Friends,
Civic Ventures founder Nick Hanauer has a great editorial in The New Republic titled “Biden’s Plan to Tax Rich People Like Me is the Best Way to Grow the Economy.” I encourage you to go read and share the piece, but the gist of Nick’s argument is this: Moderate Democrats in Congress who claim that raising taxes on wealthy people like Nick to fund the Biden administration’s Build Back Better plan would harm economic growth aren’t just wrong—their understanding of the economy is entirely backwards.
Nick writes, “the problem with today’s economy isn’t that rich people like me don’t have enough capital to invest; it’s that we’re not productively investing the glut of capital we already have.” In addition to building a green economy, funding childcare, and expanding affordable education for all Americans, the Build Back Better plan would put more money in the pockets of ordinary Americans. By taxing wealthy people like Nick and investing that money in communities around America, Congress will be putting the real job creators in America’s middle class to work by fueling consumer demand.
“$3.5 trillion in tax hikes over the next decade for my fellow plutocrats and CEOs isn’t too much,” Nick concludes. “If anything, it’s too little.” I couldn’t agree more.
The Latest Economic News and Updates
The Pandora Papers reveal a global network of billionaire corruption
Over the weekend, the International Consortium of Investigative Journalists (ICIJ) released the Pandora Papers, which document the tax shelters and other dirty dealings of the roughly 2700 people in the global billionaire class. “The documents come from the firms that helped these billionaires set up the offshore companies, and collectively, they offer glimpses of exceptionally wealthy people, their yachts and jets, their inheritance planning and the other ways companies created in tax or secrecy havens benefit them,” write Peter Whoriskey and Agustin Armendariz at the Washington Post.
These substantial troves of wealth are in offshore accounts hidden from the world’s law enforcement and tax collection agencies, and ICIJ estimates that the total worth of this untaxed wealth lands somewhere between five and eight trillion dollars—about ten percent of the whole world’s gross domestic product.
But of course, all the hard work that these journalists have done will amount to exactly nothing if our leaders don’t act on this new information. Politico highlights a new, bipartisan anti-corruption bill titled the ENABLERS Act that was inspired by the information in the Pandora Papers and which will be introduced on Friday: “The ENABLERS Act encapsulates a key idea that analysts say is, to a large degree, already standard in most other countries. The main provision is this: Lawyers, investment advisers, art dealers, realtors, accountants, public relations firms and others would be required to engage in some form of ‘due diligence’ to ensure their clients aren’t paying with or trying to move around money of suspicious origin.”
The ENABLERS Act is the barest minimum we should expect of our lawmakers, but there are promising signs that the Biden Administration is going to tackle corruption inside and outside the government as their next big campaign, once the infrastructure and Build Back Better plans are finally (hopefully?) passed. The many excesses and transgressions of the previous presidential administration provided ample proof that American anti-corruption laws are, at best, mere suggestions. Until something is done to establish clear rules with strong consequences for corrupt elites, the American people will continue to distrust their government.
America isn’t just falling behind in child care. We haven’t even started the race.
This graphic from the New York Times illustrates how much nations around the world spend on child care for toddlers. America’s embarrassing placement on this chart really says more than any essay ever could:
America’s health care gap falls along racial lines
We talk a lot in this newsletter about the fact that economic outcomes are not distributed evenly. Intergenerational wealth, wages, and homeownership are just some of the measurements that are completely different when you compare American households of color to white households. For instance, this Washington Post piece explains that Americans without college degrees are still far more likely to be unemployed than college-educated workers. But drill down into those numbers and you see that in some cases, unemployment numbers are twice as bad for Black workers without college degrees than their white counterparts:
Several new reports investigate another disparity between the races in America: Vastly different health outcomes.
"Despite a record number of Californians carrying health insurance last year, the percentage of Black residents who said they didn’t have a regular place to go for health care or advice skyrocketed," Mark Kreidler at Capital & Main writes. "When it came to explaining why they didn’t seek care in 2020, a full 40% of Latino respondents cited the cost — or lack of insurance — as a primary factor."
Health care is an economic issue in America, and the fact is that nonwhite Americans generally receive less care, and lower-quality care, than white Americans. And like most economic issues in America, the disparity in health care has only grown greater during the pandemic.
“According to the most recent data collected by the Kaiser Family Foundation, Latinos in California, who make up 40% of the state’s population, have accounted for 61% of all COVID cases and 47% of virus-related deaths. Yet of all the vaccines administered in California, Latinos have received only 31% of the doses,” Kreidler writes. “Black residents of Los Angeles County, meanwhile, have the highest rate of COVID-related hospitalizations among all racial and ethnic groups there, the Los Angeles Times reported.”
Back in 2019, the media reported widely on the problem of widespread rural hospital closures. These reports painted a picture of poor rural Americans—primarily in red states which refused to adopt the Medicare expansion program established in Obamacare—who couldn’t get the care that they needed without traveling many hours to the nearest urban area. It turns out, that wasn’t the whole picture. Laura Harker at the Center on Budget and Policy Priorities shows that hospital closures are largely happening in rural areas where Americans of color live. Some 60 percent of those affected by rural hospital closures are people of color.
For instance, look at this map of hospital closures in Georgia and you’ll see a clear pattern:
If our leaders want to improve health care outcomes for all Americans, they should use rural Black populations as their litmus test—by improving access to health care and health insurance for Black Americans in rural Georgia, they’ll improve access for everyone.
There is a plan to save rural America. The New York Times just hasn’t heard about it.
Speaking of America’s rural areas, I recommend reading Matt Hildreth’s Twitter thread which takes issue with the New York Times’s lazy coverage of rural America. He especially chafes at the Times’s repeated claims that nobody knows how to “save” rural America from economic decline. “The truth is that rural people know how to reverse the decline in their communities but their voices are missed by the ‘Sunday brunch’ media,” Hildreth writes.
He points to a fascinating Brookings investigation of a rural development policy in President Biden’s BBB legislation, the Rural Partnership Program, which “seeks to match the diversity of rural places across the U.S. and invest in local leaders, organizations, and strategies, giving communities a fighting chance to build resilience and prosperity on their own terms.”
It’s an interesting program that builds on existing community infrastructure—local nonprofits, training programs, unique expertise and assets—with the intent of building sustainable communities, not just junior cities-in-waiting. I hadn’t heard about this program until Hildreth tweeted it out, but it seems to be a nuanced and pragmatic policy.
Americans need housing support. They’ll have to wait in line.
As eviction moratoriums end around the country, a survey of waitlists for housing vouchers around finds that “nearly all have more than 1,000 families on their waiting lists and many have more than 10,000, with as many as 109,088 households at the San Diego Housing Commission.” Many of the 44 agencies surveyed, particularly in the south, have closed their lists to new applicants, meaning that many thousands—perhaps millions—of Americans don’t have even a shred of hope that an overtaxed housing system will save the day for them.
Between the end of eviction moratoriums and surging rents nationwide, our housing crisis is poised to become an outright catastrophe, and even the housing authorities that served as a safety net for a lucky few are unable to deal with this demand.
Yes, it’s still infrastructure week
While much of the political conversation of late has focused on the Build Back Better legislation, the Washington Post’s Heather Long investigates the contents of the more traditional infrastructure bill that preceded the BBB and will seemingly accompany it through Congress. This graphic provides an excellent overview:
We rightfully talk about the BBB as a transformative bill that could change the nation forever, but devoting tens of billions of dollars to renovate America’s water infrastructure— including replacing dangerous lead pipes around the country—is no small feat, either.
The economics of Squid Game
I haven’t yet watched Squid Game, the violent Korean TV series that is already the most-watched Netflix show everywhere in the world except the United States. (And based on how many of my coworkers at Civic Ventures have already binged the show, it will soon be breaking records here, too.)
It is interesting, though, that the premise of Squid Game—impoverished Koreans struggling with tremendous debt agree to play in a deadly game for money—is attracting viewers around the globe.
Between Squid Game and the Oscar-winning film Parasite, Jin Yu Young wrote about why Korea has become fertile ground for art about economic inequality in the New York Times: “As South Korean families have tried to keep up, household debt has mounted, prompting some economists to warn that the debt could hold back the economy. Home prices have surged to the point where housing affordability has become a hot-button political topic. Prices in Seoul have soared by over 50 percent during the tenure of the country’s president, Moon Jae-in, and led to a political scandal.”
None of that sounds different from what’s going on in America today. At a time when ordinary people around the globe are struggling with economic anxiety and a growing housing crisis, it is particularly interesting that one of the biggest entertainment companies in the history of the planet is profiting from a dark and gritty show about economic anxiety.
Real-Time Economic Analysis
Civic Ventures provides regular commentary on our content channels, including analysis of the trickle-down policies that have dramatically expanded inequality over the last 40 years, and explanations of policies that will build a stronger and more inclusive economy. Every week I provide a roundup of some of our work here, but you can also subscribe to our podcast, Pitchfork Economics; sign up for the email list of our political action allies at Civic Action; subscribe to our Medium publication, Civic Skunk Works; and follow us on Twitter and Facebook.
Join us on Civic Action Live on Friday morning at 10:30 am Seattle time, when Jessyn and special guest Rep. David Hackney will discuss the push-and-pull over the Build Back Better legislation, the Pandora Papers, and all the week's breaking economic news.
On the Pitchfork Economics podcast, rock star journalist Anand Giridharadas explains how wealthy people use philanthropy as a way to whitewash their reputations and keep their taxes low.
And Paul writes in Business Insider about how the so-called "skills gap" has been used as an excuse to suppress wages. Can employers ever go back to training workers on the job and providing opportunity for advancement, or is half the population destined to be stuck in low-paying dead end jobs forever?
Closing Thoughts
Last week, I wrote about an explosive new paper from a Federal Reserve economist which argued that many of the economics profession’s strongest-held economic beliefs are actually untrue. The New York Times’s Neil Irwin wrote some analysis of the paper’s findings that “Nobody Really Knows How the Economy Works,” and his post sums up the story quite well:
It is vivid evidence that macroeconomics, despite the thousands of highly intelligent people over centuries who have tried to figure it out, remains, to an uncomfortable degree, a black box. The ways that millions of people bounce off one another — buying and selling, lending and borrowing, intersecting with governments and central banks and businesses and everything else around us — amount to a system so complex that no human fully comprehends it.
Some might think this is a depressing development—that over a century of work and academic research has left us with no clear understanding of how the economy works. I argue that this worldview is a glass-half-empty situation: Now that we understand what we don’t understand about the world’s economy, we finally have a clear sense of how much is left to be discovered. Humanity loves nothing more than new frontiers to meet, and our understanding of economics is now a huge blank slate just begging for discovery and inquiry. That’s what we do best as a species, and I can’t wait to see what happens next.
Be kind. Be brave. Mask up. Get vaccinated.
Zach