0:07

Hello and welcome to the Political

0:10

Orphanage, a home for plucky misfits

0:12

and problem solvers. I'm your host,

0:15

Andrew Heaton.

0:17

Okay, I messed

0:19

up on today's episode. I'm

0:22

sorry, I messed up. Here's

0:24

the thing, I was in New York recently

0:27

for very legal, very

0:29

above board purposes, and

0:32

I hit up my good friend, Gene Epstein,

0:34

for lunch. We got talking and catching

0:37

up, all that stuff, and I said, Gene,

0:39

let's hang out some more while I'm in town. How

0:41

about tomorrow I swing by your

0:44

office and we bang out a bonus episode?

0:47

And Gene said, can't

0:49

just hang out with me for the sake of hanging out with

0:51

me? We can't just have lunch as friends? We

0:53

can't just socialize without it turning into

0:55

your job?

0:56

To which I replied, Gene,

0:59

you are my economics mentor.

1:02

I should think you would appreciate that

1:04

I'm maximizing the efficiency of my

1:06

time by hanging out with you socially

1:10

and adding an additional layer of labor

1:12

on top of that, thereby utilizing

1:15

the same period to achieve a higher

1:17

level of both emotional and economic

1:19

utility.

1:20

I mean, do you really want me to toss

1:23

out all the economics you taught me right out the

1:25

window? Because we can do that, Gene. We

1:28

can go to a diner and have pretty much the same discussion

1:31

without either of us making a buck

1:33

off of it and just have a less productive

1:35

conversation thwarting all that economics

1:38

you taught me, if that's what you want.

1:40

So Gene graciously relented

1:43

and we agreed to meet at his office

1:45

to do a bonus episode. And

1:47

that's where I screwed up. Gene

1:49

Epstein is the former economics

1:51

editor for Barron's Magazine. Before that,

1:54

he was senior economist at the New York Stock Exchange

1:56

and for a little while he taught economics at

1:58

CUNY. He is the

2:00

founder and moderator of the Soho

2:03

Forum, a popular debate society in

2:05

New York. So, knowing

2:07

his wide range of credentials and activities,

2:10

I invited patrons of the show to submit questions

2:13

that I could ask him about economics

2:15

or the Soho Forum that they would like to know.

2:17

Kind of a delayed ask me anything, a grab-bag

2:20

bonus episode.

2:22

And in the hour and a half conversation that

2:24

you were about to hear, Gene

2:27

and I got through one

2:31

question.

2:33

We don't even get to

2:34

question number two.

2:37

Also, it being a bonus

2:39

episode, it's a little bit more casual. I tend to let

2:41

my hair down when I'm doing bonus episodes and Gene

2:44

keeps this big-ass plastic jug of

2:46

macadamia nuts in his office. So I

2:48

am chowing down on that.

2:51

Like handfuls, appropriately

2:54

large handfuls of macadamia nuts.

2:56

I'm not sure if you can hear me chomping. I can hear

2:58

it in my voice that I'm eating. Sorry about that.

3:01

I don't think you can hear me licking my fingers or the

3:03

palms of my hands or anything like that. But

3:06

you can kind of hear me chewing. I am gobbling

3:08

free macadamia nuts, which I think are the

3:11

most expensive nut, which is part of why

3:13

I ate so much of them. They were free and Gene was offering

3:15

them blah blah blah economic utility. But

3:18

there is a silver lining to this

3:20

utterly derailed bonus episode that you're about

3:22

to hear. A bonus episode which

3:25

veered so sharply from its stated

3:27

aim that it actually failed upwards

3:30

right here on the main feed. Because

3:32

the whole conversation is keying

3:34

off of and occasionally stumbling

3:37

back towards a single prompt.

3:39

It does have something of an economic

3:42

through-line to it. Somewhere

3:44

in the ballpark of trickle-down,

3:47

supply-side economics and corporate

3:49

tax rates. So patron Brett

3:52

Klien or Brett Klien,

3:54

you, Brett, get an entire personally

3:57

tailored episode this week just for you.

4:00

You lucky patron. Thank you for

4:02

your prompt. I hope this episode somehow

4:04

comes out on your birthday That'd be

4:06

pretty cool. If that is the case, let

4:09

me know because I might have to become religious again It

4:11

would seem to be quite a quite a big

4:13

coincidence and everybody else brace

4:16

yourself for a heartwarming

4:18

episode about corporate

4:20

tax rates the nature of profit

4:23

labor and trickle-down

4:25

economics and maybe

4:28

a little bit a found

4:30

family

4:31

Right here on the political orphanage

4:36

Patrons don't worry. We're

4:39

still gonna do a bonus episode with gene.

4:41

I'm committed to that. He's on the books We're gonna

4:43

do this that when you hear this the

4:45

accompanying bonus episode will be gene Actually

4:48

answering some of the questions

4:50

that you submitted to us and by God We're

4:53

gonna go through at least two more questions next

4:55

time we speak. I'm committed to answering

4:57

three questions Over the course

5:00

of our conversation probably focusing on

5:02

the Soho forum and the nature of debates

5:04

in our society That means that

5:06

if you're already a patron You're gonna be able to get some more

5:08

of your questions answered and if you're not a patron

5:11

and at the end of today's episode you think I Have

5:15

a bad case of Epstein

5:18

fever Where can I get me some

5:20

more gene Epstein? Well friend

5:23

you can satiate that urge by going to

5:25

patreon.com Slash Andrew

5:27

heaten for gene will also be

5:29

this week's bonus episode Well,

5:32

how about this by the end of today's

5:34

episode you think golly? Why

5:36

can't gene adopt me as his economic

5:39

protege and surrogate nephew? Can

5:41

I score free macadamia nuts out of a plastic

5:44

jug the size of a donkey's head? The

5:46

answer my friend is yes. Yes,

5:49

you can do all these things You

5:52

can become a fellow gene

5:54

nephew surrogate but only

5:58

by going to patreon.com That's patreon.com

6:00

slash andrewheaton. Thanks.

6:09

I am joined today by my adopted uncle,

6:11

Gene Epstein, longtime friend of mine and

6:13

economics mentor. I am delighted to

6:15

see him. We hung out and had lunch the other day, and

6:18

I just wanted to spend more time with you, Gene, and I figured

6:21

if I can also optimize that time to create

6:23

content for the show, all the better. And

6:25

so we find ourselves here now. And I

6:28

opened up questions to listeners

6:30

that they would like to know from you. And so we'll kind of do

6:32

a grab bag episode this time. Always

6:35

a pleasure to talk to you, Andrew. And

6:39

I should have looked it up. Did we meet 10

6:41

years ago, or maybe it was closer

6:44

to 15 years ago, even

6:47

before you started to work for

6:49

News Corp? I think it's about 10 years ago, because it

6:51

would have been 2011 or 2012. Ten

6:55

years ago. Yeah. And

6:59

I've seen you develop as

7:02

a comic, as a commentator,

7:04

as a guy who runs the political

7:07

orphanage, and I, too, believe

7:10

that you are not a fascist.

7:14

One of my favorite comedy bits, by the

7:16

way, I recommend it to

7:18

your listeners if they haven't listened to it before. I've

7:20

listened to it two or three times, and I laugh

7:23

almost as hard as

7:25

the first time. I've known Heaton for 20 years,

7:28

and he is definitely not a fascist. Egotistical?

7:31

Yes.

7:32

Dense? You bet. Bad

7:35

tipper? The

7:36

worst. I've never liked the guy, but the one thing I

7:38

can say is, he's not a fascist.

7:40

I had the misfortune of working

7:43

as Andrew Heaton's producer for the most

7:45

miserable eight months of my life. That

7:48

man is a walking paper cut. If

7:51

he were any more self-absorbed, he'd collapse

7:53

in on himself like a neutron star, a

7:55

smug plaid, anally retentive

7:58

neutron star.

8:01

But he's not a fascist. If

8:03

Hitler returned to power, he'd probably

8:05

shoot Andrew Heaton first, and not

8:08

just because Heaton is an infuriating narcissist

8:10

and world-class dick-wagon, because he's

8:12

committed to liberalism, and he

8:15

hates fascism. Almost as

8:17

much as I hate him. Just

8:19

because he's a garbage person doesn't mean

8:21

he's a fascist.

8:23

Every picture of Andrew Heaton looks

8:25

like the before picture in an advertisement

8:28

for a more handsome man. But

8:30

you know what he isn't a picture of? A fascist.

8:33

Andrew Heaton's a great guy. Everybody

8:36

likes him, and he's not a fascist. When

8:38

I got diagnosed with cancer, Andrew Heaton visited

8:41

me in the hospital to ask me if he

8:43

could borrow some money.

8:45

When I told him I had cancer, he got really

8:47

worried and asked if he could catch

8:50

cancer from me. Then

8:52

he drove somebody's car into a lake. A

8:55

normal person. Maybe the worst person.

9:00

But at least he's not a fascist.

9:03

Oh, Heaton is hardly

9:05

a fascist. Just

9:08

a smug, uncontro-d

9:09

We

9:13

long despise him and hereby

9:16

advise him. He's got the most

9:18

bunch of the slugs.

9:21

He never shut up, but

9:24

I've flown along. He

9:26

loves him some jokes to him.

9:30

He's incredibly moron

9:33

and a likable spong. Well,

9:35

somebody please smack this

9:37

shill. But

9:40

Heaton, oh, he ain't no

9:42

fascist.

9:44

He's simply just

9:46

an ass-hat. Oh,

9:49

Heaton, oh, he ain't a

9:51

fascist. He's

9:54

selfish and not just empowering, not

9:56

just a reason he gives us no bet. He don't

9:58

get it. He's welcome but trouble's his.

9:59

He mumbles, he's not just oblivious,

10:02

popular serious Black Lotta Nash

10:04

is for him is what counts as when he tries to do

10:07

anything that is cool He's

10:10

mediocre oblivious and

10:12

I know I hate him But

10:15

he certainly is

10:17

no fascist

10:20

I have to remember, of course, which episode

10:23

it was and I don't know if had It's from

10:25

when I got this invite from Huxford Pub Which

10:27

is a funny story itself, but

10:32

and then 11 people certifying that

10:34

Andrew Heaton is not a fascist Thank you, we can

10:36

answer that list And how you

10:38

can make that hilarious is part

10:40

of your comic genius Thank you The first

10:43

kick-off question for you is economic Yes And

10:47

Brett writes, has trickle-down economics

10:49

been shown to work in a modern economy? Yeah,

10:52

well, interesting

10:55

sort of leading question, Brett Because

10:58

the question is, what do

11:01

you mean by trickle-down

11:03

economics? And so

11:05

I'm going to have to give you more answer

11:08

than you bargained for The

11:10

first point I think that's

11:12

significant to make is that it's

11:15

in the nature of capitalism to

11:17

do the exact reverse of trickle-down

11:20

If trickle-down means that

11:22

the money somehow

11:24

trickles from the better off

11:27

from the capitalist to the workers or

11:29

from the rich to the poorer I

11:31

think it's a loaded term, I think it's reminiscent of

11:34

Charles Dickens And there's this scene

11:36

in a tale of two cities where the

11:38

wine barrel explodes on a bridge and the peasants

11:41

run up and drink this dribbling

11:43

wine from the lords And it's I think

11:45

meant to elicit this idea that we

11:47

are allocating resources to rich people

11:49

and maybe some of it will get down to poor people

11:52

Yeah, the leavings of the table And

11:54

so it's important to

11:56

make that, of course, trickle-down was never

11:58

a term that was invented by anybody

12:01

such as myself who and

12:05

as we capitalists like to point out

12:08

it's in the nature of capitalism for

12:10

to work in exactly the reverse

12:13

direction a capitalist

12:16

inherently puts up

12:18

the money to sell the product

12:20

and pays the workers.

12:24

They get paid to produce the product.

12:26

The next step is can

12:29

you sell the product? There's

12:31

always a time lapse inherently

12:34

you know and

12:36

even in even in the most extreme cases

12:39

but certainly if you're making

12:41

cars, automobiles and

12:43

obviously it takes a while to pay

12:46

the workers along all the supply

12:48

chains to get the car done you know so

12:50

and they all get paid. Can

12:53

you sell the cars? Well not

12:56

if it's an Edsel I mean that's of course an

12:58

old example we use the car

13:00

that totally failed

13:03

at Ford brought out that didn't sell

13:05

at all. So the point then is

13:07

that the workers get paid

13:09

first and then the capitalist tries

13:13

to sell the product to

13:15

maybe other capitalists and indeed of course that's

13:17

along the supply chain or to the consumer.

13:20

So therefore it's

13:24

in the nature of the capitalist system and

13:26

the whole reason why there

13:28

are profits in a capitalist

13:31

system because in terms of time,

13:34

in terms of risk, in terms of speculation

13:37

the capitalist is taking a chance on

13:41

failure whereas

13:44

the workers are getting paid for sure.

13:46

If the product, if the Edsel doesn't

13:48

sell it's in the nature of the

13:50

contract that Ford Motor

13:52

Company did not ask the workers to

13:55

give that money back. Yeah they're not getting

13:57

paid on spec. They're getting paid. There's

14:00

this kind of one-to-one input on labor. Yeah,

14:03

inherent in, of course, the classic worker-capitalist

14:06

contract. Sometimes you

14:09

do get paid on spec. I dare

14:11

say an entrepreneur like you who's

14:13

made the rounds, you've struggled in different ways.

14:16

Maybe somebody did pay you on spec. The significant amount of

14:18

comedy is paid on spec. Yeah, yeah. Or

14:21

is paid in quote-unquote exposure and things

14:23

like that. I think this is part of the reason

14:26

that people in the arts tend to be so skeptical

14:30

of capitalist systems because if

14:32

you're coming from the arts, we're used to doing 90% of our

14:34

stuff just

14:36

flinging spaghetti against a wall, and maybe we

14:38

get paid at some point. I think for most artists,

14:41

it's counterintuitive to understand that

14:45

other fields don't typically work that way. People

14:47

don't do gravel companies on spec. They do gravel companies

14:49

because they want to make a buck. But

14:54

if you work on a movie, then

14:57

there might be some profit sharing. But

14:59

of course, in the modern age, you might be working

15:02

on a TV series or on a movie, and

15:04

you are paid in both cases. But

15:06

it is true, I guess, that if you're

15:09

working on a stage play, then it's so

15:11

to expect because they don't know how long

15:13

the show is going to last. But for as long as

15:15

it does play on Broadway

15:17

or whatever, you do get paid. But

15:20

you do have an interesting point. I actually, years

15:22

ago, I once did an open mic as

15:26

a stand-up comedian and told

15:29

seven minutes of marriage jokes. And

15:32

I went over big... Please tell me this is recorded because

15:34

I would love to have a copy for my archives of

15:36

you doing sale of comedy. Never recorded. I

15:39

went over pretty well. It

15:41

was a good comedic line, which is

15:43

that I don't know why she left me. And

15:47

then my whole comic bit was I gave a whole

15:49

series of reasons about why she

15:52

obviously left me, why she dumped me.

15:55

I chocked on myself about my first wife. So

15:57

that was the comedic bit for seven minutes.

16:00

know, and it got rather raw

16:02

at times, raunchy, and it was

16:04

pretty good. But it was pretty much exhausted

16:06

by comedic material. But then, in fact, it

16:10

was at Stand Up New York and New York City, I

16:13

was supposed to be getting some kind of a percentage

16:16

of the drinks. They never paid me anything

16:18

anyway. Yeah, so that's what happened. So you're

16:20

right. So that's it. All the Stand Up Comics

16:22

think that doesn't

16:24

work that way with the workers. Well, actually,

16:27

I'll say, Stand Up Comics, like Dave

16:29

Smith, who we know, would be first and foremost to

16:31

point out that starting a Stand Up Comedy Club is

16:33

a massive risk. It's a massive financial

16:35

undertaking. And so it makes sense that

16:38

the people that are fronting the money for it are going to

16:40

be getting the windfall of the profit. Yes. I

16:42

think that with a lot

16:44

of creative projects, like I've done podcasts

16:47

where I just did it for fun and was like, maybe I'll

16:49

make a buck at some point in the future. I think

16:51

a lot of arts start that way. And so the mindset

16:53

is I am just following my passion

16:56

and people ought to give me money. Why

16:58

aren't other people like, why isn't Google doing things

17:00

for free and then they get money on the back end? And

17:02

it seems kind of dirty and exploitative

17:06

to want money at the front end. And

17:08

so there's a sort of distrust of market systems

17:11

for that reason, at least that's my interpretation.

17:13

Well, yeah, absolutely. I

17:16

should add, because we could add a

17:18

couple of other artists, artists tend

17:20

to think they tend to have a sense of

17:22

entitlement, because they're producing

17:25

art, the world knows them a living. Well, we,

17:29

you and I now are theorizing as to why disproportionately

17:34

the artists tend to be left-wingers

17:37

who supposedly hate capitalism

17:39

or dislike capitalism. And it's very difficult

17:41

to come out for capitalism or libertarianism if

17:43

you're going to be like an actor in Hollywood.

17:46

But getting back to the question that

17:48

Fred posed, I haven't to do with trickle

17:50

down. Again, I think

17:52

Brett, that's the guy who

17:54

asked the question, understands, just as you understand,

17:57

that 95% of the time

18:00

the workers get paid and then the capitalist

18:03

sees if he can sell the product. That's

18:06

essentially the deal. So it's

18:08

exactly the reverse. The capitalist

18:10

may end up with nothing, may end up going bankrupt,

18:13

may incur a loss. The workers don't have to give

18:15

the money back. And again,

18:19

just in terms of the time value

18:21

of effort, if you think about Robinson

18:24

Caruso and his man Friday,

18:26

if they're going

18:28

to build a boat that

18:30

takes them further out to see so that they can catch

18:33

more fish, it's going to be an effort

18:35

of time. It's an investment, sort of

18:37

a capitalist investment. And they

18:39

may be sure that it's going to work,

18:42

but then they will be taking time

18:44

out from other things. They have the committing

18:47

their time where they're putting the – they're

18:49

sort of like putting up the money for this effort.

18:52

And for that reason, they want an extra return on their money.

18:56

Just time

18:58

is involved. The capitalist guy has

19:00

got to wait to see

19:02

if any return comes in. The workers

19:05

don't. They get the money right away. And then,

19:07

of course, there's the risk and the speculation

19:09

on top of everything else. Caruso

19:12

and Friday might not even know if

19:14

the boat is going to do the trip. If

19:17

it's actually going to work, maybe they're not

19:19

sure about the winds with respect to the

19:21

sale. So there's risk. There's

19:24

time. That's the nature of the capitalist enterprise

19:27

and why there are profits, why

19:29

capitalists will not invest unless there is some

19:31

return, and why workers get paid

19:33

first and they get the wage.

19:36

And that's the nature of the contract. And

19:38

I believe that's essentially just –

19:41

it's essentially the –

19:45

part of the reason – the key reason why

19:47

the capitalist system works so

19:49

well. But getting

19:52

now to the next aspect of

19:54

the issue with respect to trickle down, what the

19:58

left wing generally has in mind – is

20:00

something quite different. It's

20:02

a term of course never used by

20:04

pro-capitalist. It's the idea that if you

20:06

give tax breaks to

20:09

corporations, usually they're the

20:11

ones who are singled out, give a tax

20:13

break to a corporation and

20:15

then it's often argued by

20:18

let's say Republicans or pro-free

20:21

market people. I don't necessarily argue

20:23

it all the time. It's argued that

20:26

if you target a tax break to a corporation,

20:29

then the workers

20:31

will benefit, then the economy will benefit.

20:34

So that's really what

20:36

the left wing has in mind when they say trickle

20:38

down and maybe that's what Brett was thinking

20:41

about. Could be. I think you're right in that portrayal.

20:43

I think most of the time when people, I find

20:45

when they use the term trickle

20:47

down economics, which tends to belie, I don't

20:49

know with Brett, but it tends to belie a particular economic

20:52

disposition, the presumption with

20:54

trickle down economics, which as you note is

20:56

never the preferred term of people that are supply

20:59

ciders or Austrian economists, whatever the thing

21:01

is, there tends to be a presumption

21:03

that trickle down economics is predicated

21:05

on the idea that we ought to give money to

21:07

corporations. Okay.

21:10

It depends on how we're going to do that. What do you

21:12

think? What tax break is not giving

21:15

money? I agree. Like a subsidy

21:17

is different. I mean targeted tax

21:19

breaks you could say are, but like if we just say

21:21

we're lowering the corporate tax rate,

21:24

I'd say that's different. And from

21:26

my vantage point, I would say that there is a

21:29

functional and moral distinction between giving

21:31

somebody a subsidy versus just lowering

21:33

a tax. Like if we were just giving money to

21:35

corporations out of tax dollars, I would

21:38

say, yeah, that's a handout to corporations, but

21:40

I don't know anybody that's in favor of that. Oh,

21:42

I see. Okay. On the free market

21:44

side of things that think that the market's better having

21:46

the government give money to corporations. Well, you're

21:49

introducing, yeah, introducing the issue of subsidies,

21:51

which of course is at the

21:53

moment that we're speaking, of course, the

21:55

subsidies to corporations

21:58

to bring about no green

22:00

renewable energy and to move us

22:03

to electric vehicle to get back

22:05

to it. I mean, that's just massive

22:07

these days. And of course, I bridal,

22:10

as I imagine you do as a free market oriented

22:13

individual, and almost

22:15

any of the subsidies that go to corporations, they

22:17

are – basically, they

22:20

are the welfare queens in

22:22

so many ways, the corporations. They do

22:24

get massive handouts and

22:26

subsidies. Absolutely. I think,

22:29

though, that certainly the so-called

22:31

supply side is – and I don't like to call myself a

22:33

supply side because I

22:35

get confused with certain viewpoints that

22:38

I don't happen to hold. We

22:40

could go down that route. However,

22:43

I think that Brett probably is thinking

22:45

of not so much subsidies as – but

22:47

as – but a tax break, you know, lower

22:50

taxes on corporations. And

22:52

we have, indeed, over

22:55

the past several decades gone

22:57

through a period in which taxes

23:00

on corporations have been lowered, for

23:03

sure. The only

23:05

thing I would say about the

23:07

advisability of the tax burden

23:09

on a corporation is that most

23:12

likely it is a good idea

23:14

to keep it competitive. In other words, competitive

23:17

with the taxes that are imposed on corporations

23:20

in other economies because if

23:23

there is a much heavier burden on the US

23:25

corporation than, say, in Europe

23:27

or Japan – We won't go to

23:29

Ireland. Yeah, then there

23:32

will be that problem. And

23:35

we're still on the high side

23:37

for our taxes. What is the

23:39

corporate tax rate right now? It's either 18 or 22? Oh,

23:42

God, yeah. Yeah, in that neighborhood. Yeah, it was lowered.

23:44

And it's a little higher than 20. My

23:47

best guess, I should have looked it up. But

23:50

it has been lower. It's more

23:52

or less competitive now. And perhaps you know

23:54

that there's been an attempt to bring

23:56

about a global agreement where

23:58

there's a uniform tax. Oh, really? Interesting.

24:01

Did you get the Race to the Bottom phenomenon? Well,

24:04

yeah. Well, what do you mean by Race to the Bottom?

24:08

To try and stop corporations from

24:10

seeking out lower jurisdictions to have competitive

24:13

tax rates. Oh, yeah. So you're going to try and do price

24:15

fixing at a corporate level in terms of the corporate

24:17

tax. Yeah. Yeah. Yeah.

24:22

Then that's a separate issue. I just wanted to mention that. The

24:25

only thing I could say to Brett is that I believe

24:27

in parity, but I also do believe,

24:31

since we're talking about the corporate tax, do

24:33

believe that it's important to bear

24:36

in mind that institutions

24:39

do not pay taxes. Only people

24:41

do. It is true that

24:44

shareholders who tend to be richer

24:47

than the average tend to pay

24:49

far more of the corporate tax than others

24:51

do. However, what's very

24:54

interesting, and

24:56

a discovery I made

24:59

relatively recently, is that

25:01

if you take, as your base,

25:04

nominal gross domestic products

25:06

that are a measure of the size of the economy,

25:09

and then you take the

25:12

federal share

25:14

of gross domestic product over the decades,

25:17

you find it's remarkably stable. You

25:20

find it runs about 18%, 19%. It

25:22

declines in recessions.

25:30

You're talking about the effective tax rate? Yeah. Well,

25:33

the effective tax rate. In other words, because

25:35

what is this all about? If we're talking about taxes,

25:38

what share of GDP

25:41

does the federal government take? And

25:44

what I found is that most

25:46

recently, it was at 19.9%, the second

25:49

highest in history. The highest was in the year 2000 and 20%.

25:56

This is including during FDR

25:58

when you have a market. tax rate 90%? Sorry,

26:01

well, you say FDR. This

26:04

goes back to the data

26:07

that are just readily available. Really,

26:10

historically, it wasn't until after

26:12

World War II, starting in the late 1940s, the

26:16

government began to keep very comprehensive

26:19

data. Anything during

26:21

World War II or prior under FDR,

26:24

as you know, FDR died in 1945, is much sketchier

26:29

data with respect to almost anything you

26:31

could have mentioned. But data that's fairly

26:33

comprehensive, which goes back to the late 1940s, but it

26:35

fits in with

26:38

what you just said. In the 50s,

26:40

we had 90% tax rates,

26:42

much higher, in fact, much

26:45

higher nominal tax rates on the rich. And

26:48

yet, with all of that sternum

26:50

drown, all of that churning

26:53

with respect to what rates are charged,

26:55

if you just look at the percentage

26:58

of gross domestic product, nominal gross

27:00

domestic product, that went to the federal

27:02

government, it fluctuates within

27:04

a very narrow range. And

27:07

most recently, we were at the

27:09

second, I think it figures for 2022,

27:12

we were at the second

27:14

highest in history. This

27:17

is, I think, a thing very much worth pointing out,

27:19

particularly to people who sort of

27:22

view the rich as

27:24

a piggy bank that we can rattle when we need money

27:27

for well-intentioned projects.

27:30

There is an effective maximum tax

27:33

rate of about 19% historically. No one's

27:35

ever been able to crack that. And I can give a great example

27:37

of this phenomenon at work. Let's say theoretically,

27:40

the political orphanage continues

27:42

to grow and we become a million-dollar company and

27:45

there's a podcast tax that is levied

27:48

of 50%. 50% of my podcast

27:50

profit now goes to the government. I can tell

27:52

you exactly what I would do. I would

27:55

buy an office because I would

27:57

rather put that money into building up my company

28:00

the government. Eric and I, my editor, would

28:02

suddenly be going on a lot of trips because I

28:04

would rather be putting that money towards our travel budget

28:06

than giving it to the government. You tend

28:08

to find that with corporations that when you raise

28:10

the corporate tax, what you end up doing

28:12

is just incentivize them to reinvest

28:14

in their business or to splurge on things

28:17

for people in the business because no corporation...

28:19

You cannot dictate by

28:21

fiat you, the corporation, must want to give

28:24

us money. All you're doing is giving them incentives.

28:27

You're not giving them... You can't change

28:29

the contents of their hearts. If you say, if

28:32

you make above X amount of money, we're going to take

28:34

that profit away from you, it's much more likely

28:36

that they're going to... Well, now we'll get a corner office.

28:38

We'll buy a jet. We'll go on a retreat to

28:40

Davos. We would rather spend

28:42

that money on ourselves, kind of early

28:45

consumption within the company, than just give it out

28:47

to taxes. And as a result, you get

28:49

a maximum tax rate. Well, yes. Well,

28:52

of course, you're echoing

28:55

a big part of the argument of the supply

28:57

side is, I was

28:59

surprised indeed

29:02

by the stability of the share despite...

29:05

You would think when you

29:07

see a relatively stable share, you'd say

29:10

naively, well, I guess the tax

29:12

rates that were imposed on people in different sectors

29:15

probably were not very different in the 50s

29:17

versus today because we're in this. But

29:19

indeed, they would just

29:22

change it in all the time, one decade to

29:24

the next. And your

29:26

point about behavioral

29:29

changes in reaction

29:32

to higher or lower tax rates, I think

29:34

is very well taken. The other

29:36

aspect of it that you have to be impressed by is

29:38

that a lot is made

29:40

of the fact that technically

29:43

what seems to come from corporations to the government

29:45

is much lower than it used to

29:48

be. That is, if you just take it sectorally,

29:51

what does the corporate tax contribute

29:55

to the government coffers? It's as

29:58

a share of the economy. economy,

30:00

it's low. But then the other

30:02

part of it, independent of the behavioral

30:05

part of it, is just to think, well,

30:09

but then is it really lost to

30:11

taxes? Doesn't

30:13

the corporation pay wages? It

30:16

pays dividends to shareholders.

30:18

It does share buybacks, which

30:21

are capital gains. It

30:24

rises, its stock rises in value,

30:26

which is also paid in capital gains. And

30:29

so so there's so many

30:31

other taxes that are captured by

30:33

the federal government. All the people that work for the corporation

30:35

and own the corporation are paying taxes. Are paying taxes,

30:38

yeah. Yeah, yeah. Well, you

30:40

put it, I guess you summed it up very well. I

30:42

was just trying to, dividends. I'm

30:44

just trying to say that. And then of course, obviously,

30:47

bondholders who lend money to the

30:49

corporation are paid in interest and

30:51

taxes are paid on that. So that therefore,

30:54

the idea that, oh, well, the corporate sector

30:56

is just, we got to crack

30:58

down on that because the numbers show

31:01

that what's coming from the corporate sector is

31:03

quite low. But in fact, obviously, it's

31:05

being captured in so many other

31:08

ways, which contributes

31:10

to the bottom line point, the

31:12

remarkable stability about how

31:15

much government can get. Now, of course, since

31:17

we're talking about that, but then what does

31:19

government actually spend? And

31:22

most recently, much more than that, 24% of

31:25

GDP, you know, and,

31:27

and when, when is the, when, how,

31:30

how many, how many years since

31:32

I like to say what, when John

31:34

Maynard Keynes, many

31:37

of you listeners may have heard, died in 1946. How many

31:39

years since then, has

31:43

the federal government actually bounced

31:46

its budget? You know, can't, can't

31:48

his idea, I think he was

31:50

a crackpot, John Maynard Keynes, but

31:53

his idea was that, and of course, the classical

31:55

idea of Keynesian was that in

31:57

good times, you balance the budget, you make

31:59

it. might even run a surplus. It's

32:02

only in times of a downturn

32:04

that you run a deficit. At

32:07

least that was the thought. Does

32:10

deficit financing really help anyway? Who knows?

32:13

But apart from that, that was supposed to be the behavior.

32:16

But of course, once

32:19

you tell – whisper in the ears of politicians,

32:22

running a deficit is often a pretty

32:24

good idea, you know, because it helps

32:26

the economy. Once you tell them that,

32:29

then it's music to their ears. And

32:32

I'm trying to remember, I think I calculated where it was only

32:34

like 12 or 13 years since Keynes

32:37

died, in like 70, 80 years since Keynes died. Has

32:40

the government ever balanced its budget? I

32:44

went off on a tangent. But actually, I want to come

32:46

back a little bit because I thought about this a lot when

32:48

I was in Scotland. In terms of the

32:50

weird things I muse about while

32:52

walking around, to get back

32:54

to the idea of profits with corporations,

32:57

a lot of my – first of all, it's established

32:59

different corporations or different corporate sectors

33:02

tend to have different rates of profit. So

33:04

retail and restaurants tend to be pretty low.

33:06

Restaurants average like 1 to 1.5% profit rates.

33:11

Restaurants as a whole tend to be pretty low compared to like software.

33:14

Well, are you talking about – you

33:17

do understand that

33:19

the odd idea is that the classical

33:22

theory of a functioning capitalist

33:24

economy is that

33:26

obviously there's always going to be Sturm and Drang,

33:28

all these entrepreneurs. The

33:31

economy is always in flux. But

33:33

that the tendency of the system is for profits

33:35

to be equalized because if sector

33:38

A is making a huge profit and sector

33:40

B is doing just okay, then

33:43

money is going to flock into sector A, more

33:46

supply will be provided and profits will

33:48

come down, even though, of course, we don't

33:50

notice that happening too often. Anyway,

33:53

but you're talking about profits. Are

33:55

you talking about markups? I mean – Yeah,

33:58

but the reason I bring it up is that my friends – that

34:00

are much more on the Bernie Sanders wing of

34:02

the aisle tend to view high profits

34:06

as morally

34:09

excessive. I've

34:11

had conversations with people where they're like, you know, you ought

34:13

to make like one or two percent profit and then

34:15

stop and anything beyond that is avarice.

34:18

And what I've been thinking about when I was in Scotland

34:20

that I don't think people tend to understand is

34:24

if I want to start a new, if I'm running

34:26

a business and I want to start a second factory, I want

34:28

to expand my operations, that

34:30

has to come out of profit. All

34:33

of the cost in terms of paying

34:35

my employees, paying the bills, paying

34:38

the taxes, I can't take that money

34:40

and put it towards building new stuff. So if I want to build

34:42

a new shoe store or a new factory,

34:45

that has to come out of profit. If

34:47

I'm a pharmaceutical company and I want

34:49

to do more research, that research is

34:51

coming out of my profit. So the idea

34:53

that, and this is obviously not something that you're

34:56

contending, Gene, but that you only

34:58

should run like a little bit of profit and then stop,

35:00

otherwise you're greedy, is something

35:02

that I think fundamentally doesn't understand

35:05

where the actual material progress comes from,

35:07

which comes from having excess capital. You have

35:09

excess capital, you build more stuff, you research

35:11

more stuff, and the idea that you would make a

35:13

little bit of money and then stop would mean that you

35:15

would always have a static economy rather than being

35:18

able to build more stuff, which lowers the

35:20

cost of it, which means it's cheaper for the consumer

35:22

and better for everybody. Yes. Okay.

35:25

I mean, of course,

35:28

obviously, I guess we could

35:31

money the waters a little bit by saying, well,

35:34

if you want to expand, it doesn't necessarily have

35:36

to come out of profit. Maybe

35:39

some, maybe outsiders will

35:41

linger the money. But of course, obviously, then

35:43

you're incurring debt and

35:45

you have to pay them an interest, or maybe

35:48

some outsiders will have

35:50

a new stock issue,

35:53

new shares of stock

35:55

issue, and investors

35:57

will put up the money for that stock, but then ultimately,

36:00

you're gonna have to pay them back in dividends, they're gonna

36:02

want to see some capital gains out of it. So

36:04

I guess at the end of the day you are correct

36:07

that it ultimately comes.

36:09

I guess the thing that I'm trying to counter is the idea

36:12

that if you're exceeding a bare minimum profit

36:14

threshold, that you are somehow a Dickensian

36:17

evil character who's waiting in a pool full

36:19

of gold. That that profit

36:22

is where the capital to build up, if

36:24

we were in a Soviet economy, there still

36:26

has to be some kind of gain above

36:28

and beyond basic cost in order to continue

36:31

to build infrastructure. That we would

36:33

have some term for it, but essentially profit.

36:35

And so you want to have enterprises

36:38

that are developing more profit

36:40

than the cost itself, and that is from whence we're

36:42

able to build more things and continue to build

36:45

actual wealth. I would, yes indeed,

36:47

I would elaborate on your point by saying

36:50

that if the

36:53

rate of profit in the aggregate,

36:57

by the way I could tell you that actually the

37:01

rate of profit over the last decade or two

37:03

has actually been lower than what it was

37:05

in the 50s and 60s. Really? Yeah. Because isn't

37:07

that like when Robert Reich won't shut the hell up,

37:10

like in the 50s when he thinks that everything

37:12

was great because the unions were strong and the government

37:14

was stepping on all that stuff? Yes.

37:17

Like the conservatives want to live in the 50s and the

37:19

Democrats want to work in the 50s? Part

37:22

of my message to the world

37:24

has been that I spent

37:26

a quarter of a century at least,

37:29

actually more than that, covering

37:32

the official data. And

37:34

the government actually, the Bureau

37:36

of Economic Analysis, actually does keep

37:39

pretty sophisticated records on

37:42

profits. I mean they define

37:44

profits pretty well. You do a deep

37:46

dive. Profits, by the way, as

37:48

declared on Wall Street are a little different

37:51

because they are a corporation

37:53

will tend to exaggerate its rate of

37:56

profit. Now what a corporation

37:58

keeps two sets of books is one thing you

38:00

tell the IRS. And then, of

38:02

course, and then there's one thing you tell the shareholders,

38:05

you know, they've told the stock market. So,

38:07

you know, obviously, you can talk about,

38:09

you know, those corporate capitalist bastards,

38:12

they're going to minimize their profits. But that

38:14

aside, the US government, the Bureau of Economic

38:17

Analysis has a pretty sophisticated definition

38:19

of profit. And then, according

38:22

to an understanding of what income

38:25

is, what's the income

38:27

that comes in and what are the profits

38:29

that you're making. And if you trust

38:31

me that I know what income is and know what

38:33

profit is, then profit then gets

38:35

calculated as a share of income. And

38:38

so, the profit rate, actually, look, it might

38:40

sound rather hard to you. For the non-financial

38:43

corporations, why do I take non-financial

38:45

corporations? Because the financial sector- Like

38:47

banks and things? Like non-financial corporations. Right,

38:50

but like- Non-financial corporations. Right, but like financial

38:52

would be banks and- Yeah, banks, brokerage houses.

38:55

Yeah, all of those corporations that

38:58

have soared as a share of the economy

39:00

since the 1950s. And they have

39:02

higher profit rates. They work

39:04

on- and their workers are

39:06

higher paid. And so, it tends to

39:09

distort the numbers a little bit. 85% of

39:13

corporate GDP is still non-financial

39:15

anyway. It does, of course, include,

39:18

you know, corporate companies, but non-financial.

39:21

Non-financial corporate profits, which

39:24

were, you know, well over 90% of the economy in the

39:26

1950s, and now about 85%, about 17% over the last

39:28

several years.

39:35

And it was about 22%, 23% in the 1950s and 1960s, higher in the

39:37

50s and 60s. If you take

39:43

the share of wage labor

39:46

compensation, how much

39:48

goes to labor, it's

39:51

now about what- on a slightly

39:53

higher than it was in the 50s and 60s.

39:56

Labor compensation as a share of

39:58

income for the non-traditional- financial corporate sector

40:01

is a bit higher than it was

40:03

in the heyday of labor unions

40:05

in the 1950s and 60s. Really?

40:09

Yeah. So two things. First

40:11

of all, if I'm going to play devil's advocate for my arch

40:13

nemesis, Robert Reich, if

40:15

we're looking at the 1950s at

40:17

a time period where there's a more, it's pre-Reganite,

40:21

pre-Carter deregulation, there's stronger

40:23

labor unions and- Labor unions are about

40:25

one third of the private sector

40:27

today, they're 6%. But

40:30

could Robert Reich then not say, look, when

40:32

the government was more involved and had a more robust

40:35

presence, the economy was doing

40:37

better and had a higher profit margin ergo

40:39

we should have a more robust government presence?

40:42

That is evidence of the 50s

40:44

worked very well because of the government being involved?

40:48

Sorry, you could just know that. You do understand

40:51

Robert Reich, okay?

40:54

I don't think that Robert

40:56

Reich, he was Secretary

40:59

of Labor. I don't

41:02

think he knows how to work the website of the

41:04

Bureau of Labor Statistics, which used to be a

41:06

part of his own organization. I think Robert

41:08

Reich is a very, he's a much less charming

41:11

version of Bernie Sanders in my estimation. The

41:13

only thing I have- Bernie Sanders minus the

41:15

charm, that's Robert Reich. Anybody who insults Robert

41:17

Reich's height, he may be about 4

41:19

foot 7 by now. No,

41:22

he's 4 foot 10, he's very short. I

41:24

bridle at that. I don't know he was short,

41:26

I just thought he was an idiot. Really? Okay.

41:30

I don't know his height. He's horrible at economics. Shut

41:33

the hell up on Twitter. On his Twitter

41:35

feed, he often gets

41:37

insulted for being a very little guy. And

41:41

they should have insulted him for being a moron. That's

41:43

correct. Okay. But

41:45

let me understand your question. You understand that- To

41:47

reframe it, I think a lot of progressive

41:50

Democrats would say the 50s was

41:52

a period where there was higher

41:54

taxes and stronger government presence in

41:56

the economy and that the-

41:59

Reagan and Carter years deregulated

42:02

it and then there was more free trade under NAFTA.

42:06

And so we could look and say, look,

42:08

when there was a more robust government presence

42:10

union and more restricted trade in the

42:13

50s, there was a higher profit rate as well,

42:15

ergo. That is evidence

42:17

the economy actually works better with government. But

42:19

let me add something to your story.

42:23

There was a higher profit rate and

42:26

if you want to say now

42:28

the 70s, 80s and 90s, this

42:31

is the anomaly I

42:33

even have trouble accounting for. Labor

42:37

took less. The 50s and 60s, this

42:41

is the labor share. The labor share

42:43

is, I won't grab the labor

42:45

share, it was about in the high 60% range,

42:47

about 70%. And then we're going to the 70s,

42:52

80s and 90s and the labor share rises.

42:55

So things get

42:58

better for labor. As unions

43:00

are unraveling and as

43:02

deregulation is setting in and

43:04

as our free market friends like

43:07

to complain, we went off the gold standard, suddenly

43:09

labor as a whole, its

43:12

labor compensation as a whole, is doing

43:14

better, is taking a larger share

43:17

of the pie in the non-financial

43:19

corporate sector. Now you

43:21

see then that so what Robert Reich

43:24

would say, well if labor is taking

43:26

a larger share of the pie, I as

43:28

a labor guy want

43:30

to cheer for that. And therefore

43:32

it looks as though good things happen

43:35

in the 70s, 80s and 90s compared to

43:37

the 50s and 60s. You see the anomaly.

43:39

I do. When you say labor,

43:41

you mean wages, just like W2 wages? Compensation.

43:44

Okay. Okay. Now- Well plus

43:46

like pensions and healthcare I'm guessing. Well

43:50

compensation, yeah. Labor,

43:53

this is a bone of contention and

43:56

when I corrected a New York Times columnist

43:59

at a so-from debate about that.

44:02

He said some things which I

44:04

could quote. I

44:06

pointed out that he was using

44:08

just wages and salaries and

44:10

not including the

44:13

huge increase in benefits. And

44:15

benefits are carefully calculated

44:18

by the government that include,

44:20

you know, just what is contribution now? 41K

44:22

healthcare, childcare. Yeah, yeah. What do they contribute

44:25

to that? Well, essentially,

44:28

it really thinks that you'd be spending money on

44:30

anyway, except especially

44:33

with medical care. As

44:35

you know, we can give

44:37

you medical care. The anomaly is

44:39

that we can give you medical care and you don't

44:41

have to pay taxes on that income. I

44:44

mean, we're going

44:46

down that route. You probably know why there's

44:49

so much corporate medical care

44:51

because it's income that goes to you, but you

44:53

don't pay income taxes on it. So the point is that

44:56

compensation broadly defined wages,

44:59

salaries, and benefits. Benefits rose

45:02

from the 50s, 60s into the 90s and

45:04

it pretty much now plateaued benefits,

45:07

bona fide benefits that are probably the

45:09

contribution to your pension and contribution

45:12

to your medical care. Okay, so that's compensation,

45:15

labor compensation. So

45:17

that's what we're calculating. In the 50s

45:19

and 60s, it was at a certain

45:21

level, high 60s, nearly 70%.

45:24

And then it rose in the 70s,

45:26

80s, and 90s. And then for

45:28

some strange reason, since then,

45:31

it descended over the last 20 years.

45:33

It's been somewhat higher than

45:35

it was in the 50s and 60s, but still

45:38

it's tapered off a bit. So

45:40

that's been the trend. And that's off of the

45:43

Bureau of Economic Analysis. Yes. Okay,

45:45

so you're using the government's numbers to get those up. The government's numbers

45:47

properly defined. I don't

45:50

want to take you down the rabbit hole of how I calculate

45:52

income, but everything – this

45:54

is where I've been kind of classic. I

45:57

try to let point out to people – I

45:59

delivered a lecture. The Mises Institute

46:01

about this, that the whole definition

46:04

of income, that the Bureau

46:06

of Economic Analysis in their glossary

46:09

and in their handbook keeps emphasizing

46:12

is my definition. Now, if

46:14

you want to go down that route, I could tell you.

46:16

But the error

46:18

that's been made is that people

46:21

confuse income with

46:23

gross domestic product. Income is actually

46:26

net domestic product. I

46:28

can go down that route with you. But the point

46:30

I make whenever I lecture

46:32

on this at any length is that I

46:34

have the backup

46:38

of the glossary of the Bureau of Economic Analysis,

46:40

of a handbook. They go to great

46:42

pains to explain that

46:45

income is net domestic product,

46:47

not gross. The difference between net

46:49

and gross is depreciation

46:51

of capital. Now,

46:54

you're such a scholar, you may want to ask me about

46:56

this, but I guess we could leave

46:58

that one alone and simply say that I'm

47:01

also looking at the net domestic product

47:03

of the non-financial corporate sector.

47:06

So, guiding back to your Robert Reich point,

47:09

I'm only saying that the

47:14

whole sense of reality gets turned on its

47:16

head. And the heyday of unions,

47:20

when by the way, the other part,

47:24

virtually no competition from cheap labor

47:26

abroad either in the 50s and 60s. That's

47:28

supposed to be the other bugaboo. Is that

47:31

just because we had higher tariffs and

47:33

things? Well, mainly,

47:36

of course, most of

47:38

the world is just barely getting off the

47:40

ground. They were all subsistence agriculture, so they couldn't

47:42

be running factories in China. Yeah, the

47:44

Chinese were starving. Europe, well,

47:46

I mean, by the 60s, of course, Europe did

47:49

begin to take off. But obviously, Europe

47:51

was still in the 50s in particular, recovering

47:53

from the devastation of World War II.

47:57

So was Japan. And then in

48:00

And then in addition, of course, China

48:02

barely existed on the map and

48:04

so on. So over the last 20 years

48:07

when China joined the WTO, the

48:09

competition in cheap labor abroad actually

48:12

really started in the 80s and 90s. So

48:15

there was much less of that in the 50s and 60s. And

48:18

the cheap labor part of it is supposed to have

48:20

been devastating to wages and so

48:24

on. So all of that was

48:26

not present in the 50s and 60s and yet

48:29

we're doing, in terms of labor compensation,

48:31

somewhat better. Now with

48:33

that said, I don't know

48:36

now my final punchline will probably now disappoint

48:38

you. Maybe you didn't want to go down

48:40

that route. If we take labor compensation

48:43

itself, then

48:46

has there been greater inequality?

48:50

Yes there has. So in other words, somebody

48:52

would say to me, hey, you're just talking about what all

48:54

those overpaid schmucks are making,

48:56

labor compensation includes CEO

48:59

compensation. Obviously in the aggregate,

49:01

it's a small piece of the total CEO

49:05

compensation or in the composition of the skilled.

49:07

However, part of my hobby horse

49:10

is that indeed compensation

49:12

itself is more

49:14

unequally distributed than it used to be.

49:17

That's true. So okay, I want to make sure I understand all of this.

49:22

And in terms of income and

49:24

wages, salaries and benefits,

49:27

has increased as a percentage of the economy

49:30

since the 50s. However, we

49:32

should point out that those salaries

49:34

are not just the workers in the company.

49:37

It also includes the CEO, the CTO,

49:39

the CFO. Well, it's always, well, it might

49:41

be okay. Well,

49:44

who's ever earning a salary from

49:46

a CEO who's got paid a salary and they

49:48

get the benefits and so on. So indeed it

49:50

always included that. So that's true. So

49:53

we're talking in averages, is this the same with the median?

49:55

And I asked this because theoretically if wages

49:58

for the average worker had gone down, And

52:00

obviously both of those things can be true very easily.

52:02

You know, you're getting,

52:05

you're getting, you used to get 15% of a pie that was

52:07

half as

52:10

great, now you get only 12%, but

52:12

the pie is twice as big. It doesn't bother me. I

52:15

care about the floor, I don't care about the ceiling. Well,

52:17

as long as the floor is rising and everybody's getting better, I

52:19

don't care if other people are getting richer faster

52:21

than me as long as the poor are getting better. But

52:23

I want, since you got me started, I really

52:25

want to get into one of my key hobby voices,

52:28

which is that, that when I, whenever

52:30

I debate a left-winger,

52:33

I point out that we

52:35

libertarians don't,

52:38

and you of course echoed the point, we don't,

52:40

we don't object to inequality

52:44

as such. We do, we

52:46

do object to government interference

52:49

in labor markets that might

52:52

lead to inequality. And government

52:54

interference in labor markets in particular

52:56

has to do with the rise of

52:58

restrictive licensure that

53:00

is much more difficult to,

53:03

you know, to become a hairdresser or a

53:05

manicurist. There's all kinds of special

53:07

interests, because the guild system has really

53:09

taken over just to work in a

53:11

funeral parlor, much more difficult,

53:14

and essentially affected jobs

53:17

that pay moderate amounts of money,

53:20

much more difficult for people

53:22

who get laid off from a factory job to

53:25

move to another kind of job that might

53:27

pay them decent wage by the rise

53:29

of restrictive licensure, which is basically

53:32

government-backed and government-imposed.

53:34

And I, of course, I go further. I don't

53:36

believe in restrictive licensure in law

53:38

and in legal matters. I

53:41

think that if you and I worked for

53:43

a law firm that handled divorces

53:45

in a matter of six months, we could handle

53:48

divorces also, or maybe in a matter of three

53:50

months decide it's only the part of

53:52

the legal guild system that keeps people

53:54

from moving in. But you

53:56

could have attorneys have

53:59

certificates. have the Bar Association

54:01

give a certificate and say that we are endorsing

54:03

this person and you should be very skeptical of

54:05

an attorney that is not certified by the Bar

54:07

Association, but they're still allowed to practice

54:10

law and if that's all you want or you can afford it, you know them personally.

54:12

Precisely, and maybe that president got an eighth grade

54:15

diploma. What about doctors? Well,

54:21

I think I'm okay with doctors having licenses. Oh,

54:23

God. But Gene, my thing

54:26

is if you screw up and body fluids that

54:29

you don't want shoot out, then I think

54:31

it should be licensed. You and I have been in

54:33

harmony all this time. Let

54:36

me just make one point, but I'd like to go back to,

54:39

look, my uncle who was a dentist

54:43

taught me, whenever

54:45

I said doctor, he said you mean a physician.

54:47

He was a dentist and you understand

54:50

why he was a little bit touchy because he was a doctor

54:52

also. So, I want to

54:54

tell you, and my uncle who just died

54:56

four months ago at the age of 96, I want

55:00

to correct you, you mean a physician. Sure. But

55:03

okay, you said doctor, but that aside,

55:06

do you know that when Milton Friedman

55:09

published Capitalism and Freedom, his

55:11

classic book which came out in 1962, his first great salvo

55:13

about libertarian

55:19

free market economics, he had a chapter

55:21

on the evils of restrictive licensure. And

55:24

then he said, I'm going to devote this

55:26

chapter to the

55:29

evils of restrictive licensure with respect

55:31

to medicine, with respect to physicians.

55:34

He said, why do I want to do

55:37

that? Because I want to take the most difficult

55:39

case. If I can convince you that

55:41

we shouldn't really have restrictive

55:44

licensure with respect to physicians, then

55:46

the rest should follow really shouldn't

55:48

have restrictive licensure with respect to barbering

55:51

either, cutting hair and whatever. But

55:53

I want to leave that alone for a moment. Although

55:56

we didn't have barber licenses,

55:58

Gene. All the barbers would fucking cut. cut people's heads

56:00

off. They wouldn't know what they're doing. They'd be sweetening,

56:03

totting those throats across blood in

56:05

the streets if we had to have unregulated

56:07

barbers. In a free

56:10

market, obviously. Some

56:12

of us look like

56:15

they're still witch doctors selling snake oil.

56:18

It's almost impossible to keep them down.

56:21

It's just that 98% of us or more would go to

56:27

people who have certification from

56:30

different private sector entities.

56:32

You and I would set up a service whereby,

56:35

just as you just joked about bar referrals, you

56:38

and I would set up a service for money and

56:40

we'd make a good amount of money certifying

56:44

physicians, certifying those who are trained

56:46

and they would advertise that. The

56:48

vast majority of us are not suicidal.

56:51

And then these physicians would advertise and

56:53

they would say, look, if you go

56:55

to those witch doctors who've been certified

56:58

by Robert Reich's organization. The

57:01

government. They'll

57:03

probably remove the wrong testicle

57:05

from you. You want to go to our

57:08

doctors. So that's what would happen.

57:11

Obviously, restrictive licensure

57:13

is one thing. Certification

57:16

is another. In a complicated

57:18

economy, you and I want certification.

57:21

But the

57:23

free market would provide it because it would be a huge

57:26

demand for it. Therefore, the

57:28

idea that you necessarily need government

57:31

forcing it on people causes

57:33

a lot of harm. That's why I came

57:36

to about physicians. But I wanted to get to one other

57:38

point about inequality, which is

57:40

the subtle point, and it has to do with housing,

57:42

where you've been very eloquent. You

57:44

taught me about LA, about housing.

57:47

The thing about the

57:49

interference of government and housing

57:51

which drives up, which makes housing so

57:54

unaffordable for people of limited means

57:56

in areas like LA and areas like

57:59

New York. is that if you

58:01

connect the dots, it's a huge

58:03

cause of income inequality.

58:06

Because as has been pointed out, if

58:08

you are in the $80,000 to $100,000 a year class of professional,

58:14

as painful as it is to move to

58:16

an area where the housing is expensive,

58:19

then you can afford it. But

58:21

if you're in the $40,000 to $50,000 range, then

58:25

you might really think twice about

58:27

moving to those high-wage areas, because

58:30

housing for your family is so hard to find.

58:34

And so the government interface and

58:36

the housing market is a huge

58:38

contributor, as research has shown, to

58:43

income inequality, because it

58:45

impedes labor mobility

58:48

even more than restrictive licensure does. And

58:51

so my key point then is that we

58:53

libertarians, yeah, we've got

58:55

a problem with income inequality. Our

58:58

problem is that the government is causing it.

59:01

And in the

59:03

two ways that I mentioned, restrictive licensure

59:06

as well as the housing market.

59:08

Is there a way to quantify that? I ask this because

59:11

I find that it's much

59:13

more common for people to get very animated about

59:16

CEO salaries and inequality at

59:18

the top than to get animated

59:21

about barber licenses or local

59:24

housing ordinances. And

59:27

I don't know if that's because it doesn't

59:30

affect people in

59:32

the upper middle class. And so they just assume it's peripheral.

59:36

Is there a way to quantify how

59:38

big that is in terms of people at the bottom?

59:41

In the case at the bottom, yeah,

59:43

how? Well, now I'm

59:46

not going to remember what I've cited

59:48

before. There was some real landmark

59:50

research having to do with calculating

59:52

how much more expensive it is.

59:58

To move to. certain

1:00:00

cities like New York and San Francisco that have

1:00:02

restrictions. And

1:00:05

that expense is very great. But I guess if

1:00:08

you're really looking for this sort of the ultimate number,

1:00:10

which is to say that restrictive

1:00:13

licensure and housing, do

1:00:16

we know that it means

1:00:18

then that the lower half

1:00:20

gets 20% less than it otherwise

1:00:23

would get? That kind of number?

1:00:25

Hard to come by. It's just that the

1:00:28

numbers really are so huge with

1:00:30

respect to the increased cost. And

1:00:33

I guess other ancillary evidence is so great

1:00:35

that we know that it matters.

1:00:37

We know that it's significant. Although, as I

1:00:40

say, it is

1:00:43

true that I can't

1:00:45

say that it's a major

1:00:48

crime because we do have numbers

1:00:50

showing that everybody on all levels

1:00:52

is doing better than ever. So that therefore

1:00:55

it's not as though it's

1:00:57

impoverishing people.

1:00:59

So that's true.

1:01:02

But indeed,

1:01:05

you press on and you always want

1:01:07

answers. And an actual calculation

1:01:10

about how much inequality it's causing

1:01:12

is probably a very difficult number to come

1:01:14

by. So on inequality as well. And

1:01:17

as previously stated, I care about the

1:01:19

floor. I don't care about the ceiling. So

1:01:21

I'm not a big guy that gets wrinkled about inequality.

1:01:24

The best argument that I've most

1:01:26

of the arguments that I hear about inequality are a

1:01:28

very visceral inequality is inherently

1:01:31

evil, which I disagree with. The argument that

1:01:33

I think has more traction is

1:01:35

that as societies become

1:01:38

increasingly unequal, they

1:01:40

become increasingly unstable.

1:01:43

And that if you have a very unequal society,

1:01:47

even if I Andrew Heaton am right that the floor

1:01:49

is the important thing and not the ceiling, that

1:01:51

there's a much higher percentage or

1:01:54

there's a higher chance of there being revolution

1:01:56

of there being a crime.

1:02:01

sort of psychically motivated crime but trajectory

1:02:23

of most people's careers is

1:02:25

that

1:02:27

you start out in life and on the

1:02:31

lower tiers by the way you tend to level

1:02:33

off your income when you're in your 40s. At

1:02:36

least in terms of the actual longitudinal

1:02:38

studies. You're doing better

1:02:41

than you did when you're in your 20s but

1:02:43

you level off in your 40s. The

1:02:45

more professional higher level

1:02:48

types will level off in their 50s and

1:02:50

maybe early 60s. So

1:02:53

if people experience that, better

1:02:56

off than I used to be,

1:03:00

how many of them are really reading all these studies

1:03:02

but there's left-wing nuts about how, yeah

1:03:06

but you're getting

1:03:08

a lower piece of the pie than your counterpart

1:03:10

did when you were 50. The

1:03:14

usual line is, will

1:03:16

this generation be better off than

1:03:18

the generation before? Will you compare

1:03:20

yourself with your parents? Now

1:03:23

of course my father was a multimillionaire

1:03:26

and your father's a successful judge so

1:03:28

we are both regression toward the mean.

1:03:31

We're just making our peace with it. We're not causing

1:03:33

revolution. We accept our limitations.

1:03:37

Our dads were great and we're not so

1:03:39

great, you and me. So all I'm saying

1:03:41

is that I think that this is like the

1:03:43

stuff of left-wingers. There

1:03:45

really is the immiseration

1:03:51

of the proletariat. If people

1:03:53

are experiencing real economic

1:03:56

hardship that they didn't know

1:03:58

before, that 10 years ago,

1:04:00

they're worse off than they were 10 years

1:04:03

ago, which of course is always true of some people. Then

1:04:05

I can imagine social

1:04:07

problems. With that said, I guess

1:04:10

the next thing you can come at me with is, well then

1:04:12

how did Trump do so well? Isn't there a lot

1:04:14

of dissatisfaction with the way the

1:04:16

world works? And

1:04:19

that would be a little bit more difficult to answer, I

1:04:21

guess. However, doesn't

1:04:23

it make sense to you that most

1:04:26

of what you and I are talking about, Robert

1:04:29

Rice says he's got 150 million, he's got 1.5

1:04:31

million Twitter followers, but most people

1:04:34

have never heard of him. Most people don't care about these

1:04:36

things. Most people don't care about equality,

1:04:38

inequality. They mostly experience

1:04:41

whether they are succeeding in life,

1:04:44

if they're doing something with their lives. By

1:04:47

the way, I mean, the other statistic is, which I'm

1:04:49

not sure if I lay this on you, the last time

1:04:51

we were talking about welfare, which is that, but

1:04:54

it's come to light from very good research. In 1967,

1:04:57

67% of

1:05:01

those eligible to work, and

1:05:03

I could define that, of the lower 20%

1:05:05

had a job.

1:05:09

The lower 20%, 67% of the poorest 20% had

1:05:11

a job. Cut

1:05:16

to the year 2017, where the

1:05:18

labor market is just as good, low unemployment

1:05:21

rate, that number got cut to 36%. 36% of

1:05:24

the labor participation

1:05:26

rate? Yeah, of

1:05:28

course. Had a job, yeah, we were working, yeah.

1:05:31

Wait, wait, I just want to understand this. That means that 64%

1:05:34

or whatever, like about 60% of

1:05:37

people who would be working or

1:05:39

not working in the current economy? That

1:05:43

in the current economy, if you take the lower 20%,

1:05:46

the poorest 20%, one-third of them have

1:05:49

a job. Okay, we're looking at the bottom

1:05:51

quintile. This isn't the overall economy, the bottom quintile.

1:05:54

But it's a relevant point, I think. In 1967,

1:05:58

two-thirds of them had a job. I shouldn't have given you

1:06:01

the precise percentages because that's just so

1:06:03

surreal. It was two-thirds, it's gone

1:06:05

down to one-third of the lower 20%. Two-thirds

1:06:08

of the lower 20%. Now, in the higher

1:06:11

quintiles, as you climb, of

1:06:13

course, it gets up to, you know,

1:06:16

those eligible to have a job, it climbs

1:06:18

to 90%. Most of

1:06:20

those in the higher quintiles are working. And

1:06:23

as you go up the quintile, the next quintile is

1:06:25

also on the low side. So the old

1:06:27

idea that the poor are laboring

1:06:31

and the rich are sitting on their asses, whether

1:06:34

that was ever true, and

1:06:37

they are idle rich, we have heard of a few of

1:06:39

those, but basically it's the idle poor. Basically

1:06:42

we have a situation in which the

1:06:45

ticket out of poverty is to have a job

1:06:48

for the vast majority of us. Well,

1:06:50

you know what, in a recent, we could wrap up

1:06:52

this topic here in a moment. By the way, good job, Brett. It

1:06:55

was about an hour we squeezed out of that one question. Thank

1:06:57

you. It was one sentence, we got an hour out of it. I'm just trying to

1:06:59

shock you, because again, I don't

1:07:02

think I had this number for you before, because I know,

1:07:04

of course, I'm a bleeding heart and you're a bleeding

1:07:07

heart. I'm only trying to tell you about

1:07:09

the harm that the welfare state has

1:07:11

done. You know, I was going to say this was recently

1:07:13

pointed out on the SOHO forum, which we can get back

1:07:16

to in a moment, where you were debating David

1:07:18

Friedman, son of Milton Friedman, and

1:07:22

I think he brought up that

1:07:25

you have a

1:07:28

rapidly declining rate of poverty

1:07:31

up until the war on poverty is declared. And

1:07:34

that his analysis, and I think yours and several

1:07:36

of the Thomas Souls of the world would say

1:07:39

that effectively the mechanism

1:07:41

that had been alleviating poverty prior to that

1:07:43

was getting people plugged into the economy

1:07:45

and becoming autonomous actors, where everybody's

1:07:48

on this treadmill. We might be going at different speeds,

1:07:50

but the goal is to get people on the escalator. When

1:07:56

we start having the war on poverty, despite

1:07:59

the very good intentions, that the onus comes

1:08:01

to rather than getting you onto the elevator

1:08:04

trying to make poverty more palatable

1:08:07

and that the rate of poverty I think has been

1:08:09

almost constant since that time. Well,

1:08:11

it hasn't been that bad. Well, that's a slight exaggeration,

1:08:13

but still the progress has slowed and

1:08:16

indeed Charles Murray

1:08:18

actually made this point best when he

1:08:20

talked about the period from 1949 to 1964, huge

1:08:26

decrease in poverty and yet by

1:08:28

the standards of the great society nothing

1:08:30

was done until the first time they

1:08:32

have a war on poverty and progress slows. But

1:08:35

indeed to put a finer point on the issue,

1:08:37

it's that whenever good

1:08:39

intentions are clear and

1:08:41

indeed the statements you

1:08:44

publicly usually are, oh,

1:08:46

we don't want people to stay in poverty, we

1:08:48

just want to give them a hand,

1:08:50

not a handout, all that stuff. But

1:08:53

the bureaucracy begins to set in and

1:08:55

has a stake in dependency because

1:08:58

the poor become their

1:09:00

customers and so

1:09:03

the motivations become this

1:09:06

mission creep. And

1:09:09

if you're running a poverty program

1:09:11

for the government, what's

1:09:13

it to you if they remain in poverty? That's

1:09:16

why you have a job. So

1:09:18

there's no particular motivation to get people

1:09:20

off of it. Even though there

1:09:23

was a push in the late 90s that

1:09:26

actually Bill Clinton was a part of and

1:09:29

that the Newt Gingrich

1:09:32

contract with America was pushing. That was the

1:09:35

limit of the amount of time you were on welfare

1:09:37

but in certain requirements that you've got to go

1:09:39

apply for jobs and so forth. So

1:09:42

politics is not hopeless but then there was a reversal,

1:09:44

a huge increase in disability

1:09:47

payments. Essentially, from 1967 to

1:09:49

the present, there's been a quadrupling in welfare payments and

1:09:55

that could be the only expert nation. Aside

1:09:58

from that, interesting. period,

1:10:01

which demonstrated actually,

1:10:03

although I guess you could debate it

1:10:05

because the Clinton-sponsored

1:10:09

reforms, I believe interestingly,

1:10:11

if you think about Clinton, he did have

1:10:13

that sort of conservative streak.

1:10:16

He was a neoliberal. I mean, like in retrospect,

1:10:18

he was a... Yeah. The era of big government

1:10:21

is over. He was a deregulator. He was a free trade

1:10:23

guy. Well, he was going to spend a pile

1:10:25

of dough on Hillary care, if you recall. Yeah.

1:10:28

Because I think he was... He

1:10:30

felt guilty about cheating on his wife, so

1:10:33

he gave her Hillary care. He was happy

1:10:35

when it got defeated. And

1:10:39

then by 1994, both

1:10:41

houses of Congress became Republican. Suddenly,

1:10:43

there's a contract on America. Suddenly,

1:10:46

there's austerity heading in, and

1:10:49

Clinton goes with that. Probably liked

1:10:51

it better, interestingly,

1:10:54

than... And probably was happy that his wife's

1:10:56

Hillary care got defeated. And then on top of

1:10:58

everything else, by the way, there

1:11:00

was the end of the Cold War. And then even

1:11:03

though we wanted to keep fighting and we didn't want

1:11:05

NATO to get dissolved because we're

1:11:07

a militaristic society, and Clinton

1:11:09

was a militaristic guy, he had to close

1:11:11

a few bases. So the defense budget

1:11:14

actually declined a bit in absolute

1:11:16

terms. And then we began to run surpluses.

1:11:19

And then, of course, we're trying

1:11:21

to get people off the welfare

1:11:23

rolls. And there was a fair

1:11:25

amount of success. It

1:11:28

did help, but then it was reversed. But

1:11:30

I'm only trying to make the point

1:11:33

to the bleeding

1:11:35

hearts that there

1:11:38

is a reality to welfare

1:11:40

dependency. And there is a

1:11:42

tragedy that

1:11:46

only one third of them have jobs. How

1:11:48

can you possibly climb out of poverty unless

1:11:50

you've got a job in the first place?

1:11:53

Unless you make a go at the job

1:11:55

market. that

1:12:00

can happen with bleeding heart people

1:12:02

such as ourselves is that we can

1:12:04

sometimes cause these traps.

1:12:07

While it gets routinely, I

1:12:10

say lambasted, I think I'm mispronouncing it, but

1:12:12

lambasted, if I bring up the concept of the welfare

1:12:14

cliff, it makes total sense. Wiltwilker

1:12:17

cliff. Cliff. So

1:12:20

the idea of like the, if

1:12:23

you add up both direct payments and services,

1:12:26

the average person in the bottom quintile of

1:12:30

the American economy gets about $45,000 worth of government

1:12:32

aid per year. That's

1:12:34

including food stamps, housing

1:12:36

subsidies, and so on and so forth. So if

1:12:39

theoretically, you're going to go

1:12:41

from getting a job that's $30,000 a year to $40,000 a year, but you're now ineligible

1:12:48

for all of that, and all of a sudden your net

1:12:50

income, if we're adding all of that up, drops

1:12:52

by 40%, you're not, whatever that is, 20%, you're not going to do it. Very

1:12:57

logically, intelligent, self-interested

1:12:59

people that are struggling at the bottom of the the economy

1:13:02

would not take the position of removing food

1:13:05

and resources from their kids in order to

1:13:07

get a job that in the future might help them.

1:13:09

And so you can cause these traps to occur. You

1:13:12

brought up disability payments, which I think

1:13:14

are particularly insidious, not because I

1:13:16

don't want people to be taken care of if they're truly

1:13:18

disabled, but because I think the structural forces

1:13:21

for it

1:13:22

are

1:13:23

deeply misaligned. We do not count people

1:13:25

out on disability on the government's

1:13:28

preferred method of looking at unemployment.

1:13:31

And so if I'm the governor of the state and

1:13:33

I can get you onto disability, one,

1:13:35

the state's not paying for it because it's federal, so I

1:13:38

don't have any problem there. Two, it makes my

1:13:40

employment records look better. And

1:13:42

so every single state in the union has an incentive. There

1:13:44

are states that literally have call centers where the

1:13:46

state hires the call centers to call people

1:13:48

up and go, we think we can get you on disability. And

1:13:50

what happens? That person's now on disability legally

1:13:53

can't work because then they won't get the disability payments

1:13:55

and they're trapped wherever we put them for the

1:13:57

rest of their life. Well, yes.

1:13:59

indeed and where the workplace has gotten

1:14:02

safer. Jobs

1:14:05

specific jobs that used to be dangerous or less

1:14:07

dangerous,

1:14:08

the work,

1:14:09

the movement to the service sector has been

1:14:12

meant inherently. You're working in dead less dangerous

1:14:14

situations even though

1:14:17

life expectancy has now declined,

1:14:19

it's still better than it was 30 years ago. So

1:14:22

we should have seen a decline in disability

1:14:27

filings rather than

1:14:29

an explosion. But it happened

1:14:31

because of renewed

1:14:33

incentives to apply for disability.

1:14:36

That changed as well. So we have

1:14:38

an explosion in disability payments rather

1:14:40

than a leveling off or a decline. So

1:14:43

all of those things are true. That's my major. But

1:14:46

I want to return to one point to finish

1:14:48

the answer to Brett. The

1:14:52

irony is that the biggest

1:14:55

trickle down that

1:14:59

we have had over the last 10, 15 years

1:15:03

is known as quantitative easing.

1:15:05

It's essentially the

1:15:08

Federal Reserve printing trillions

1:15:11

of dollars that essentially

1:15:13

goes into the hands of the finance

1:15:15

people, into the hands of the banks. And

1:15:17

that's supposed to be helping the economy.

1:15:21

And so the irony is that... When

1:15:24

you're quantitative easing and the Fed... Yeah.

1:15:27

I guess it's the Fed... Purchases of

1:15:29

bonds by the Federal Reserve, yeah. Right.

1:15:32

They just give a big chunk of money to the banks and go spend

1:15:34

this time... Well, who are they buying the bonds

1:15:36

from? They're

1:15:39

buying the bonds from the bond

1:15:41

dealers and they're printing money in

1:15:43

order to buy it. And

1:15:46

when it goes into the hands of the banks, it

1:15:48

was supposed to be a stimulus program back in 2008, 2009.

1:15:57

And so essentially it's... And

1:16:00

it was called quantitative

1:16:02

easing because they're buying 10-year

1:16:04

bonds. They're trying to keep the interest rates low. By

1:16:07

buying bonds, you drive out the price, and you drive

1:16:10

down the interest rate arithmetically.

1:16:13

So there was this massive, and now, of

1:16:15

course, it's continued. It's no longer called content.

1:16:17

So there's massive, massive attempt to

1:16:19

stimulate the economy by buying bonds.

1:16:22

And essentially, the first recipients

1:16:26

of that money generally,

1:16:28

people were the well-heeled.

1:16:31

The financial companies. When we do qualitative

1:16:33

easing, it's not that the

1:16:36

Fed hits a button and says, double the monetary

1:16:38

supply. Everyone with a dollar now

1:16:40

has $2. Everyone in America has the

1:16:42

exact amount of quantitative easing that we did.

1:16:45

It is starting like a wave

1:16:47

at the banks, and then trickles out there. Yeah,

1:16:49

of course, the joke is, but sometimes they

1:16:51

do. I think even Ben Bernanke, the head of the

1:16:53

Fed, or something, even joked that when they were calling

1:16:55

him helicopter Ben, to some degree,

1:16:58

most recently, it is true that the money was

1:17:00

sent directly, well, sent to business people.

1:17:03

It's generally just some rich people. But

1:17:06

oftentimes, it's the helicopter analogy. The

1:17:09

government puts cash in helicopters and

1:17:13

it spews out over the cities, and

1:17:16

people scramble to pick it up. Because

1:17:18

we did do, I guess, the COVID relief

1:17:21

checks we got were a form of quantitative easing. Yeah,

1:17:23

yeah. But that was where everybody

1:17:25

got a direct payment. But normally, you're

1:17:27

getting loans to businesses, or ultimately, they

1:17:29

get some market rates on bonds to banks?

1:17:32

Yeah, yes, indeed. Well,

1:17:34

yeah. OK, I'm going

1:17:36

to collaborate further. But even the most

1:17:38

recent LeCova relief, like

1:17:41

we had my wife, who I rented a restaurant,

1:17:44

this person is not fabulously rich,

1:17:46

but this person, not proletariat, got $900,000

1:17:49

from the government. Man,

1:17:52

I need to get some goddamn podcast money from Uncle

1:17:54

Sam. So my point is, this is the stimulus. And

1:17:57

this is the stimulus. And so, so, so. So

1:18:00

the joke, to

1:18:02

my mind, is that I hear

1:18:05

Barack Obama and the

1:18:08

other left-wingers talk about, and Robert Reich

1:18:10

talk about trickle down,

1:18:12

doesn't work. And I

1:18:14

want to say, you're right, Barack,

1:18:17

you're right, Robert Reich. And

1:18:20

you know, the most insidious,

1:18:22

ugliest form of trickle down is something

1:18:25

you don't even mention, known as quantitative

1:18:27

easing, known as the Federal Reserve showering

1:18:30

money on rich people, and that's supposedly

1:18:33

stimulating the economy because

1:18:35

it's trickling down. Jesus Christ, you're right,

1:18:37

the whole premise of trickle down economics

1:18:40

that we were talking about earlier of giving corporations

1:18:42

rich people money is that quantitative easing

1:18:45

is that. They're creating money out

1:18:47

of nowhere, thereby debasing the value

1:18:49

of the dollar, and the gap is being

1:18:52

given to the rich and powerful in the

1:18:54

hopes that they stimulate the economy. That

1:18:56

is, as our progressive friends view it, that

1:18:58

is trickle down economics, and it is routinely done

1:19:01

through the government. Yes, but it's, well,

1:19:03

of course, our progressive friends don't

1:19:06

even notice that that's

1:19:09

the real trickle down that occurs,

1:19:11

and that's the real trickle down that,

1:19:15

whether it succeeds or not, is very

1:19:17

much up for debate, but apart from

1:19:20

that, you are implicitly

1:19:22

endorsing that trickle down because you never even

1:19:24

mention it. It seems okay with you, and

1:19:27

of course, it probably confuses you

1:19:29

anyway, so what really happens because it gets a little

1:19:32

bit subtle for people like Robert Reich to think about,

1:19:35

but I just, there's a famous, it's

1:19:38

famous, I've seen a number of times where Barack Obama

1:19:40

says trickle down, they say, can

1:19:42

I give money to the rich, and then it trickles

1:19:44

down to the working class, but

1:19:47

it doesn't work. It doesn't work. Now,

1:19:49

he's grandstanding like that, and meanwhile, the

1:19:52

trickle of, oh, yeah, my joke, of course,

1:19:58

of course trickle down doesn't do just that. just

1:20:00

to it. It's a knife.

1:20:02

It really should be called the torrent

1:20:05

down of cash, the trillions in cash.

1:20:08

Again, I just rhetorically, I am

1:20:11

very much on the side of free enterprise. I

1:20:13

do not want to give the rich money.

1:20:15

What I want to do is if you are providing value

1:20:18

by building houses,

1:20:20

creating services, creating entertainment, if you are

1:20:23

providing value, I'm okay with

1:20:25

you keeping some of that value. In fact, most

1:20:27

of that value, and I tend to look at it in terms

1:20:29

of output rather than input, by

1:20:31

which I mean the general estimate

1:20:34

is that, say, to take Bill Gates, for example,

1:20:36

it's estimated that Bill Gates, the incredibly

1:20:39

wealthy individual, has netted about 2% of

1:20:41

the overall economic growth that he unleashed

1:20:43

on the World Bank. I was about to cite that

1:20:45

research, and now I'm forgetting the- And

1:20:48

I'm fine with that. If he keeps 2% of the whole

1:20:50

planet, got that the other 98%, great.

1:20:53

Keep the 2% you got, and I don't care how wealthy

1:20:55

you are. The analysis that was done

1:20:57

by the guy who collaborated

1:21:00

with Paul Samuels- Paul

1:21:02

Simon, the musician? Paul Samuels.

1:21:06

There was a research paper published

1:21:08

in 2014 that estimated how much the innovators, the

1:21:16

billionaires, the big

1:21:18

entrepreneurs, get out

1:21:20

of a share of the income that

1:21:23

they produce. And indeed, I'm

1:21:26

astonished at your knowledge and

1:21:28

learning, because the estimate, and

1:21:31

it was based on empirical data from

1:21:34

the late 40s to the present. It didn't

1:21:36

take the Robert Barron periods of the COVID

1:21:39

age,

1:21:41

the 1890s, but it took from the

1:21:43

late 40s to the present and included, obviously,

1:21:46

Bill Gates and Bezos and the more

1:21:48

famous one. And indeed, 2%

1:21:51

was the approximate estimate that

1:21:53

they worked with. Good for them. Thanks

1:21:55

for providing value. Well, indeed,

1:21:58

obviously. other. Actually,

1:22:02

it was odd that the paper said that

1:22:04

the other 98% goes to the consumers. And

1:22:09

I thought that was a summary statement. I

1:22:11

thought that that's probably a little bit

1:22:14

exaggerated that it probably a lot of it

1:22:16

goes to workers. It goes to the rest of

1:22:18

us anyway. So their contributions

1:22:22

are immense. And indeed,

1:22:24

as I recently, of course I recently quoted

1:22:26

a famous line that Sam Walton, another

1:22:29

billionaire, came out of nowhere, and

1:22:32

a hazy billionaire. And

1:22:35

he probably had his his Walmart

1:22:37

is probably the greatest anti-poverty institution

1:22:41

developed over the last several decades,

1:22:43

you know, putting name brand

1:22:45

goods within the reach of people of limited

1:22:47

means, you know, huge discounts

1:22:50

on name brand goods, because of his concepts

1:22:52

about how to do things. And so his

1:22:55

contribution to alleviating poverty

1:22:57

is probably enormous. And that,

1:23:00

I mean, in his case in particular.

1:23:03

So to wrap up with with trickle

1:23:05

down economics, we're

1:23:07

taking umbrage with the idea that trickle

1:23:09

down economics means giving money to

1:23:11

the rich. We're allowing them to we're

1:23:14

not punishing people for being successful. But

1:23:16

the real trickle down economics is literally quantitative easing

1:23:18

because that is literally giving money to the rich

1:23:21

out of the public offer. Yeah, yeah. And I guess I

1:23:23

guess I'm my joke again is it doesn't

1:23:25

do justice to it because we're talking about trillions

1:23:27

of money printed. But but

1:23:30

but indeed, as you say, but I guess

1:23:32

the trickle down is the trillions

1:23:35

goes fattens the coffers of the

1:23:37

and the coffers of the rich. And indeed, it's

1:23:39

a huge part of the reason why, right,

1:23:41

and others are probably basically correct in

1:23:44

saying that inequality of wealth has

1:23:46

been exacerbated since 2020, because

1:23:49

of all that all that money printed.

1:23:52

And I want to make sure that I apologize

1:23:54

for getting so granular on this. It's such an interesting

1:23:56

point that I want to make sure I understand this. When we talk

1:23:58

about quantitative easing. Yeah. that

1:26:00

they'll net more in income and because

1:26:02

they'll net more in income, they'll invest it and

1:26:05

the money will trickle down to the workers and to

1:26:07

the consumers and so on. That's usually what's

1:26:09

meant by trickle down. But my only point though

1:26:11

is that if you call that trickle down,

1:26:13

then there's got to be an even

1:26:15

bigger word to describe quantitative

1:26:18

easing. I'm going to call that a truffle flush. Trickle

1:26:20

flush. Trickle down. Imagine that wine coming down

1:26:22

from the barrels, a quantitative easing.

1:26:24

Imagine that the toilet's

1:26:26

all backing up three stories up. There's

1:26:28

a much, much worse phenomenon. Oh my God.

1:26:31

You're getting vulgar on me

1:26:33

now. You're

1:26:35

hitting a new low in metaphors. I'm

1:26:38

not sure I want to go. So I would agree with part of

1:26:40

that on the tax breaks in that, well

1:26:43

previously established, I am, I

1:26:46

don't think people understand normally that one,

1:26:48

corporate taxes do have an effective

1:26:51

maximum amount and that anything you do over

1:26:53

that's just going to compel them to reinvest or splurge.

1:26:56

But beyond that, the people are already paying

1:26:58

their income tax. So I am very skeptical

1:27:02

of corporate taxes. That said, if you're targeting

1:27:04

tax breaks, I agree. Like if it's the

1:27:06

government saying the general corporate tax rate's going

1:27:08

to be 18%, but we like

1:27:11

this particular industry, so we're going to go 10% or

1:27:14

we like this particular company, then it's the government

1:27:17

picking winners and losers and a subsidy is

1:27:19

just the flip side of a tax break. I

1:27:21

think one of the things that the Republicans are not

1:27:24

given enough grief on

1:27:26

is that the Democrats tend

1:27:28

to prefer subsidies as the mechanism by which

1:27:30

the government alters the economy, but

1:27:32

Republicans will just do targeted tax breaks and

1:27:35

it's the same thing. Because if I as the government

1:27:37

want to have somebody build a factory,

1:27:40

I can either give you a subsidy

1:27:42

to build the factory or I can say, look, we'll

1:27:44

take $3 million off your taxes. It's

1:27:46

the same thing. Because at the end of

1:27:48

the day, I'm going to have to raise taxes on everybody

1:27:50

else or make up the difference

1:27:52

through quantitative easing. So it ends up being

1:27:55

we are taking value from the public.

1:27:57

So anyway, subsidies and targeted

1:28:00

tax breaks are just different sides of the same

1:28:02

coin. And so I'll give credit to people that

1:28:04

have a problem with that, as do I. Well,

1:28:07

I guess I'm going to agree

1:28:09

with you that if a tax break to

1:28:11

sector A, corporate sector

1:28:15

A, means that they're paying $3

1:28:19

billion less in taxes, and

1:28:23

for us to say subsidy to sector A

1:28:25

means that the government cuts them

1:28:27

a check for $3 billion, it's

1:28:29

all the same $3 billion, which is effectively

1:28:32

your point, I guess. Is that right? Yeah.

1:28:35

Yes. So yeah, that's right. Although

1:28:37

the only part I bridal at, which gets into the subtleties, which is

1:28:39

that, but the taxes are going to have to

1:28:42

be paid by somebody else. And

1:28:46

then that next part becomes a little bit

1:28:48

iffy as to... Because

1:28:51

do government bureaucrats actually think

1:28:53

that way? Well, if it's at a state level, yeah,

1:28:56

because state level, they're going to have to balance their budget,

1:28:58

which means they're going to have to raise taxes through

1:29:00

sales tax or property tax or income tax. At

1:29:02

the federal level, you don't have to do that because you can run

1:29:05

a deficit, but that deficit's

1:29:07

going to ultimately be paid by quantitative

1:29:11

easing or debt

1:29:13

that is being incurred by taxpayers later in the future.

1:29:15

So either way, that targeted tax

1:29:18

break is being paid by somebody else. Well,

1:29:20

actually, okay. Yes, indeed. Although,

1:29:23

I mean, we're now... The Biden

1:29:25

administration was going to incur

1:29:28

a deficit of $2 trillion to get back to the

1:29:30

moment in time. The

1:29:33

congressional budget office was projecting a

1:29:36

deficit in the coming fiscal year for the

1:29:38

Biden administration of $2 trillion, but

1:29:40

it's been... Because Biden couldn't

1:29:42

get his student loan program accepted,

1:29:45

it's now only going to be $1.7 trillion,

1:29:48

which is, again, an absolutely staggering

1:29:50

number. So it's total fiscal

1:29:52

irresponsibility, and when you're

1:29:55

saying ultimately somebody's going to pay

1:29:57

the piper, you're right about that, but not

1:29:59

that they... politician seems to care

1:30:01

these days. Although now you give

1:30:04

me an opportunity to get back to my other hobby

1:30:06

horse. Brett, we're through with

1:30:08

you. We've kissed off. It took

1:30:11

us a while. He's either thrilled or he's quit being

1:30:13

a patron. One of those two things has happened. He's either

1:30:15

really, really happy that he got his own personal economics

1:30:17

lesson or he's pissed off. We kissed our children.

1:30:20

But as I like to point out

1:30:23

to people that really we talk about

1:30:25

how much government taxes us by. Remember

1:30:27

I was talking about the revenue

1:30:29

take. The revenue take is remarkably

1:30:31

stable. You know, 17 to 19 percent

1:30:34

and it's amazing

1:30:38

that it's remarkably stable since

1:30:41

the 1950s and so much has changed from

1:30:43

decade to decade with respect to how much

1:30:45

the government can actually get. But then

1:30:47

that's revenue. But then when I

1:30:49

like to emphasize when you when you talk about

1:30:51

how much government taxes us by,

1:30:54

it's really how much from

1:30:57

what you GDP is our base, which is okay in

1:30:59

this case.

1:31:01

How much does it does it does

1:31:04

it take? How much does it suck up? Really

1:31:06

that should be measured on

1:31:08

the expenditure side. If it's if

1:31:11

it's spending 24% of GDP,

1:31:13

that's really the tax we're paying. Some

1:31:16

of it is coming in revenue but

1:31:18

it's claiming those resources

1:31:21

are being sucked up by government 24%

1:31:24

as a rough measure. So therefore I

1:31:26

like to emphasize and then you're nodding so

1:31:28

you tend to agree, which is that the simplest

1:31:31

way to ask how much is government really taxing

1:31:34

us by by hook

1:31:37

or by crook because government learned well

1:31:39

you can you can tax, you

1:31:41

can borrow and you can print. And

1:31:44

so those three ways we're

1:31:46

gonna suck up money from the economy, that's how

1:31:48

we tax them. Because we're taking

1:31:50

money, we're taking capital

1:31:53

that would otherwise go into something else and we're doing it

1:31:55

through debt or whatever. Yeah and we're spending it

1:31:58

on whatever government wants to spend that. So

1:32:00

Alex, a real tax rate is now

1:32:02

approximately 20, I

1:32:05

think maybe it was 24% a year ago, maybe 23%. A

1:32:08

real tax rate is now at that

1:32:10

level. It's not measured by the revenue

1:32:12

take, it's really measured by

1:32:14

the expenditure take because what it spends

1:32:17

is really what it takes from us one way

1:32:19

or the other. And so hopefully

1:32:21

that's an interesting lesson even for people

1:32:24

who haven't yet gotten their questions asked

1:32:27

and answered. So let's get to

1:32:29

the next question. Actually, we've only got five minutes

1:32:31

left before I read again. So

1:32:33

look, your donors are gonna be pretty

1:32:36

pissed off. You know what, I think

1:32:38

what we'll do Gene is we will just do this again. Gene,

1:32:40

thank you so much.

1:32:44

That's the show, thanks for listening. Thank

1:32:47

you, Gene Epstein, for coming on to discuss

1:32:49

trickle down economics. Thank you, Eric

1:32:51

Stipe, who edited today's episode. Thank

1:32:53

you, Brett Klein, who supplied

1:32:56

the prompt for 100% of today's episode. And

1:32:59

as always, thank you patrons who make the entire show

1:33:02

possible. And finally, a very

1:33:04

big shout out to Mark's

1:33:06

Macadamia Nuts, the finest Macadamia

1:33:08

nuts on the planet. That's

1:33:12

it for us. I've been,

1:33:14

how's this go? I've been Andrew Heaton and

1:33:16

you have to, damn it, I should write this down. Until

1:33:19

next time, that's it. Until

1:33:21

next time, I've been Andrew Heaton and

1:33:23

so have you.