline,

Jacob Shapiro: 00:28:16

like maybe the cards are there.

Jacob Shapiro: 00:28:17

I can't really see that.

Jacob Shapiro: 00:28:18

I've sort of talked about if you look at the spending, like there's actually

Jacob Shapiro: 00:28:21

gonna be more spending up until.

Jacob Shapiro: 00:28:23

President Trump is theoretically no longer in office, and then the next

Jacob Shapiro: 00:28:26

president is supposed to inherit this and make the cuts that balance all these

Jacob Shapiro: 00:28:29

figures that are saying those things.

Jacob Shapiro: 00:28:30

But anyway, I wanted to ask you from a deficit perspective

Jacob Shapiro: 00:28:33

or a US debt perspective, is there anything sanguine in here?

Jacob Shapiro: 00:28:36

Is it, do you, do you buy this view that it's less than what it could have been?

Jacob Shapiro: 00:28:40

Um, is this the last time we're gonna get this level of fiscal pro or is

Jacob Shapiro: 00:28:43

this just US politics right now?

Jacob Shapiro: 00:28:44

Is it just, we don't have any fiscal conservatives.

Jacob Shapiro: 00:28:47

We just have people who are gonna blow out the deficit to

Jacob Shapiro: 00:28:48

realize their political goals.

Mike Konczal: 00:28:51

Yeah.

Mike Konczal: 00:28:51

So I, I wanna take two different things.

Mike Konczal: 00:28:52

One is like, what was the kind of delta from what people might have reasonably

Mike Konczal: 00:28:56

expected, uh, in, you know, like January of this year, once it was clear, um,

Mike Konczal: 00:29:01

you know, the Republicans would have a United controller, you know, even

Mike Konczal: 00:29:04

November, December of last year, and I.

Mike Konczal: 00:29:07

You know, the deficit path is probably a bit worse than I think

Mike Konczal: 00:29:10

people would have reasonably thought.

Mike Konczal: 00:29:12

I think you would've reasonably thought that they would've extended what they had,

Mike Konczal: 00:29:16

um, in the TCJA, the previous President Trump's 2017 bill, uh, uh, some of it

Mike Konczal: 00:29:21

was permanent, but a lot of it expired.

Mike Konczal: 00:29:23

Would have expired at the end of this year.

Mike Konczal: 00:29:25

And so I think a reasonable person would've thought, well,

Mike Konczal: 00:29:27

they're gonna extend that and maybe they're gonna do another.

Mike Konczal: 00:29:30

Half trillion in some kind of gimmick stuff that President Trump had

Mike Konczal: 00:29:33

campaigned on, no taxes on tips, which doesn't actually end up helping as

Mike Konczal: 00:29:37

many workers as you would think, even people who make their incomes in tips.

Mike Konczal: 00:29:40

Um, but instead there's a lot more stuff on that front.

Mike Konczal: 00:29:44

Uh, a lot more stuff is made permanent, A lot more stuff like, uh, 1 99 A, which

Mike Konczal: 00:29:49

is like if you don't know about it, then you're not gonna benefit from it.

Mike Konczal: 00:29:52

But if you do know about it, you're probably very happy.

Mike Konczal: 00:29:54

Uh, if you're a very wealthy lawyer or business owner or a

Mike Konczal: 00:29:57

person who picks their own income.

Mike Konczal: 00:30:00

Um, you know, like a lot of this stuff is more regressive and more permanent than

Mike Konczal: 00:30:06

I think people would've probably thought.

Mike Konczal: 00:30:08

So it definitely spends more than people, I think, reasonably would've thought.

Mike Konczal: 00:30:13

Um.

Mike Konczal: 00:30:14

Also, like, I honestly didn't think they'd do the cuts to Medicaid the way they did.

Mike Konczal: 00:30:17

I, I, I think that was also surprising.

Mike Konczal: 00:30:19

And though those cuts aren't enough to offset how much more, how much more

Mike Konczal: 00:30:25

spending there is by cutting taxes or how, how much more or how much less revenue

Mike Konczal: 00:30:29

there is as a result of the tax cuts.

Mike Konczal: 00:30:32

Um, I, I am still very, very surprised.

Mike Konczal: 00:30:34

I would not have thought that they would've gone as hard as

Mike Konczal: 00:30:36

they did in January, for instance.

Mike Konczal: 00:30:38

Mm-hmm.

Mike Konczal: 00:30:38

Uh, when I was first thinking about what this might look like, um.

Mike Konczal: 00:30:42

And so, you know, it's, it's a bigger deficit.

Mike Konczal: 00:30:44

Um, and some of the.

Mike Konczal: 00:30:47

Cuts that, you know, you can imagine a world in which there

Mike Konczal: 00:30:49

are cuts to healthcare, but also you raise taxes because you're

Mike Konczal: 00:30:54

very worried about the deficit.

Mike Konczal: 00:30:55

And that's generally how, kinda like grand bargains work.

Mike Konczal: 00:30:57

But here you've just cut a bunch of healthcare, uh, in a way that's

Mike Konczal: 00:31:01

not where the healthcare costs are scary, which is, you know.

Mike Konczal: 00:31:04

Has could be more like a, there are ways to bring down healthcare costs and

Mike Konczal: 00:31:08

healthcare spending by the government that I think have bipartisan consensus

Mike Konczal: 00:31:12

and just, you know, uh, a lot of wealthy people would lose their lose, lose

Mike Konczal: 00:31:16

those, lose that, uh, wasteful spending.

Mike Konczal: 00:31:19

But this is not it.

Mike Konczal: 00:31:20

And this is not the way to do it.

Mike Konczal: 00:31:21

This is, uh, you can just see it by the fact that they're saying it's not gonna do

Mike Konczal: 00:31:23

anything to people, but they're budgeting as if it's gonna cut, kick, you know,

Mike Konczal: 00:31:27

11 million people off their healthcare.

Mike Konczal: 00:31:28

So.

Mike Konczal: 00:31:30

Um, so I do think it's, it's a much worse fiscal picture than I would've thought the

Mike Konczal: 00:31:34

Trump administration was probably gonna do in January in terms of like financial

Mike Konczal: 00:31:38

markets, um, on one hand it's a little bit more, spending a little bit more of a

Mike Konczal: 00:31:41

net impulse, like a kensen fiscal stimulus into an economy that's been at, you know,

Mike Konczal: 00:31:47

the same unemployment rate for a year now.

Mike Konczal: 00:31:48

Uh, pretty much clearly near full employment.

Mike Konczal: 00:31:51

Um, on the other hand, the tariffs are a pretty regressive, um, drag on growth.

Mike Konczal: 00:31:55

And, um, independent of, of their allocative effects, independent

Mike Konczal: 00:31:59

of how much there might slow our economy and our potential over the

Mike Konczal: 00:32:02

medium term, right out the door.

Mike Konczal: 00:32:04

There's, it's just, it's raising taxes on, on consumers.

Mike Konczal: 00:32:07

And so, uh, we're already seeing revenue go up from that.

Mike Konczal: 00:32:09

And so like that, the drag from that is probably gonna balance out.

Mike Konczal: 00:32:12

So it's not clear to me there's a real big.

Mike Konczal: 00:32:15

Growth impulse one way or the other on this bill.

Mike Konczal: 00:32:17

People have debated on this quite a bit, but you know, it probably nets out.

Mike Konczal: 00:32:21

So not a lot more spending and we see consumer spending basically

Mike Konczal: 00:32:24

flat this year, if not down.

Mike Konczal: 00:32:26

Um, you know, stock markets have been euphoric and angry and upset and all over

Mike Konczal: 00:32:30

the place because, um, even to this day, you know, recording this on the eighth,

Mike Konczal: 00:32:35

I have no idea what our tariff policy is gonna be and I followed for a living.

Mike Konczal: 00:32:37

So, uh, anyone's guess is what?

Mike Konczal: 00:32:40

You know, a year from now where this thing actually lands and

Mike Konczal: 00:32:42

if it ever lands anywhere.

Mike Konczal: 00:32:43

So, you know, I think, uh, a lot of the volatility in stock markets

Mike Konczal: 00:32:47

and financial markets, it probably reflects the fact that, um, just

Mike Konczal: 00:32:50

the huge amount of uncertainty about what we're actually gonna do with

Mike Konczal: 00:32:52

imports and tariffs and other really key things for the global economy.

Jacob Shapiro: 00:32:57

Yeah.

Jacob Shapiro: 00:32:58

And, and maybe listeners will write to me and explain this to me, like, I, I

Jacob Shapiro: 00:33:00

still, like, I just cannot comprehend the Medicaid cuts like you said, because Okay.

Jacob Shapiro: 00:33:04

Like, yes, you need to cut.

Jacob Shapiro: 00:33:06

Like medical costs in the United States.

Jacob Shapiro: 00:33:08

It's a big portion of spending.

Jacob Shapiro: 00:33:09

But if you're gonna do that, if you're gonna do department of government

Jacob Shapiro: 00:33:11

efficiency, style cutting, then you cut across the board like you try

Jacob Shapiro: 00:33:15

and do spending all over the place.

Jacob Shapiro: 00:33:16

But this is not what this bill does.

Jacob Shapiro: 00:33:18

Like this bill says, no, we're gonna cut from this one thing, which means people

Jacob Shapiro: 00:33:21

die in places where people vote for us in large numbers and we're gonna throw

Jacob Shapiro: 00:33:25

money at these other things which don't actually help, uh, you know, which are.

Jacob Shapiro: 00:33:29

Which not only like, um, like yes, they're, you can argue whether

Jacob Shapiro: 00:33:32

they're political or not, but they're gonna increase the deficit.

Jacob Shapiro: 00:33:34

So the whole reason you're, you're taking on the really tough problem of Medicaid

Jacob Shapiro: 00:33:38

is because the deficit is a problem, but you're not actually fixing anything.

Jacob Shapiro: 00:33:41

So why would you go after Medicaid?

Jacob Shapiro: 00:33:43

And I'm not saying this from an ideological point of view, I'm saying

Jacob Shapiro: 00:33:45

from a sort political strategy point of view, it seems really, really

Jacob Shapiro: 00:33:49

shortsighted to cut this thing because if you're adding all this other stuff.

Jacob Shapiro: 00:33:53

Why not just keep an extra trillion on so that you don't have the people

Jacob Shapiro: 00:33:57

that are mad at you in two or three years or whenever the cuts go through?

Jacob Shapiro: 00:34:00

Um, I don't know.

Jacob Shapiro: 00:34:01

It, it's just really hard for me to process, but.

Jacob Shapiro: 00:34:04

Um, may, maybe we turn to tariffs there as well, and we can spend

Jacob Shapiro: 00:34:06

a little bit of time on that.

Jacob Shapiro: 00:34:09

Um, it's what, July 8th?

Jacob Shapiro: 00:34:10

We, we were liberated on, on April 2nd or whatever it was.

Jacob Shapiro: 00:34:14

I hope everybody's enjoying their liberation.

Jacob Shapiro: 00:34:16

To your point, we don't know what tariff policy is.

Jacob Shapiro: 00:34:18

I. The Japanese don't know what tariff policy is.

Jacob Shapiro: 00:34:20

The South Koreans don't know what tariff policy is.

Jacob Shapiro: 00:34:22

Different countries and leaders of countries are getting strange letters

Jacob Shapiro: 00:34:25

with weird capital letters and with things spelled wrong, uh, that tells them

Jacob Shapiro: 00:34:29

that they are getting X tariff, right?

Jacob Shapiro: 00:34:31

And then President Trump is coming out and tweeting.

Jacob Shapiro: 00:34:33

Actually, it's a deal, not a tariff, and it's all gonna be towards August

Jacob Shapiro: 00:34:36

1st and it blah, blah, blah, blah, blah.

Jacob Shapiro: 00:34:38

So, um.

Jacob Shapiro: 00:34:39

The, the flip side of that though is, you know, we have not seen a huge uptick

Jacob Shapiro: 00:34:43

in inflation since Liberation Day.

Jacob Shapiro: 00:34:45

We haven't seen, uh, particularly negative jobs, reports or anything like

Jacob Shapiro: 00:34:49

that, like the economy seems to be okay.

Jacob Shapiro: 00:34:51

So I wanted to get your take on Terrace, but also wanted to ask

Jacob Shapiro: 00:34:54

why hasn't the bottom fallen out?

Jacob Shapiro: 00:34:56

Because it seemed for a couple weeks thereafter, liberation Day, you know,

Jacob Shapiro: 00:34:58

we were reading about supply chain gridlock and it was gonna be COVID

Jacob Shapiro: 00:35:01

again without the government support and everything was gonna fall off the

Jacob Shapiro: 00:35:04

wheels and it, and it hasn't happened.

Jacob Shapiro: 00:35:06

And maybe some of that is.

Jacob Shapiro: 00:35:07

You know, uh, Trump always chickens out, but it also feels like there

Jacob Shapiro: 00:35:10

hasn't been this sort of one-to-one, um, relationship between the two.

Jacob Shapiro: 00:35:14

And, and maybe you'll tell me that more is coming, but I, I've noticed, like I

Jacob Shapiro: 00:35:17

expected weirder CPI prints, I expected weirder signals, um, in the market.

Jacob Shapiro: 00:35:22

And aside from, you know, the bond market having its little freak

Jacob Shapiro: 00:35:25

out and the dollar continuing, its descent since Liberation Day.

Jacob Shapiro: 00:35:28

Like most markets seem to be, uh, strangely like sanguine based on all

Jacob Shapiro: 00:35:33

the chaos that's happening around them.

Jacob Shapiro: 00:35:35

So take that any direction you want.

Mike Konczal: 00:35:36

Yeah, absolutely.

Mike Konczal: 00:35:37

So, um, as a reminder for your listeners on April 2nd, president

Mike Konczal: 00:35:41

Trump announced, um, uh, really large tariffs, um, that would, I, I believe

Mike Konczal: 00:35:45

be essentially 20% tariff rate, which we haven't seen since the 1930s.

Mike Konczal: 00:35:50

And at that point it was already declining.

Mike Konczal: 00:35:52

Um, you know, right now, you know, it, it, it.

Mike Konczal: 00:35:55

Right now it's, it's about 3% be, you know, in the first term of,

Mike Konczal: 00:35:58

uh, president Trump, you know, it was like one point half percent.

Mike Konczal: 00:36:01

He brought it up to two to 3%.

Mike Konczal: 00:36:02

Now they're jumping up to 20%.

Mike Konczal: 00:36:04

Even at that, the worst.

Mike Konczal: 00:36:06

Even at the point where the impact was gonna be the most intense, you

Mike Konczal: 00:36:09

know, forecasters basically gave it a 50 50% chance of a recession because

Mike Konczal: 00:36:13

imports at the end of the day, are not that big of part of the economy.

Mike Konczal: 00:36:16

There are things you can substitute.

Mike Konczal: 00:36:18

It's less that it would be a technical recession, uh, where there's, you

Mike Konczal: 00:36:22

know, two quarters of negative GDP growth and unemployment goes up

Mike Konczal: 00:36:25

substantially, and instead just a more general sluggish stagnation.

Mike Konczal: 00:36:29

The analogy I use a lot is, um.

Mike Konczal: 00:36:31

The uk uh, England, after Brexit in 2016, where, you know, they withdrew from the

Mike Konczal: 00:36:37

European Union really became anti-trade and the, like, the most visceral way

Mike Konczal: 00:36:41

that they could be, the equivalent of us doing, you know, 15 to 20% tariff

Mike Konczal: 00:36:45

rates and the economy just sucked for a long time and still sucks, right?

Mike Konczal: 00:36:48

Like, you know, it just, it's slower.

Mike Konczal: 00:36:50

Um, you know, I, I. You if you know, just it's slower.

Mike Konczal: 00:36:54

Things aren't working as well.

Mike Konczal: 00:36:55

People are just feeling poorer.

Mike Konczal: 00:36:57

And once you get into that low gear, that stag stagnation, it's really hard

Mike Konczal: 00:37:01

to get out of it because you first have to dig out of that thing before you can

Mike Konczal: 00:37:04

even do all the stuff we want to do.

Mike Konczal: 00:37:06

That's still hard to like.

Mike Konczal: 00:37:07

Rebuild growth.

Mike Konczal: 00:37:08

So that's always been my base case is less like there is going to be

Mike Konczal: 00:37:11

a recession or a stag, like 1970 stagflation, which I saw was exaggerated,

Mike Konczal: 00:37:16

but you know, it was at, at the peak number was like a reasonable fear.

Mike Konczal: 00:37:20

Um, more this kinda like longer term stagnation.

Mike Konczal: 00:37:23

Now, you know, a lot of companies from what we're seeing is.

Mike Konczal: 00:37:27

You know, they're not sure what to do with their prices 'cause they're

Mike Konczal: 00:37:29

not actually sure what the end rate of these these tariffs are gonna be.

Mike Konczal: 00:37:32

Right.

Mike Konczal: 00:37:32

So we just, you know, we finally had another announcement yesterday

Mike Konczal: 00:37:35

on the seventh, which kinda looked a lot like the Li Li Liberation

Mike Konczal: 00:37:39

Day rates, which were quite high.

Mike Konczal: 00:37:41

Uh, and you know, some people think, well maybe now that the bills passed, he's

Mike Konczal: 00:37:44

gonna go ahead and go gung-ho here in his, the Trump's administration is really gonna

Mike Konczal: 00:37:49

jam through high tariffs because they did the one law that they wanted to pass.

Mike Konczal: 00:37:52

Mm-hmm.

Mike Konczal: 00:37:53

Um, maybe.

Mike Konczal: 00:37:54

Maybe not, I don't know.

Mike Konczal: 00:37:55

Maybe they think it's gonna give them more negotiation to do more

Mike Konczal: 00:37:58

grandstanding and more deals.

Mike Konczal: 00:38:00

It is honestly, quite hard as someone who watches this professionally to

Mike Konczal: 00:38:03

even really get a sense of, so you can imagine a lot of business economists

Mike Konczal: 00:38:07

at various Fortune 500 companies, uh, or the s and p 500 companies that's

Mike Konczal: 00:38:11

saying like, you know, we don't know what to do, so let's just kick the can.

Mike Konczal: 00:38:14

Let's wait, let's run down inventories, which we've heard a lot about

Mike Konczal: 00:38:17

in, uh, in the chatter without necessarily increasing prices.

Mike Konczal: 00:38:20

And once you run down inventory, not then, it's all prices, right?

Mike Konczal: 00:38:23

Um, and so that's, that's one thing.

Mike Konczal: 00:38:26

Second, the job market, you know, like is gonna be, it's gonna be weird because,

Mike Konczal: 00:38:31

you know, like it's, the economy is slowing, people are spending less money.

Mike Konczal: 00:38:34

We've seen it so far this year.

Mike Konczal: 00:38:35

You know, we're gonna get another GDP report in a few weeks.

Mike Konczal: 00:38:38

Um, you know, it's.

Mike Konczal: 00:38:42

I'll say during the Biden administration, I served in the Biden administration,

Mike Konczal: 00:38:45

um, and worked on, on some of the inflation policy and analysis.

Mike Konczal: 00:38:49

You know, the soft landing was pretty miraculous.

Mike Konczal: 00:38:51

The fact that we were able to bring down inflation, the l from a very high

Mike Konczal: 00:38:54

level to a, a regular level without a recession, without unemployment really

Mike Konczal: 00:38:59

even going up very much and with, you know, GDP growth faster than trend.

Mike Konczal: 00:39:04

Um, was pretty remarkable, but it did leave the economy a little fragile, right?

Mike Konczal: 00:39:08

Like interest rates have been high.

Mike Konczal: 00:39:10

Um, you know, housing had slowed quite a bit.

Mike Konczal: 00:39:12

Construction had slowed quite a bit.

Mike Konczal: 00:39:14

Um, you know, a lot of the cyclical jobs had slowed a bit.

Mike Konczal: 00:39:17

There's a lot more jobs in healthcare.

Mike Konczal: 00:39:19

Um, I still think that's.

Mike Konczal: 00:39:21

A very solid economy, but it's not something you'd

Mike Konczal: 00:39:23

really wanna stress, right?

Mike Konczal: 00:39:24

Like it's not something you really wanna put pressure on.

Mike Konczal: 00:39:26

So it is true the jobs, you know, the labor reports last six months look a

Mike Konczal: 00:39:30

lot like the six months before, at the end of the Biden administration, you

Mike Konczal: 00:39:33

know, unemployment between four and 4.2%, a hundred, 150,000 jobs a month.

Mike Konczal: 00:39:38

Um.

Mike Konczal: 00:39:39

But you know, like once you start stressing that there's, there's not

Mike Konczal: 00:39:41

a lot of, you know, there, it could, it could fall apart pretty quick,

Mike Konczal: 00:39:44

which is why I think it's there.

Mike Konczal: 00:39:46

There, the uncertainty around tariffs, much less, just the

Mike Konczal: 00:39:49

tariffs themselves has been really.

Mike Konczal: 00:39:51

Really surprising to me.

Jacob Shapiro: 00:39:53

Yeah.

Jacob Shapiro: 00:39:53

What about inflation?

Jacob Shapiro: 00:39:55

I know that, um, you know, if you look at, um, data from, you know, Michigan

Jacob Shapiro: 00:40:00

Survey of Consumers, you get, you know, really high, uh, rates of expected

Jacob Shapiro: 00:40:04

inflation over the next five to 10 years.

Jacob Shapiro: 00:40:07

At the same time, if, if you look at like the New York Fed, like, uh,

Jacob Shapiro: 00:40:09

I think it was just this morning, like release some data that.

Jacob Shapiro: 00:40:12

Uh, expectations were maybe down a little bit, at least from one year

Jacob Shapiro: 00:40:15

from now, uh, 3% rather than than 3.2%.

Jacob Shapiro: 00:40:18

I've been looking at the CPI and I continue to think, you know, you strip

Jacob Shapiro: 00:40:21

out energy, um, which is really bringing it down like doesn't look so great to me.

Jacob Shapiro: 00:40:25

And I feel like to, to your point, once you run down the inventories and if you

Jacob Shapiro: 00:40:28

still have all of these trade issues, like you can substitute some things,

Jacob Shapiro: 00:40:31

but you can't substitute all things.

Jacob Shapiro: 00:40:32

Like, we still rely on lots of in inputs from lots of different

Jacob Shapiro: 00:40:35

places around the world.

Jacob Shapiro: 00:40:36

So those costs are gonna have to be.

Jacob Shapiro: 00:40:38

Passed on a little bit, but where do you think, um, we're at with inflation for

Jacob Shapiro: 00:40:42

the next six to 12 months and, and maybe on a longer term time horizon as well?

Mike Konczal: 00:40:46

That's a good question.

Mike Konczal: 00:40:47

I mean, I, I, I think we'll eventually see some more in goods.

Mike Konczal: 00:40:50

We can argue that, you know, the pattern, the price level of durable

Mike Konczal: 00:40:53

goods is generally declining.

Mike Konczal: 00:40:55

So the fact that it's increasing over the past six months

Mike Konczal: 00:40:57

is, is, is a notable break.

Mike Konczal: 00:41:00

Um, you know, I, I've seen some people watch this quite closely.

Mike Konczal: 00:41:03

Um, you know, I, I, I expect we'll see a little bit more in goods in

Mike Konczal: 00:41:06

over the second half of the year in some certain kinds of services

Mike Konczal: 00:41:09

that are, are traded this way.

Mike Konczal: 00:41:11

Um, I don't think you'll see huge numbers.

Mike Konczal: 00:41:14

Um, I think what I. Freaked out the Federal Reserve and I think freaked

Mike Konczal: 00:41:17

out a lot of people was what, as you said, the Michigan survey, which, you

Mike Konczal: 00:41:20

know, inflation expectations over the next five to 10 years, they actually

Mike Konczal: 00:41:23

never budged during the peak inflation.

Mike Konczal: 00:41:25

If you run those numbers back.

Mike Konczal: 00:41:26

They were also, they were basically the same numbers in 2019 as

Mike Konczal: 00:41:29

they were in 2021 and 2022 when inflation was like 8% over the year.

Mike Konczal: 00:41:34

Um, because I think, uh, it just didn't, consumers didn't recognize

Mike Konczal: 00:41:38

that prices would be higher on a more.

Mike Konczal: 00:41:40

Enduring and durable basis, and you can argue a lot, and people argue a ton

Mike Konczal: 00:41:45

about what those numbers really mean.

Mike Konczal: 00:41:48

And how accurate they are.

Mike Konczal: 00:41:49

Um, what I'd say is that it is true that you have not seen, um, those

Mike Konczal: 00:41:55

numbers in the financial markets data, uh, like the New York Fed, Cleveland

Mike Konczal: 00:41:58

Fed, and a couple other feds like track expectations through financial data.

Mike Konczal: 00:42:02

The problem is once it's in the financial data, it's very hard to get it out.

Mike Konczal: 00:42:05

So like you would, if, if you waited until you were at that level,

Mike Konczal: 00:42:08

then you almost certainly need a recession to bring down inflation.

Mike Konczal: 00:42:12

Um, I think some of the Michigan numbers have rolled back as I think people have

Mike Konczal: 00:42:16

understood that the worst version of tariffs have rolled back, though, who

Mike Konczal: 00:42:20

knows what, what with what just happened yesterday as we're recording this, um.

Mike Konczal: 00:42:25

So what I'd say is that, you know, I, I think the worst case scenarios have, have

Mike Konczal: 00:42:30

eased up quite a bit since April, that Trump is probably gonna have something,

Mike Konczal: 00:42:34

um, still quite high, um, and already generating quite a bit of revenue.

Mike Konczal: 00:42:39

So it's, you know, quite a, quite, quite important tax

Mike Konczal: 00:42:42

increase on working day Americans.

Mike Konczal: 00:42:44

Um, but is.

Mike Konczal: 00:42:46

Going to be a little less of the scary stagflation.

Mike Konczal: 00:42:49

And I think, you know, the fed's gonna start probably adjusting

Mike Konczal: 00:42:52

to that reality as well.

Mike Konczal: 00:42:54

Um, you know, it is funny to watch the Trump administration say like, everyone

Mike Konczal: 00:42:58

got it wrong because like, they didn't do the thing that they've said that they were

Mike Konczal: 00:43:01

gonna do because you see a lot of like, like, oh my God, there's no inflation.

Mike Konczal: 00:43:05

It's like, yes, because you're not doing the thing you threatened to do in April.

Mike Konczal: 00:43:08

Uh, so congratulations.

Mike Konczal: 00:43:10

Um.

Mike Konczal: 00:43:11

But, uh, yeah, so that, that's kind of where I think it is right now.

Mike Konczal: 00:43:14

I think that's where most analysts are on this.

Jacob Shapiro: 00:43:17

Yeah.

Jacob Shapiro: 00:43:18

Um, I don't envy Jerome Powell at all, but rate cuts through the end of the year.

Jacob Shapiro: 00:43:22

What, what are your views?

Jacob Shapiro: 00:43:23

You think we're gonna get some, or, or do you think that

Jacob Shapiro: 00:43:26

Jerome's gonna hold the line?

Jacob Shapiro: 00:43:27

Um, it sounds like we're not thinking about increases, although if, if you did

Jacob Shapiro: 00:43:30

have an, an inflation surprise to the upside, I don't, I don't quite know what

Jacob Shapiro: 00:43:33

Trump or Powell would do with themselves.

Jacob Shapiro: 00:43:35

But how are you thinking about interest rates through the rest of the year?

Mike Konczal: 00:43:38

So if you.

Mike Konczal: 00:43:39

So the, the Fed itself reports this, but if you were just to plug the economy as

Mike Konczal: 00:43:42

a whole into, uh, what, what economists call a Taylor rule, but basically

Mike Konczal: 00:43:46

it's just like a little widget in Excel that kind of gives you what the

Mike Konczal: 00:43:49

rate the Fed should be doing is, um, it's basically where it is right now.

Mike Konczal: 00:43:53

Um, you know, it's, it's uh, you know, approximately within

Mike Konczal: 00:43:56

the range we have right now.

Mike Konczal: 00:43:58

So, um, the Fed's not very much off.

Mike Konczal: 00:44:01

And crucially, and I think this is really important for the way these debates

Mike Konczal: 00:44:04

are playing out, is that, you know, you could argue maybe the Fed should cut.

Mike Konczal: 00:44:07

A quarter of a percentage point for your listeners.

Mike Konczal: 00:44:09

You know, the fed cuts in quarter percentages, so

Mike Konczal: 00:44:11

it's like four, 4.25 or 4.5.

Mike Konczal: 00:44:15

I, I could see the argument for cutting a quarter of a percent from, i, I

Mike Konczal: 00:44:17

believe it's 4.5 to 4.25 right now.

Mike Konczal: 00:44:20

Um, depending.

Mike Konczal: 00:44:22

Um, you know, president Trump has said he wants rates at 1% or 2%,

Mike Konczal: 00:44:26

which would be, you know, two and a half percentage points cuts.

Mike Konczal: 00:44:29

Right.

Mike Konczal: 00:44:30

You know, like 10 cuts as opposed to one.

Mike Konczal: 00:44:32

And there I do not see a plausible case for why you

Mike Konczal: 00:44:35

should have rates at that level.

Mike Konczal: 00:44:36

And so the idea that this is like the late in the year 2021, um, or

Mike Konczal: 00:44:41

perhaps this, uh, right when inflation really took off or you took off

Mike Konczal: 00:44:45

in a much more durable way or, um.

Mike Konczal: 00:44:49

You know, the summer of 2008 when the Financial Bear Stearns had

Mike Konczal: 00:44:52

collapsed, Lehman had not yet, but a lot of people worried.

Mike Konczal: 00:44:55

The Fed, which had, was not cutting rates very aggressively,

Mike Konczal: 00:44:57

was missing the great recession.

Mike Konczal: 00:44:59

I don't see that case for here right now.

Mike Konczal: 00:45:01

I do not think the Fed is so offsides and I. As it has been in

Mike Konczal: 00:45:05

the past to justify the pressure.

Mike Konczal: 00:45:08

Uh, you know, I, I think the Fed should be independent, period, but

Mike Konczal: 00:45:10

the level of pressure Trump officials are putting on, I think, is completely

Mike Konczal: 00:45:14

detached from any economic analysis.

Mike Konczal: 00:45:16

And they wanna really do different things with it.

Mike Konczal: 00:45:17

Like have the Fed just basically manage the debt instead of inflation.

Jacob Shapiro: 00:45:22

Yeah, I mean it's hard to, to interpret any other rationale towards

Jacob Shapiro: 00:45:26

cutting interest rates that low besides debasing the currency and inflating

Jacob Shapiro: 00:45:30

your way out of a debt problem, which is not what you would expect from, uh, the

Jacob Shapiro: 00:45:33

halls of power in the Republican party.

Jacob Shapiro: 00:45:35

Um, we've got, but for casino owner who is, uh,

Mike Konczal: 00:45:38

a real estate Mongol who has done bankruptcy many times, maybe it does

Mike Konczal: 00:45:41

actually fit his view of how the economy should work, but hopefully well and.

Mike Konczal: 00:45:45

And maybe the United

Jacob Shapiro: 00:45:46

States is in a position where somebody who has great experience

Jacob Shapiro: 00:45:49

with bankruptcy is somebody that should be, uh, in control, because that's a

Jacob Shapiro: 00:45:52

different way of thinking about things.

Jacob Shapiro: 00:45:54

Um, I'm gonna give you an impossible brief to to close out which, and which is

Jacob Shapiro: 00:45:58

inspired by, by Rorty because, you know, we, we began talking about Rorty and I

Jacob Shapiro: 00:46:01

wanted to bring it back to him because I think when he talked about the left,

Jacob Shapiro: 00:46:04

and he talked about how the cultural left basically swallowed everything

Jacob Shapiro: 00:46:08

else so that things became more about identity politics or political correctness

Jacob Shapiro: 00:46:12

rather than working with workers and.

Jacob Shapiro: 00:46:14

Figuring out how to help people in the context of globalization,

Jacob Shapiro: 00:46:17

which exacerbated, um, inequality.

Jacob Shapiro: 00:46:19

Let's say it's four years from now.

Jacob Shapiro: 00:46:22

I wave the magic wand.

Jacob Shapiro: 00:46:23

Uh, a man of or woman who, whoever you want is president and hires you

Jacob Shapiro: 00:46:27

to be the chief economist, uh, or the chief economic advisor for them.

Jacob Shapiro: 00:46:30

And you're inheriting what you see so far.

Jacob Shapiro: 00:46:32

Like, like we said, it could change 500 billion different times before then

Jacob Shapiro: 00:46:35

based on how the administration is going.

Jacob Shapiro: 00:46:37

Um, but you know, in a couple years.

Jacob Shapiro: 00:46:40

If you had a change in power, uh, and you had the ear of whoever was

Jacob Shapiro: 00:46:43

gonna be in the office next, um, how would you, what would you advise?

Jacob Shapiro: 00:46:47

How would you start to pick up the pieces or, or what kind of like, not just,

Jacob Shapiro: 00:46:51

uh, hey, the one beautiful bill sucks.

Jacob Shapiro: 00:46:52

Like, what would you substitute for some of the things that we're seeing that are

Jacob Shapiro: 00:46:56

passing as policy in the United States?

Mike Konczal: 00:46:58

Well, I can say I, I'll, I'll bring up stuff that I

Mike Konczal: 00:47:00

know will still be an issue in a few years because I can't tell what will.

Mike Konczal: 00:47:04

Be new issues, uh, and, and how we'll, uh, sufficiently address things like

Mike Konczal: 00:47:08

the civil service and how well the government works post Doge and a

Mike Konczal: 00:47:12

lot of government cuts and a lot of other things that are gonna probably

Mike Konczal: 00:47:14

be happening with the Supreme Court.

Mike Konczal: 00:47:16

Um, I do know affordability will still be an issue on the key things

Mike Konczal: 00:47:19

that really matter for people.

Mike Konczal: 00:47:20

Housing, healthcare, childcare, retirement security.

Mike Konczal: 00:47:24

Food, you know, food and energy.

Mike Konczal: 00:47:26

Uh, I work at the Economic Security Project.

Mike Konczal: 00:47:28

I'm the senior Director of Research and policy.

Mike Konczal: 00:47:30

And, you know, at ESP, um, you know, we, we work on policy that helps

Mike Konczal: 00:47:34

build power for working people.

Mike Konczal: 00:47:36

And you know, one thing we're really focused and thinking

Mike Konczal: 00:47:38

a lot about is affordability.

Mike Konczal: 00:47:40

A lot of our work has been on income support.

Mike Konczal: 00:47:43

A lot of our work has been on market crafting, which is to say

Mike Konczal: 00:47:45

that there are certain things where people need a level of resources.

Mike Konczal: 00:47:49

Um, say if you're a child in poverty or you're someone who's retired,

Mike Konczal: 00:47:53

um, you know where you need a level of income support, uh, or a level

Mike Konczal: 00:47:56

of baseline access to a resource.

Mike Konczal: 00:47:58

I. Then there are markets that deliver them that can be quite dysfunctional,

Mike Konczal: 00:48:01

which prevent people from getting the resources that they need.

Mike Konczal: 00:48:04

You know, like we we're concerned about getting money into people's pockets and

Mike Konczal: 00:48:07

we're also concerned about people who are trying to take it out of their pockets.

Mike Konczal: 00:48:10

So, um, with that in mind, you know, we think a lot about

Mike Konczal: 00:48:13

affordability and we think a lot about how the way certain kinds of.

Mike Konczal: 00:48:16

Uh, baseline supports, but also certain kinds of market structuring

Mike Konczal: 00:48:19

can make things much more accessible.

Mike Konczal: 00:48:21

So when you think about, you know, food security, we think about like,

Mike Konczal: 00:48:25

well, what about guaranteed income?

Mike Konczal: 00:48:27

What about expanded EITC or CTC or other forms of income support?

Mike Konczal: 00:48:31

And also, um, consolidation and groceries and meat packing, and as well

Mike Konczal: 00:48:36

as, you know, uh, public groceries.

Mike Konczal: 00:48:38

Maybe that has a role to do, uh, that can play a role.

Mike Konczal: 00:48:41

Like how do you structure food markets so that they're competitive and getting.

Mike Konczal: 00:48:44

Things where they need to go, but also how do you make sure that there's just

Mike Konczal: 00:48:47

enough money so people can afford food no matter how competitive the market is.

Mike Konczal: 00:48:50

And I think, you know, those two tools, uh, under a framework of affordability,

Mike Konczal: 00:48:54

I think are still gonna be quite urgent.

Mike Konczal: 00:48:56

Um, you know, thinking about, we're already thinking about

Mike Konczal: 00:48:58

other people who have thought about capitalism for a long time.

Mike Konczal: 00:49:02

You know, those are still the fundamental problems.

Mike Konczal: 00:49:03

Even, you know, I, everyone's people think.

Mike Konczal: 00:49:06

Correctly about, you know, the risks that AI could pose.

Mike Konczal: 00:49:09

Both like kinda existentially, but also just like, you know, the

Mike Konczal: 00:49:12

labor market and people's careers.

Mike Konczal: 00:49:14

And you know, we dealt with this going from agriculture to industrial economy

Mike Konczal: 00:49:17

and I don't know if the AI will be as big as that was, which was quite

Mike Konczal: 00:49:21

dramatic and help pioneer the role of social insurance and antitrust.

Mike Konczal: 00:49:25

And you know, I think those two tools structuring markets

Mike Konczal: 00:49:28

so that they work better.

Mike Konczal: 00:49:29

And then making sure people have the resources to get things in markets.

Mike Konczal: 00:49:33

Through work and through non-work means of income of, of gaining access to income.

Mike Konczal: 00:49:37

You know, those will still be very relevant in a few years and

Mike Konczal: 00:49:40

that's not necessarily a specific platform someone should run on.

Mike Konczal: 00:49:43

Um, but knowing that the affordability crisis and those things is not going away

Mike Konczal: 00:49:48

and the conceptual tools we can use to tackle them are still gonna be the same.

Mike Konczal: 00:49:52

Um, I think that's a pretty good foundation to start to.

Mike Konczal: 00:49:54

Do a lot of thinking on as we're, as we're doing right now

Mike Konczal: 00:49:56

at Economic Security Project.

Jacob Shapiro: 00:49:58

Yeah.

Jacob Shapiro: 00:49:58

No, and I, and I, the, the things that motivated people to vote for

Jacob Shapiro: 00:50:01

President Trump will still be there, uh, at the end of his administration.

Jacob Shapiro: 00:50:04

Those things won't be fixed.

Jacob Shapiro: 00:50:05

If anything, they'll be even more acute.

Jacob Shapiro: 00:50:07

So you'll probably still, um, those will probably still be

Jacob Shapiro: 00:50:10

hot button political topics.

Jacob Shapiro: 00:50:12

How, how do you pay for those things, especially when you think we're adding

Jacob Shapiro: 00:50:15

another 3 trillion or whatever to the deficit, um, with this new bill?

Jacob Shapiro: 00:50:19

Like at what point does the debt just become a handicap

Jacob Shapiro: 00:50:21

on our ability to do anything?

Jacob Shapiro: 00:50:23

Like, like some of the things that you're talking about.

Jacob Shapiro: 00:50:24

'cause that takes spending.

Jacob Shapiro: 00:50:26

Um, and the, the left in general is talking about using the government to

Jacob Shapiro: 00:50:29

spend in order to take care of people.

Jacob Shapiro: 00:50:31

But it's, it's hard to do that when you're starting to close in

Jacob Shapiro: 00:50:33

on 40 trillion or whatever it is.

Jacob Shapiro: 00:50:35

So how, how would you, um, how would you try to approach that accordion?

Mike Konczal: 00:50:39

Yeah, I mean, there's a lot of things there.

Mike Konczal: 00:50:41

Um, one is that, you know, um, interest on the debt will start to pile up.

Mike Konczal: 00:50:45

And they'll start to eat more into the budget.

Mike Konczal: 00:50:46

And whether or not that's an actual economic constraint, it

Mike Konczal: 00:50:48

certainly is a political constraint.

Mike Konczal: 00:50:50

It's what forced, um, George Herbert Walker Bush's hand in the late eighties

Mike Konczal: 00:50:54

and early nineties to do a deficit deal with Democrats, uh, when interest

Mike Konczal: 00:50:58

on, on the debt had gotten to levels as it will soon get to, uh, now

Mike Konczal: 00:51:03

following President Reagan's tax cuts.

Mike Konczal: 00:51:05

So one could imagine something like that.

Mike Konczal: 00:51:07

Um.

Mike Konczal: 00:51:08

Happening in, in the next few years, or, you know, over the next five to 10 years?

Mike Konczal: 00:51:12

Depends a lot on how much feedback there is in the financial markets.

Mike Konczal: 00:51:16

I mean, rates are quite high.

Mike Konczal: 00:51:17

Um, they might come down a little bit, but they probably won't come

Mike Konczal: 00:51:20

down a lot and they're probably not gonna come down to 2019 levels.

Mike Konczal: 00:51:23

So, um, you know, the ability of the economy to grow faster than the

Mike Konczal: 00:51:27

interest on debt grows, uh, is probably gonna be a little bit more subdued.

Mike Konczal: 00:51:33

Something that gave us a lot of wiggle room in the past, maybe

Mike Konczal: 00:51:35

less so, especially if we're gonna have a lower growth because we

Mike Konczal: 00:51:39

are now tariffed and, uh, trumped.

Mike Konczal: 00:51:42

Uh, the economy is just, um, between nativism and tariffs has just moved

Mike Konczal: 00:51:47

into a much slower growth path.

Mike Konczal: 00:51:49

That said, when it comes to affordability, a lot of it is about containing costs and

Mike Konczal: 00:51:53

a lot of it is about moving costs more efficiently to the government, right?

Mike Konczal: 00:51:56

So moving.

Mike Konczal: 00:51:57

Some private healthcare into a public option for Medicare, which

Mike Konczal: 00:52:01

I think people would like more, can in fact save money and, um.

Mike Konczal: 00:52:06

Though, you know, it's moving from private to public, which is a big deal.

Mike Konczal: 00:52:10

It does mean that there's more resources overall.

Mike Konczal: 00:52:12

Um, in the same way the Affordable Care Act was able to slow and

Mike Konczal: 00:52:15

bend the cost curve of healthcare.

Mike Konczal: 00:52:16

So I think there are efficiency gains that you could make, um, that are credible and

Mike Konczal: 00:52:20

I think that that could help do things.

Mike Konczal: 00:52:22

I think there's also a lot of growth you could unleash through investments,

Mike Konczal: 00:52:26

through housing policy that could help.

Mike Konczal: 00:52:27

Um.

Mike Konczal: 00:52:28

Of the case, but you are right that it's a little tough to figure out right

Mike Konczal: 00:52:32

now, in part because we haven't seen the full impact on interest rates yet and

Mike Konczal: 00:52:35

what they'll look like in a year or two.

Mike Konczal: 00:52:37

But it is something that will become more of an issue sooner than later.

Jacob Shapiro: 00:52:41

Well, Mike, I hope you'll consent to come back in a

Jacob Shapiro: 00:52:42

year or two to talk about it with us when we see kind of what unfolds.

Jacob Shapiro: 00:52:45

And otherwise, just thank you for making the time and sharing your perspective.

Jacob Shapiro: 00:52:48

I appreciate it.

Mike Konczal: 00:52:49

Absolutely.

Mike Konczal: 00:52:49

Thanks for having me on.