Spending cuts aren’t the only answer to the budget deficit

Make Me Smart October 26, 2023 Transcript

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Kimberly Adams 

Okay, let’s do it, whenever you’re ready

Kai Ryssdal 

Hey everybody I’m Kai Ryssdal, welcome back to Make Me Smart where we make today make sense.

Kimberly Adams 

And I’m Kimberly Adams, thank you for everyone for joining us this Thursday, October the 26th.

Kai Ryssdal 

There’s being a Thursday we’re doing audio clips today, news and happenings of the past five days here is number one.

Shawn Fain

We told Ford to pony up. And they did. We won things nobody thought was possible. Since the strike began, Ford put 50% more on the table than when we walked out. This agreement sets us on a new path to make things right at Ford, at the Big Three, and across the auto industry.

Kai Ryssdal 

So that’s Shawn Fain and head of United Auto Workers announcing the agreement late yesterday Wednesday evening, East Coast time, late afternoon here on the West Coast. About their agreement with Fort sorry, had to I don’t usually but but I had to there anyway. So that’s right. Ford has made a deal with UAW or UAW has made a deal with Ford. I think it’s interesting in a couple of respects. Number one, this now applies the pressure on Stellantis and General Motors, which it’ll be interesting to see how much longer the strike overall lasts. Number two, there were some things for all the Fain did get in this agreement, right, and you got 25% pay increases, cost of living adjustments are back a ratification bonus for the workers, lots of good stuff for the workers. The thing he didn’t get, which I know they’d been fighting for, and which will be the future of the of the car industry is they didn’t get EV battery manufacturing plants under the union umbrella in this deal. And I think that could turn out to be something but But overall, look, I mean, General Motors said the other day, sorry I gotta open the door for Willow because she doesn’t show up until we’re freakin three minutes into this podcast. GM said the other day, it’s losing $200 million a week on the strike. And that is just not sustainable for a company. And so they, Ford realized, look, we gotta we gotta settle. We have made a bunch of money, we’re gonna get part of the back. And now they’ve got to deal. Alright. Sorry. There we go.

Kimberly Adams 

Everybody’s doing their jobs today. No, I mean, I really do think that your point about what this means for the other auto makers will, you know, be key because then it’s like, is this the baseline? Or is this the best? Right of what comes next? Okay, this next clip is actually from January of 2022, which I know was forever ago. But it is relevant to what is going on in Congress. And I heard it on the Congressional Dish podcast, which is hosted by Jennifer Briney. And so I’ll play it and then we can talk about why it matters.

Mike McCord

The sixth longest CRs in the history of the Defense Department have all occurred in this last 12 year period, we have turned a 12 month fiscal year into an eight month fiscal year in terms of our ability to initiate new starts and enter contracts. That should be unacceptable and not the new normal. It’s hard to see this full impact because or the inefficiency from looking from outside because the organization has of course adapted to its circumstances just as organisms do. Nobody plans to enter into contracts in the first quarter of fiscal year now because the odds that we would actually be able to do so are so low.

Kimberly Adams 

Right. So this is something that I’ve been wondering for a while, and I wasn’t sure if it was true. And then I heard it on the podcast. And and now if we checked it on C-SPAN, it is true. The fact that we cannot pass budgets on time, the fact that we cannot pass spending on time is shifting the way our government works in lots of different ways. And sure, we talk about how the agencies get ready for a shutdown and all the money they have to spend on a shutdown. And we talk about, you know, the politicking about it and all the legislation that doesn’t get passed because, you know, they’re trying to avoid a shutdown and everything else. But think about that just the realm of military contractors. And the fact that and I’m sure it’s beyond the military, that people literally don’t even plan to have contracts that will need anything done to them. Basically this time of the year, because they don’t think it’s going to actually happen. And what that does to how much we have to spend on contracts, what that does to pricing. What that does for negotiation, that’s a mess. That’s all.

Kai Ryssdal 

Right. It’s an appalling abdication of responsibility and and obligation, full stop.

Kimberly Adams 

Yes, and I’m sorry, I don’t know if I said it. But that was Undersecretary of Defense, Mike McCord testifying to the House Appropriations subcommittee on defense back in January of 2022.

Kai Ryssdal 

There you go. There you go. Okay, next one.

Kristin Toussaint

Back in 1965, the CEO to typical worker pay ratio was just 20 to one. And then 1989, it was 58 to one and some reports now put it around 325 to one, but we’re also seeing ratios that far exceed that, you know, and one of the most extreme examples we pointed out at Fast Company, Live Nation’s ratio is 5,414 to one. And then I think now, people are really starting to question that.

Kai Ryssdal 

Bob Iger at Disney 500 to one. Speaking about CEOs to regular workers pay salaries. That was Kristin Toussaint from Fast Company, about a whole series they did on CEO pay how it has gotten where it is. And it’s, you know, just get back to that first piece tape we played. There was a huge thing in the earlyish days of the UAW strike where Shawn Fain and his lieutenants rightly pointed out that the CEOs of the big three car companies are making tens of millions of dollars have, gotten multimillion dollar raises over the past number of years. And oh, by the way, that’s just not conducive to good employee morale and productivity and justice. It’s it’s a, it’s a not small deal. And I think it’ll be interesting to see what happens as number one Stellantis and GM go, but also the SAG-AFTRA strike is still going on. And so there’s that.

Kimberly Adams 

Yeah. Yeah, I wonder when and this came up a little bit in that interview that you did about when shareholders start making the CEOs make less, you know, because their boards and their shareholders are the ones who get to decide, you know, what if since you made this deal with the unions, that to pay them more that’s coming out of your paycheck? Is that gonna happen? Or is it gonna be like you did the best you could, here’s another couple million dollars. Yeah, yeah. Anyway, one more clip.

before we go.

Garrett Watson

One really big thing that’s gonna impact most people in the US in their tax situation, is going to be the tax cliff at the end of 2025, where basically, the 2018 tax law changed a lot of individual policies, including the tax rates and brackets, most of that nearly all of it on the digital side unwinds all at once at the end of 2025. And so that’s going to set up a big discussion and debate, especially depending on the the control of Congress in the White House post 2024. on where to take steps to move forward for individuals.

Kimberly Adams 

Control of Congress and the White House in 2024. This is my very roundabout entryway into the discussion of the new house speaker, because there is so much to do in Congress, like there’s always a lot to do. But there’s some really big stuff coming down the pipeline. I know we’ve talked about, you know, we’re coming up against a government funding deadline. I know, we’ve talked about, you know, the the fact that the farm bill has not been addressed and many other things, but this was Garrett Watson, a senior policy analyst at the Tax Foundation. And while I was doing some reporting on the budget deficit this week, specifically about why we talk so much about the spending side of things and not so much the revenue side, he dropped this little piece of information, and I was like, come again. And he said in 2025, at the end of 2025, something like 23 of the provisions from the 2017 tax cuts and jobs act related to individual income taxes will expire, meaning most taxpayers will see a tax hike unless some or all of those provisions are extended. So we are talking about the 2024 election, whatever Congress ends up in place after the 2024 election, one of their first things that they’ll have to do is a figure out what to do about the debt ceiling, because that will be up again. Number two, they’ll have to figure out, is the debt ceiling and 2024? 2025? I don’t know. It’s 2024. Alright, in 2025. They are going to have to figure out what to do about taxes. It’s far away. I get it, and it’s a probably something that will get extended and there’ll be a big fight. But just it’s another reminder that who’s in those seats matters in terms of It’s not just politicking. And so that was my roundabout way of saying, hey, this is something I didn’t know was coming, but it is. And it’s really gonna matter who’s making those decisions when that time comes.

Kai Ryssdal 

For sure, debt limit, debt limit is waived until January 20, January 1, 2025. So there’s that. Here, here’s the other thing, though, about the Tax Cuts and Jobs Act, which was, of course, the 2017, Trump administration $1.7 trillion, over 10 years tax cut that went mostly to corporations and rich individuals. Lots of conversation about budget deficits, and about shrinking government. And cutting spending is amazing to me. And look, I understand the political realities. And I’m not being naive here. But it’s amazing to me that we’re only talking about one side of the budget deficit equation, which is to say cutting spending. Government has in its capacity, the ability to raise revenue. But that is not at all on the table. It’s really remarkable. So there was an episode of of the daily the other day, and we know how I feel about the daily, but every now and then it’s really good. Jim Tankersley had a really good explanation of this particular tar that Congress gets itself stuck on, which is that it only talks about cutting spending. And that’s mostly Republicans. But Tankersley points out that even if Democrats were going to talk about raising taxes, Democrats would want to spend that money not on reducing the deficit and debt, but on new social programs to help the poor and children’s health and schools and all that stuff, which, you know, fine, we’d have that debate. But the amazing part is that even Democrats would not want to put it toward deficit reduction. And I just, it’s amazing that we’re not able to have those conversations. I just, it’s a failing. We can’t talk about it.

Kimberly Adams 

You know, while you were out the other day, and Amy was hosting, we actually did that story.

Kai Ryssdal 

Well, there you go. Okay. Now, as we all know, I don’t listen, I don’t listen to when I’m out.

Kimberly Adams 

Well, I’m so proud of you. Actually, as I was listening to you talk I was like, good for you, Kai. Good for you for just like taking your time away as time away. Yes, I’m very proud of you for that. But yes, but you’re right. I mean, I I was having the same thought. I wonder if it was the same day that he was running that you listened to The Daily, but yeah, it’s like there’s this whole other side of it. And you know, the cognitive dissonance is amazing because people are like, we need to cut spending we need to cut spending well, if you want it to actually matter then what you’re talking about is cutting Social Security and Medicare that’s what you want to do? You want to cut defense?

Kai Ryssdal 

Right? Right. Because that’s that’s what it is. Totally and you Republican congressman, who wants to do that, Republican Congress person rather excuse me, who wants to do that? Go back to your district and tell all the seniors that sorry, Social Security’s over with and to all the people who work at the at the Boeing plant or the you know, Raytheon plant, sorry, this plant is gonna get shut down. Right? How do you think that’s gonna go over? I just, I don’t think people are concentrating on that stuff. You know?

Kimberly Adams 

And if there’s no appetite to cut spending, then do we have to increase our appetite to grow revenue? I mean, maybe we get a federal weed tax and that’ll probably close a big hole right there. But this is also related to there’s a Supreme Court case coming up this term about taxes taxes on I believe it’s on capital gains, from like, companies owned companies outside the United States. It’s a weird international tax thing, but the way that it’s being interpreted could just decimate tax revenues. Even the sort of rightish leaning Tax Foundation put an op-ed out and they were just like, if this happens, this is going to be a multi tens of billions of dollars hit to revenues like it’s a big deal so yeah, revenues that’s that’s the story.

Kai Ryssdal 

Yeah, yeah. All right, we’re gonna we’re gonna go on on that went back tomorrow for economics on tap, that YouTube livestream starts at 3:30 Pacific, 6:30 Eastern, we’ll do some news, some drinks and a game.

Kimberly Adams 

Yes. And we love hearing from you. So if you have a story you’d like to share even if it’s something super wonky, like tax revenues, we love it anyway. Or something else way more fun hopefully. You have a comment questions suggestion? Our email is makemesmart@marketplace.org. Or you can leave us a voicemail at 508-U-B-SMART.

Kai Ryssdal 

Ahh Jay Siebold. Today’s episode of Make Me Smart was produced by Courtney Bergsieker with assistance from H Conley. Audio engineering by Jay Siebold. Ellen Rolfes writes our newsletter our intern is Niloufar Shahbandi.

Kimberly Adams 

Marisa Cabrera is our senior producer. Bridget Bodnar is the director of podcasts, and Francesca Levy is the executive director of Digital.