Friends,
In 2021, President Biden made a big step toward raising wages across the country: As the National Law Review explains, Biden “sharply increased the minimum wage rate in effect for federal contractors and set annual adjustments to account for inflation.” This January, thanks to Biden’s executive order, the minimum wage for federal contractors reached $17.75.
It’s unclear exactly how many contractors work for the federal government, though Erin Mansfield at USA Today reports that according to the most recent records, “the government spent $427 billion on contracted services that needs to be done by humans” last year. The number of federal contractors has been estimated to be at least double the two million people who work directly for the federal government.
The reason Biden’s contractor minimum-wage increase matters is the fact that those millions of federal contractors work in every state of the union—including states like Texas that still set their minimum wage at the federal minimum of $7.25 an hour. This undoubtedly increases the competition for labor in local labor markets, raising wages for everyone, in the same way that states with stronger union power have higher wages for non-union workers.
Unfortunately, earlier this month, President Trump revoked Biden’s executive order to raise wages for government contractors, which drags the federal contractor minimum wage down by nearly $4.50 per hour, to $13.30, which was a level previously set by President Barack Obama.
This is a disaster for workers around the country. It reduces the bargaining power of workers in low-wage states and cities, and it reduces the spending power of consumers around the country, meaning many contractors will have almost a third less to spend at local businesses. And it will hit those states that are still stuck at the federal minimum wage of $7.25 the hardest, ensuring that the lowest-wage workers will struggle even harder to afford higher prices.
On his Substack, former Biden economic Adviser Jared Bernstein notes that the spending power of the federal minimum wage is now “down by half since its late 1960’s peak and is at its lowest buying-power level since before even I was born.”
Make no mistake: This is a trickle-down war against the federal minimum wage. The Trump Administration seems to be doing everything it can to strip workers of leverage and to kick out the foundations of minimum wage protections for low-wage workers in the United States.
The Latest Economic News and Updates
An Abundance of Conversation
This week, the economics world was swept up in a conversation about Abundance, the brand-new book from the New York Times’ Ezra Klein and The Atlantic’s Derek Thompson. The book looks at some of the biggest problems facing America: a housing shortage; green-energy infrastructure that doesn’t begin to meet the challenges of climate change; and no big, bold public projects to capture the public’s imagination.
The authors argue that a politics of abundance is needed in America, and here I’m going to quote the publishers’ own description of the book’s solution toward building that abundance: “Rules and regulations designed to solve the problems of the 1970s often prevent urban-density and green-energy projects that would help solve the problems of the 2020s. Laws meant to ensure that government considers the consequences of its actions have made it too difficult for government to act consequentially.”
Many pundits have taken issue with the book’s claims that urban and blue state liberal leaders, specifically, have failed to meet the moment. Klein and Thompson make the argument that zoning laws that protect wealthy homeowners who bought their houses in the 1980s have prevented states like California from building the massive amounts of housing that they need to meet demand, for instance.
I haven’t yet read Abundance, though it’s rocketed to the top of my to-read list. But even without reading the book, I’ve been keeping close tabs on the conversation surrounding Abundance, and it is fascinating
In his newsletter, Ned Resnikoff outlines part of the problem with the Abundance discourse: The book has been pigeonholed into familiar partisan “turf wars” between familiar groups: “The Left (broadly defined) or The Center (broadly defined, and sometimes also called The Establishment). You may be surprised to learn that a debate over, for example, the relative merits of adopting European elevator safety standards falls so neatly along these ideological lines,” Resnikoff writes. “But of course it does, because American elevator codes are a Regulation (left-coded), and transitioning to a slightly less onerous set of standards is therefore a Deregulation (right-coded).”
Todd Tucker, in his Fireside Stacks newsletter, addresses one of the hot-button topics that Thompson and Klein touch on in Abundance: “the role of labor is ambiguous in the abundance imagination. On the one hand, the book treats unions warily, painting their demands to be paid prevailing wages or be included in construction projects as an obstacle rather than an opportunity to build power and higher-quality projects,” Tucker writes.
“On the other hand, one of the few heroes of the book is Pennsylvania Governor Josh Shapiro, who rebuilt a collapsed section of I-95 in a record 12 days,’ Tucker continues. “The authors note ‘he chose to use union labor but to gore a lot of other interests and processes” (emphasis added), such as requirements for environmental impact assessments or multiple bids for contracts.”
Tucker’s questions aimed at the abundance narrative are important: “What is the role of unions in their political project? Is moving toward a better pro-union equilibrium (like corporatism) the goal? If so, how can public policy help us get there?”
The Roosevelt Institute’s President and CEO, Elizabeth Wilkins, asks some important questions about the argument in Abundance that the goal should be to eliminate “veto points” that allow related parties (homeowners at zoning board meetings, lobbyists for big corporations, etc) to scuttle, downsize, or delay big projects.
Wilkins argues, “you can’t do any of that robust building without also seriously contending with the economic power imbalances that shape our political possibilities. Eliminating veto points, worthy though it may be, will not eliminate either the problem of concentration in markets that can also choke or distort supply, or the problem of special interests with disproportionate power.”
“After all, the very wealthy will always have the best lawyers working on finding or creating new veto points that advantage them,” she continues. “In addition to scrutinizing key points of purchase for existing wealth and power, we also need to build countervailing power as a movement—including labor, tenants, and others—to keep the former in check, fight for the long-term policies we want to see, and defend our democracy against outsized corporate influence and capture.”
It’s an important conversation, and I’m eager to figure out how middle-out economics fits into the abundance discourse. Middle-out advocates want to see abundance, growth, and prosperity, and we accomplish those goals by centering working people in our policymaking. In fact, the rise of the modern middle class and the massive economic growth of the post-war period—which you might even call the greatest abundance economy ever on earth—was directly the result of the New Deal policymaking focused on government investments, market interventions, and an active rebalancing of power between labor and capital.
One of the primary roles of government is to address the power differential between 90% of workers in the US and the wealthy few elites at the top who always want a bigger piece of the pie. But we live in a time when trust in government is distressingly low, and the Trump Administration is exploiting that lack of trust to slash services and investments across the economy, which adds to the lack of faith in government to get things done. I agree with Klein and Thompson’s point that the best way to rebuild working Americans’ trust would be for government to do big things, quickly and efficiently.
I’m excited that this conversation is happening. At a time in American history when many progressives are doomscrolling and feeling helpless, Abundance at the very least is inspiring an optimistic conversation about what we want the American economy to be, and what kind of big aspirational projects we’d like America to undertake in the future. When you’re having a conversation that encourages you to dream big, like this one, there really are no losers.
More and More Americans Are Feeling Economic Uncertainty
Polls that ask users to report their own feelings about the economy are a double-edged sword. On the one hand, especially in these partisan times, factors like party affiliation and other tribal indicators can warp the results enough that they don’t bear much resemblance to how the economy is actually affecting people’s lives. But on the other hand, self-reporting economic polls can often catch leading indicators that slow-moving economic data doesn’t catch.
For most of the Biden presidency, Americans were reporting that the economy felt like it was in a bad place, even when America’s recovery from the pandemic far exceeded the rest of the world. Those respondents were placing a lot of emphasis on the higher prices caused by inflationary pressures, showing that the economy didn’t feel good to them because their costs were often running ahead of even their growing paychecks.
As we move into the third month of the Trump Administration, more and more Americans are souring on the economy. Seemingly every week we see more self-reporting polls that show concern for the future of the American economy due to economic uncertainty, and this week saw a slew of new data that continued the trend.
For instance, Emily Peck at Axios reports a University of Michigan study shows that “The share of consumers who expect unemployment to rise over the next year surged to 66% in March, the highest level in a decade.”
“Meanwhile, the ZipRecruiter Job Seeker Confidence index fell 3.6 points in the first quarter this year,” Peck continues. “That's in line with another employee confidence measure, from Glassdoor, that Axios' Courtenay Brown reported on earlier this month.” Peck reports that the people who are feeling the most anxiety are “Workers in the middle of the labor market, those with some college education or just a Bachelor's degree.”
“The US Consumer Confidence Index, which measures how optimistic (or not) people feel about the economy, fell to 92.9 in March — its lowest level since February 2021,” reports Hyunsoo Rim at Sherwood. “Expectations on income, business, and job market conditions over the next six months also fell to 65.2, a 12-year low and well below the 80-point threshold that often signals a recession.”
And a US Chamber of Commerce survey of small business sentiment released yesterday finds that small business owners’ confidence “fell to 62.3 in the first quarter, down from 69.1 last quarter, and the exact same level as this time last year,” Axios reports. The reason for this renewed skepticism is clear: “58% [of respondents] said inflation is their biggest challenge, the highest level since they first asked in 2021 — even as the rate of price growth is well off the highs seen three years ago.”
New polling this week from Navigator Research (PDF) shows that a growing number of Americans are increasingly concerned about the economy, prioritizing topics like inflation, jobs, Social Security, and health care, They prioritize these issues far above Trump Administration priorities including “transgender issues” and “censorship of free speech,” which ranked at the very bottom of the priority poll.
Navigator reports that three out of five Americans think inflation is the most important issue, but only 28% of Americans think Trump and Congress are focused on this issue.
In fact, a huge majority of Americans—including Republicans and voters who generally approve of Trump’s performance—say their costs are going up. Until that number declines, it’s likely that these Americans will continue to be unhappy with the economy as a whole, because most Americans regularly interface with the economy in two very specific ways: When their paycheck lands in their bank accounts, and when they spend that paycheck at local businesses.
So that’s how Americans are feeling about the economy. But are those bad feelings based on real data? Glassdoor’s chief economist told Axios that job listings and hiring data on Glassdoor are anemic right now: “The big issue in the labor market at the moment is hiring. It's slow, and back to 2013 levels,” when the economy was still sluggish in the wake of the Great Recession.
It’s best, in the end, to approach self-reporting polls the same way a family doctor would: You should trust when your patients tell you how they’re feeling, but you should also verify with appropriate tests to gauge how their bodies are actually responding. Sometimes the data-driven approach will catch a problem that is invisible to us in our day-to-day lives, and other times the opposite is true.
Credit Cards Are Robbing from the Poor to Give to the Rich
In The Atlantic, Annie Lowrey explains that the credit card industry has been rigged against poor Americans in favor of the wealthy few. “Over the past few decades, the credit-card market has quietly transformed into two credit-card markets: one offering generous benefits to wealthy Americans, the other offering expensive debt to the poor, with the latter subsidizing the former,” Lowrey writes.
“While balances are compounding at the highest average APR in decades, a brutal 21.5 percent, the haves are not just pulling away from the have-nots,” she continues. “The people swiping their cards to pay for food and gas are also paying for wealthy cardholders’ upgrades to business class.”
Lowrey explains that for the wealthy few, credit cards are a convenience and a wealth-builder. They “pay off their balance in full every month, avoiding late fees and interest charges. They use credit cards as a convenient payment method, and as a way to earn travel points, cash back, airport-lounge vouchers, seat upgrades, and other goodies.”
But too many working Americans, she explains, “use credit cards as a payment tool and as a short-term loan, to cover surprise expenses and groceries the week before payday.” Their cards don’t provide cash back or perks, and they carry balances for extended periods of time.
Credit card companies have further exacerbated that split between the haves and the have-nots to raise their annual percentage rate far above even the high interest rates currently set by the Federal Reserve. Some of the profits incurred from those interest rates paid by the poor go toward making perks for the wealthy few even better. But most of it winds up being funneled directly into the profit margins of credit card companies: “the revenue credit-card firms make from interest payments has ballooned from $76 billion in 2020 to $170 billion in 2024,” Lowrey reports.
For most Americans, the problem has gotten big enough that leaders in Congress have taken notice and proposed legislation to fix the problem. “ A bipartisan House bill would cap credit-card interest rates at 10 percent, and a Senate proposal would lower swipe fees,” Lowrey writes. (Though swipe fees—literally, the charge credit card companies levy on merchants every time a customer swipes a card at their business—aren’t directly paid by consumers in most cases, they still contribute to higher prices overall.)
This whole sad state of affairs also offers another perspective on trickle-down economics. Whenever you see someone making huge gains in the economy, that money didn’t materialize out of nowhere. It had to come from somewhere. And in a low-regulated economy like our own, which has seen nearly forty years of consistent deregulation of the powerful, that outsized wealth is being vacuumed directly out of the pockets of working Americans and deposited into the accounts of the wealthy few.
That transfer of wealth has been going on for decades in big and small ways across the economy, and it has resulted in $80 trillion being pulled out of worker paychecks and deposited into the coffers of the wealthiest one percent. Once you start to connect those dots, the scam of trickle-down economics becomes visible everywhere you look. Lowrey’s report is just one example of how the grift has gotten even worse in the last few years.
This Week in Trickle-Down
You should read this whole New York Times report about the Trump Administration’s biggest war against regulations yet, this time in the Environmental Protection Agency: “...the E.P.A. would unwind more than two dozen protections against air and water pollution. It would overturn limits on soot from smokestacks that have been linked to respiratory problems in humans and premature deaths as well as restrictions on emissions of mercury, a neurotoxin. It would get rid of the “good neighbor rule” that requires states to address their own pollution when it’s carried by winds into neighboring states. And it would eliminate enforcement efforts that prioritize the protection of poor and minority communities.”
Thanks to the Trump Administration’s cuts to the Internal Revenue Service’s budget and staff, “Treasury Department and IRS officials are predicting a decrease of more than 10 percent in tax receipts by the April 15 deadline compared with 2024,” reports the Washington Post. “That would amount to more than $500 billion in lost federal revenue; the IRS collected $5.1 trillion last year.”
This bombshell Washington Post report exploring the aftermath of Trump’s budget cuts at the Social Security Administration is worth a read: “The Social Security Administration website crashed four times in 10 days this month because the servers were overloaded, blocking millions of retirees and disabled Americans from logging in to their online accounts. In the field, office managers have resorted to answering phones in place of receptionists because so many employees have been pushed out. Amid all this, the agency no longer has a system to monitor customer experience because that office was eliminated as part of the cost-cutting efforts led by Elon Musk.”
This Week in Middle-Out
“Increased federal spending in recent years has helped to improve U.S. ports, roads, parks, public transit and levees, according to a report released on Tuesday by the American Society of Civil Engineers,” reports the New York Times. “But that progress could stagnate if those investments, some of which were put on hold after President Trump took office in January, aren’t sustained.”
A new report from the State Innovation Exchange (PDF) shows how state government spending supports millions of jobs around the country, creating even more jobs by putting more cash into the pockets of working people.
This Week on the Pitchfork Economics Podcast
We have a special episode of the podcast for you this week featuring brief interviews with most of the contributors to the new issue of Democracy Journal, which is titled “It’s Still the Post-Neoliberal Moment.” Some of the smartest economic thinkers on the topic of middle-out economics explain where our economy is today, where it’s going, and where it should go. This episode offers a survey of the current landscape of progressive economics, and you won’t want to miss out.
Closing Thoughts
Earlier this year, as Donald Trump was assembling his cabinet, many people observed that the second Trump Administration was staffed by the biggest number of billionaires in American history. This proved to be an unpopular move—polling at the time showed that a mere 12 percent of all Americans, across party lines, wanted Trump to take his advice from billionaires.
Last Friday, Commerce Secretary Howard Lutnick, who is believed to be worth somewhere between $2 and 4 billion, proved why it’s a bad idea to stock an administration full of billionaires. Lutnick was asked whether the Trump Administration’s DOGE team would delay Social Security payments on the conservative All-In podcast, and Lutnick’s answer was about as out-of-touch as it could possibly be.
“Let's say Social Security didn't send out their checks this month,” Lutnick said. “My mother-in-law who’s 94, she wouldn’t call and complain. She'd think something got messed up, and she'll get it next month.”
Instead, Lutnick said, “a fraudster always makes the loudest noise, screaming, yelling and complaining.” He elaborated that if you wanted to find out who was defrauding Social Security, the “easiest way to find the fraudster is to stop payments and listen” because “whoever screams is the one stealing.”
It’s the kind of statement that only someone who has no idea what it’s like to be poor would make. I’m willing to bet that nearly 100 percent of the readers of The Pitch have someone in their social circle who would experience tremendous economic hardship if their Social Security payments were a month late.
Working Americans put a small amount of their paychecks into Social Security, with the understanding that they’ll get that money back once they hit retirement age. A Bankrate survey of retired Americans found that 62% of retirement-age Americans are “very reliant” on their Social Security checks, with another 15% claiming they’re “slightly reliant.” Only 15% of all respondents said they were “not at all reliant” on their Social Security checks—a number which undoubtedly includes Lutnick’s mother-in-law.
Lutnick’s comments are the kind of casually cruel offhand comments that only a super-rich person who has either forgotten or never experienced the stress of living paycheck to paycheck would make. And if the billionaire Secretary of Commerce can’t fathom the idea of a person who needs their Social Security check to survive, it’s a good bet that his policies are going to similarly ignore that segment of the population. For forty years, Washington DC was ruled by trickle-downers who were eager to dump money on the richest one percent of Americans, under the false pretense that the wealth would eventually trickle down to everyone else. Now, it seems, those wealthy elites have eliminated the middle-man. A government of billionaires is going to rule in the best interest of billionaires.
Be kind. Stay strong.
Zach