There’s a deep undercurrent of fear running through the labor market that AI will cause catastrophic job loss. In Gallup’s latest State of the Global Workplace Report, 18% of U.S. employees said it was very or somewhat likely that their job would be eliminated within five years.

Meanwhile, AI companies have positioned themselves as our saviors, encouraging talk about how destructive AI will be and then declaring that they have solutions for it, like an AI-wealth funded universal basic income.

Don’t listen to them. UBI isn’t a solution, it’s a cop out.

How AI Job Loss Works

When a technology is adopted into the workplace, it makes workers more productive i.e. they can produce more in the same amount of time with the technology than without it. As productivity changes, demand for labor also changes, and jobs are created and destroyed as a result.

So the crux of AI adoption is worker productivity.

The figure below shows output per hour of work (i.e. labor productivity) in the US from 1947 – 2026. It is a steady, increasing line with no clear and obvious technological advancement visible. Computers, hard drives, microchips, laptops, the internet, cell phones, emails, microsoft office—all quietly integrated. The only jumps are around recessions, when output recovers before employment does.

Source: BEA, via FRED.

How many jobs will we lose to AI? We don’t know, because we don’t know:

• how quickly firms will adopt AI,

• how quickly it will benefit their productivity, and

• how quickly that adoption and productivity increase leads to headcount changes, including

• the number of people who are hired as a result, and

• the number of people who are fired as a result.

Even after the fact, we won’t be able to measure these things that well and if we did, we wouldn’t be able to attribute them to AI with a high degree of certainty. A lot is going on in the economy at any given time. If you look at the graph of productivity, you don’t see innovation adopted with the same kind of leaps as its invented.

In sum: We have to assume AI job loss is coming, but we can’t assume much more than that.

What do we do about AI? Hard, vague question.

What do we do about job loss? Fix unemployment benefits.

Why UI and Not UBI?

Sam Altman, the most vocal AI leader cum proponent of universal basic income (UBI), wrote in 2014 that AI will render millions of workers non-employable in the labor market, calling them “a new idle class.” His insight: “The obvious conclusion is that the government will just have to give these people money.”

Problem 1: It’s certainly a convenient distraction for the policy discussion around AI to be focused on UBI rather than the more visceral AI policy questions of mass copyright infringement, liability for encouraging users to kill themselves or murder others, civil rights violations, and anti-competitive monopolies.

Problem 2: Selling a universal basic income as the salve to AI economic wounds perpetuates the underlying assumption that AI will put millions out of work and there’s nothing we can do about it. AI will cause job loss—that is inevitable. AI will create a large, permanent population of non-employable people—that is fearmongering.

Problem 3: Job loss is part of our labor market. Nearly 2 million workers leave or lose a job every month. Obsolescence is also part of our labor market, as typists and video rental stores could tell you. Declaring a wide swath of workers so useless that all we can do is throw money at them is offensive and lazy. The government shouldn’t give up on millions of workers who want a job because their former bosses said to.

Fair point though: The salience of the jobpocalypse-UBI message is aided by the feeling that the government has given up. The US lacks a robust, functional unemployment program. That lack has nothing to do with AI and everything to do with the failure of Congress to maintain the current unemployment system of unemployment insurance (UI).

Let’s build a new one!

For the rest of this post, I will outline my vision for a new unemployment system. Because I am an economist and fairly literal, I have struggled what to call it. In my head it is “unemployment insurance 2.0,” and even I know that’s terrible. My husband has encouraged me to think more like a male senator from the 1950s and name it after myself, “The Edwards Plan.” But what I want is for the name to actually say what it does, and since its a benefit from the government, do so in a way that people can’t easily attach stigma to it.

We landed on Bridge Benefits. Because that’s we want: a bridge between jobs, careers, locations, whatever, but a bridge over troubled waters.

Bridge Benefits - Building on Obvious Lessons

The existing Unemployment Insurance system was designed for manufacturing workers of the 1920s. A handful of states set up their own unemployment program, which served as the model for Unemployment Insurance in the Social Security Act of 1935. UI has been growing financially weaker since the 1970s, less generous since the 1980s, and it proved so unprepared to meet the moment during the pandemic—the most sudden and severe job loss the US has ever seen—that Congress had to build a new unemployment benefit on the fly while propping up the old one through an influx of cash. But we’ve learned a lot from it.

Obvious flaw: UI is actually a confederation of 53 separate state and territory programs with little coordination between them. States set their own benefit qualifications and benefit levels. So, two workers could have the same job at the same employer, but because their office location is in different states when they get laid off, one could get 2-4 times the benefit amount as the other.

You can’t really make people feel better about looming jobs loss if it comes with the caveat, “Don’t live in North Carolina.”

Obvious win: UI does not require workers to be poor to get benefits. It operates a lot like Social Security. The program is funded via payroll taxes and a specific worker’s benefit amount is a function of their past wages (rather than current income). The upshot: you don’t have to prove you’re poor to get UI, you just had to have lost a job.

As a result of eligibility coming from job loss and not poverty, unemployment benefits decrease the use of welfare benefits, and in particular more generous unemployment benefits decrease the use of food stamps in the short term and disability in the long term.

Obvious flaw: Unlike Social Security, UI payroll taxes are only paid by the employer (so they are real salty about it) and non-W2 employment is not covered. It misses a lot of workers, and workers, because they don’t see the payroll deduction for unemployment on their paycheck like they do for FICA, don’t have as much knowledge of the program.

All together: Bridge Benefits needs to be a federal program with a single benefit and tax structure that keeps the payroll-benefit link, adds a worker-side tax, and brings in all 1099 workers.

^for what it’s worth, those changes alone would make Bridge orders of magnitude better than UI, but we can do more, so we should.

Bridge Benefits - Triage, Triage, Triage

There’s basically three types of unemployment spells: short, medium, and long. Think under three months (more than half of spells are that short), 3-9 months, and then more than 9 months. A good unemployment system would try to match benefits to the spell type, e.g. short benefits for short spells. Since we don’t know how long a worker will be unemployed ahead of time, the design answer is to triage through unemployment tiers, matching benefits to length as they go. Something like:

- Tier 1 – Generous benefits for a short period (circa 6-12 weeks). This is basically a “no questions asked” benefit, you show up, say you’re unemployed, and get cash fast but short. If a worker has not found a job at the end of the period, they must reapply for benefits and move to:

- Tier 2 – Less generous benefits for a longer period (circa 3-6 months). Now we ask questions. Applicants have to meet with an employment counselor to get labor market information and search advice before they can get benefits. If a worker has not found a job at the end of the period they must reapply for benefits and move to:

- Tier 3 – A long-term unemployment program. Less generous benefits with employment counseling and the opportunity to apply for additional assistance to support career changes (more on that below).

The length between these tiered benchmarks can vary. Finding a job is harder when the economy is bad. And it can also be harder for older workers or workers with longer tenure. A 30-year-old who spent two years with a company is going to have a different unemployment experience than a 50-year-old who was there for two decades. The triage steps don’t need to be fixed or uniform.

I think we can get really creative here. Benefits could be paid out as a lump-sum rather than weekly; it’s not like mortgages, rent, or utilities are paid weekly. Tier 2 counselors can also help with volunteer and temporary job opportunities—things workers can do while still looking that won’t result in benefit loss. They could give mental health screens. People could also be allowed to skip through the triage. If you lose your job and you know you want to switch careers, for instance, you can move straight to Tier 3.

Bridge Benefits - Sticking the Landing

Tiers 1 and 2 of Bridge Benefits comprise a short-term unemployment system. If you think about it, in the short term the government’s job is not that hard. Give people who are out of work some money for some time. The hard part is finding a job, and it’s the out-of-work person who is doing that. And given what we know about unemployment, this is all the vast majority of unemployed workers will ever experience.

But what happens if they don’t find a job? If, after months and months of searching, there’s still nothing?

Tier 3 is where Bridge Benefits need to really step up. The US does not have a long-term unemployment program. It’s had versions of one, set up to do specific things in specific cases, like Trade Adjustment Assistance or Works Progress in the Great Depression. But never a permanent program. And it’s the permanent part that makes AI so scary. Bridge Benefits needs to nail this.

As I’ve written it above, at the end of Tier 2, the unemployed worker again meets with an employment counselor, this time to renew for less generous benefits and to get assistance to support career changes. What does the mean, exactly? Think of it as financing the pivot. The difference between Tier 2 and Tier 3 is parallel to the psychological transition of knowing that parlaying your current resume will not be enough, and you need to do something else to find a job. You’ve got to pivot, and that takes resources and decisiveness, something workers who have been out of a job for a long time need help with.

I don’t mean that in a derogatory way, like the only people left on unemployment by this time are bad at deciding things. I don’t think that at all. At all. Unemployment is awful, especially for mental health, confidence, pride. And frankly if we are going to design a good program, we have to go in knowing how emotionally draining job search is when its unsuccessful.

Here’s what Tier 3 can offer, to start:

- Moving assistance. Moving is expensive, but a fresh start can be helpful. Bridge Benefits could help relocate workers to cities with more hiring or where the worker has a stronger network.

- Business assistance. Not for nothing, entrepreneurial activity is on the rise in the US, in part in response to the weak labor market. Having a job and being on someone’s payroll are not the same thing; lots of people (including myself) are self-employed. Having enough cash to start a business can be tough, especially if a worker is at the end of long unemployment spell that has depleted their finances. Bridge Benefits could offer small seed investment, mentoring, and education.

- Training and education assistance. Workers can be open to big career switches, but practically speaking cannot afford to not earn money. Training is great, but even if its paid for it doesn’t pay the bills. Plus, training and education don’t create jobs. Bridge Benefits can help pay for reskilling, upskilling, whatever you want to call it, making sure that that time investment put in by the workers is well aligned to labor market need.

Again, we can be so, so creative here.

Workers could opt into public employment over assistance. Reviving and expanding Americorps is a start, and there’s lots of on-the-ground high labor needs for government services, like census takers. Moving assistance could include a home buying program. Like, if you’re on Bridge Benefits and you get moving assistance, you can sell your home directly to the federal government at a slightly sub-market price. That could be a way to reduce any “house lock” as well as stabilize prices in distressed areas (in this case, the federal government would operate like investor-owned housing does).

I could keep going, but hopefully you get the point. If it sounds ambitious, it’s supposed to; the goal of having Tier 3 benefits at all is to telegraph to workers that they aren’t written off. The government believes in your employability. Sure, that won’t mean much to some people (who will no doubt, no doubt, quote Reagan at me), but it will mean something to others. Because it says, we trust you, we trust that you tried, and we will help you try again. It’s why it’s Bridge, so that workers can see that it’s about getting to the other side.

What’s Not to Like?

A lot! There’s enough in Bridge Benefits that people from all over the political spectrum will dislike it. On the liberal side, it’s the ways in which Bridge Benefits differ from UI that would be worse for workers. On the conservative side, it’s that this would only make unemployment itself worse.

Liberals: I Don’t Like This

First, Bridge Benefits greatly reduce the standard length of unemployment benefits. UI varies across states, but 26 weeks is typical. Tier 1 tops out at 12 weeks, but honestly it’s more appropriate to be shorter than that given typical spell length. That is arguably a benefit cut.

Second, it adds a tax on workers. UI is financed by employer-paid taxes. Bridge Benefits taxes both employers and employees and independent contractors, like Social Security. This is a rubicon for a lot of progressives: employers should pay for unemployment, not the workers who suffer from it.

Third, it makes workers recertify to get more benefits as they progress through the Tiers. That will result is people dropping from the program. It’s a loathsome fact that states will use recertification to add administrative burden to the program in order to discourage people from successfully progressing to the next Tier. I think you could design it effectively so this is minimized, but I know lots of lefties would disagree with me. Again, benefit cut.

They’d say I’m some combination of naive and impractical, basically offering up a less generous unemployment program that leaves too many openings for conservative to weaken or cut.

Conservatives: I Also Don’t Like This

First, Bridge Benefits lets any unemployed worker enroll. In UI, a worker needs the permission of their former employer to receive UI benefits—the employer must verify that the job loss was through no fault of the worker. Workers who quit (in most cases) and workers who are fired for cause (in all cases) are ineligible for benefits. Bridge Benefits doesn’t require that, which means someone could quit their job, walk on down to the unemployment office, and get money. That’s a bad incentive for the economy.

Second, and related, Bridge Benefits gives very generous resources to people who have been unemployed a long time, like moving help or tuition. This creates the incentive and the opportunity to quit your job, wait it out on unemployment, and then get those things for free.

Third, Bridget Benefits leans on public workers (like employment counselors) to administer the program well. The government isn’t good at these types of tasks.

They’d say I’m some combination of naive and impractical, basically offering up to anyone who wants it a free check from the government and bonuses for not working.

Me: Keep It Coming

So Bridge Benefits are either too stingy or too generous, depending on who you ask. Let’s look back to UI for another lesson.

Why is it that only workers who are laid off through no fault of their own get UI benefits? Lots of reasons, historically: how manufacturing workers experienced layoffs 100 years ago, how the program was financed via taxes, old assumptions that the only people affected by economic conditions were laid off. Plus, managing work disincentives.

It is generally true that money that doesn’t come from work is a work disincentive. Think of it at extremes: if you won $500 million in the lottery, you’d quit your job. So if you apply that truism to unemployment benefits, the conclusion is that workers who get money while unemployed stay unemployed longer. That’s not good for the economy, it would push the unemployment rate up and make recoveries from recessions longer.

Limiting unemployment benefits to workers who have lost their job through no fault of their own is a way to try to identify workers who are least likely to respond to the disincentive.

But the pandemic recession holds the distinction of being the downturn with the largest job loss, the most generous unemployment benefits—and the fastest labor market recovery. Notably, employer attestation of no fault job loss was waived. To the extent that one can view the pandemic as an experiment to let anybody, just anybody who wants it, claim unemployment and get a lot of money from it, it’s hard to argue the labor market was worse off for it.

Researchers at the Federal Reserve Bank of San Francisco examined the effects of the very generous pandemic unemployment benefits and found that even $600 extra a week did not discourage job taking. “Cash is a work disincentive” is too simple, because an unemployment benefit is a time-limited source of reduced income which has much lower value than the permanent income from a new job.

Unemployment benefits don’t need as much screening, but they need clear time limits. Hence, in Bridge Benefits, anyone can get it for a very short amount of time, and then participation is regulated through re-application and employment counselors.

But I mean this genuinely: criticisms like the ones above are great. I think program design benefits from skepticism in the way it also benefits from creativity. Unemployment is hard. And designing a public program that essentially has to provide more help the longer someone is on it is really, really hard.

I wouldn’t own to being either naive or impractical, but I am genuinely ambitious when it comes to having a better economy. So ambitious that my criticism of Bridge Benefits is that it’s not enough. If the problem is that workers are afraid of job loss coming from AI, a new unemployment system is necessary, but too narrow to be a complete solution.

Calming The Troubled Waters

I genuinely believe part of making AI job loss less scary comes not just with fixing unemployment, but fixing our labor market. On average, the top 10% of workers earn around $250,000 a year and the bottom 90% of workers earn around $45,000 a year. That spread—and the drop between them—is increasing. Even if you consider that the average wage of a computer programmer is around $100,000, a drop down to the non-elite average is 50% pay cut. That’s steep.

What makes it steeper is that pay has to go far. It has to cover child care, out-of-pocket health care, housing, utilities, and food—those all come with rising price tags. And what makes it not just steep but painful is the loss of non-wage amenities associated with good jobs. Low-wage jobs often don’t have retirement, health insurance, paid family leave, sick days, or even any paid time off.

Losing your job is terrifying when we’ve left the bottom of the labor market behind.

This is why I don’t like UBI. It doesn’t fix the structural issues in our labor market and our economy that drive the fear and pain behind job loss. If this is a moment, A Capital M Moment In History, let’s catalyze our fear to solve problems we know we have. Throwing money at people corporations have given up on is lazy. I want us to build a better economy so corporations don’t have such power over us to instill fear.

And if you approach each problem, they all have solutions. We can do this.

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Post Script - Want More Details?

Three years ago I used this newsletter to write a detailed proposal for a new UI program. It goes a lot deeper than this post. You can read it—The Future of (Out of) Work—in full. Some of my thinking has changed, but I do go into great length with lots of charts about the composition of unemployed workers and what that means for an unemployment benefit. It’s also part 2 of 2, the post just before it (which is linked there) is a deep, deep dive about what’s wrong with our current UI system.

Post Script - A Fair Question

Why should you listen to me?

I’m a PhD labor economist and I cut my academic research teeth, as it were, on Unemployment Insurance, the only permanent job loss benefit program in the U.S. But in the pandemic, when use of unemployment benefits exploded, I wrote a mix of explanatory blog posts and opinion columns about UI: it’s a broken program, it inherited and perpetuated racial bias in benefits, it is an absolutely vital benefit for the unemployed but 1) delivered by states who have little interest in those benefits being good and 2) overseen by a Congress that has failed and failed again to reform it.

My hope was that America’s expansion of unemployment in the pandemic would offer evidence of how we can think differently about helping unemployed people and propel reform, but instead states seemed to learn that they don’t need to improve their programs because the federal government will step in when it matters, like during a recession. My prediction is that the current UI system will only deteriorate further.

What is a recession and are we in one right now? I have a long answer for you.

1. The Chart

2. The Declaration

3. The Words

4. The Story

1 The Chart

Here’s the chart that caught my eye. It’s called the HPW Labor Market Tightness Index (HPW is an acronym of the authors who came up with it, Heise, Pearce, and Weber). In the labor market, tight is good and loose is bad. You can think of it like: the economy can only be as big as the number of workers in it, like a beach ball can only be as big as its plastic casing. The labor market is tight when the ball is taut—we can’t blow much more air into it. The labor market is loose when the ball is slack—it needs more air.

Typically we measure tightness through the unemployment rate, which counts the share of workers who don’t have a job. The HPW Tightness (which does sound like a ship!) looks at unemployment relative to 1) how many people are quitting and 2) how many job openings there are. If a labor market is tight, there should be lots of movement of people leaving and moving jobs.

Here’s HPW Tightness since 2000, in blue. They also put three-month wage growth next to it, in gray.

Y’all, this chart is chilling.

• It starts in 2000 and immediately falls—that’s the 2001 recession.

• Then it rises and drops quickly again—that’s the 2007 aka great recession.

• Then it slowly rises for a long time and has a sharp drop down and spike up—that’s the pandemic recession.

• Then it rises again before falling for a long time—that’s 2022 to today.

I was struck by just how much the shape of the line over the last three years looks like the recessions that came before it. If anything it’s worse because it’s longer.

The reason why we are not officially in a recession is because however bad the current decline, the level of tightness is still good. HPW Tightness is right around 0 today—a level typically seen when the labor market is at its strongest just before a recession starts.

So that’s not good. Not only have we not put name to whatever misery the past three years have been, unless that line changes direction soon, it’s about at the level where all the prior recessions have started. We could be in a recession already.

How could we be in a recession and not know it?

2 The Declaration

The US has a cyclical economy. That means that it goes through ‘business cycles,’ a period bookended by recessions. It goes like this:

• The economy expands

• It stops a little bit and slows down (PEAK)

• It hits a low (TROUGH)

• It speeds back up and passes the point where it slowed down (RECOVERY)

• The economy expands again (EXPANSION)

Or in econspeak:

Peak—>Trough—>Recovery—>Expansion—>Peak—>Trough—>Recovery—>Expansion—>Peak—>Trough—>Recovery—>Expansion—>Peak—>Trough—>Recovery—>Expansion—>Peak—>Trough—>Recovery—>Expansion—> you get it.

If you look at the total number of jobs in the economy, you can see the cycle visually. The economy is adding jobs i.e. the line is going up. Every so often there’s a divot aka recession, and then more jobs. You can also see how absolutely brutal the Great Recession was in 2007-2009 and how absolutely severe the 2020 pandemic shock was.

When do we know the economy is in recession? When is peak and trough? Believe it or not, there’s no official government agency that does this. It’s not like the Treasury Department issues a recession announcement, or the Federal Reserve, or any public official. It comes from a group of economists.

A private professional association (the National Bureau of Economic Research) has a group (the Business Cycle Dating Committee) that keeps a history of all recessions in the US and announces when a recession has begun and ended. They did this initially for research purposes back in the 1920s to set the record straight on when recessions happened to improve how they are studied. You can’t learn how a recession affects unemployment if researchers are using four different definitions of a recession.

Here’s the same figure, with the periods of official recession shaded in.

In modern times, the NBER announcement carries the weight of officialdom. Their definition is that a recession is:

“a significant decline in economic activity that is spread across the economy and that lasts more than a few months.”

You’ve probably heard the shorthand that a recession is two quarters of negative growth, but they’re careful not to make a rule out of it. Instead, they backdate recessions, announcing in, say, October that a recession started ten months early in December.

When you think about it, this is pretty incredible. When the economy shows signs of weakness, they wait to see how the story shakes out. Did the jobs report stay bad? Did inflation get better? Was GDP worse than we thought? And once the weakness is palpable enough to be a recession, they go back and say “Well, it all started here.”

So think of it as: when do you know when you’ve had a bad week? Surely not Monday afternoon. You could have had a horrible morning, but there’s a lot of week left to write it off entirely. Good things can still happen. But by Friday, when every day offered up some fresh awfulness, you can call it: this was a bad week. You’ve decided at the end that the week was bad the whole time. How we declare recessions is similar.

Why do it this way? Two reasons.

1. Don’t freak people out. A lot of the economy is moved by mood. Simply declaring a recession has started will worsen the economy to some degree, as people grow fearful and cautious and change their behavior. We wouldn’t want a recession to be too easy to declare because they carry their own momentum.

2. Get it together. Backdating a recession’s start gives policymakers room to maneuver. So say there’s a bad data report; we want policymakers to get to work to counter the weakness, look for problems, calm worries. Not every bad report should be a recession.

The US is not currently in recession. But we could have started one and will find out later. And there’s no rule, it’s not like the backdating of a recession start has some cap of, “oh we only go back three months, or ten months, or 15 months.” So long as the economy has signs of weakness, it’s up for recession grabs.

3 The Words

To review:

• Labor market tightness is in decline in a way that looks like a recession or at least well on its way.

• But it’s not a recession because not enough bad things have happened in the economy for one to be declared.

However you, person on the ground living your life, are struggling right now, please allow me, economist from my lofty perch, to tell you it’s not actually a recession.

Two stories for you.

Slam Poetry Inflation

At the end of 2023, I was at an elementary school in DC for a holiday concert, where each grade’s kids sang songs and did a dance. The program kicked off with a performance of the 5th grade slam poetry team. I stood there, in awe, as they performed a piece called “inflation.”

Believe it or not, inflation to these 10-year old kids was not about the monthly or yearly growth rate of prices in the economy. They talked about their mom pulling food out of the shopping cart at the grocery store, not being allowed to turn the heat up, how the 99 cent can of tea costs three dollars, all of it because of inflation. This word was a way for them to convey their economic struggles.

I wrote about it in a column, “The People’s Inflation Is Still a Big Problem,” and I explained how the statistical event of elevated inflation rates gave Americans a language to talk about issues far beyond the annual growth rate in prices.

At the time, I felt like because their use of the word was technically incorrect, a lot of Americans were being ignored, like: People who are complaining about inflation are wrong because inflation has fallen. But they weren’t talking about inflation inflation, they were talking about their inflation. Maybe they were failing a strict econ vocab test, but they weren’t wrong.

Econ 101

At the start of 2025 I was asked to give a lecture to a group of undergraduates who were going to spend the semester studying and working in DC. Since we had a newly elected president, I gave them a short history of the financial products that lead to the financial crisis and Great Recession to explain how current presidents are often credited or blamed for economic stories long in the making.

One of the students came up to me afterwards and said, “If what you said is so interesting, why is Econ 101 so awful?”

I agree with him, it’s pretty awful. The economy is of natural interest to anyone living in it. How much you earn, what kind of job you have, what you can buy, why your city has money or doesn’t—the economy determines so much.

And then you arrive bright-eyed, bushy-tailed in Econ 101, ready to learn about all these things that are part of your life, and instead you’re hit with a brick wall: two lines crossing on a graph. One is supply, one is demand, they meet at price. Somehow everything that you feel and like as a person can be expressed as a “preference curve” and your choices boiled down to “maximizing utility.” How that relates back to the real world is an opaque mystery, one you certainly don’t get to by the end of the semester.

What I told the student was: think of economics as a language.

Economists love to think of themselves as scientists, the physicists of human interaction. So they present Econ 101 like Physics 101: here are the most basic rules. The problem is that the economics rules are built in a world that has never, and will never, exist. Physics is accurate from day one—force always equals mass times acceleration. But economics feels inaccurate from day one—the market is never perfectly competitive, people never have a budget constraint limited to choosing between two (optional) goods, workers are never paid their marginal productivity. Why learn rules derived from a world we’ll never live in?

As a science, economics can feel like a sham.

So think of it as a language, closer to Spanish 101. No one arrives into an intro language class expecting to speak or talk like a fluent person would. There’s an artificial feel to every 101 conversation: the rigid formal speaking, the simple grammar, the selection of words that eschew the many exceptions to the rules of conjugation.

“Hello sir, where is the library?”
“The library is next to the dormitory.”
“Thank you.”
“You are welcome.”

Fluent speakers don’t sound like 101 learners, but you’ve got to get through 101 to become fluent.

I didn’t just say this to get the kid to stick with 101, I genuinely believe economics is like its own language. It’s not a wild take. In an academic department, it’s pretty common to call work outside of academic publishing as “translation.” So getting an article in a peer-reviewed journal is “research” and writing about that article in an op-ed or making a video about that article is “translation.” It’s an admission that we have our own way of speaking. Our language is part of how we parse the world.

Lost in Translation

Economists’ tightly held definitions—like inflation and recession—carry immense weight. That kid who performed a poem about inflation—he was taking over a word not just to convey his story, but also to give his story importance. People care about inflation, even if they don’t care about him and his mom struggling. He was rejecting the idea that inflation was over, not because he didn’t understand inflation, but because he understood it perfectly: it’s a time when important, powerful people cared that Americans couldn’t afford things.

I honestly don’t think economists have the words to talk about what we are going through in the labor market right now because we’ve never seen it before. Go back to the payroll chart I put above, with all the recessions. Typically, the economy is adding adding adding jobs, and then it falls. That’s easy to see. But right now, we aren’t adding or losing much. We’ve flatlined. That’s never happened.

In fact, if you go back through the jobs reports over the past ten months, the US has lost jobs in every other month: June, August, October, December, February. The annual growth in jobs in 2025 was 0.1%. That’s about as close to flat an economy this size will get. It’s like a lost year, a lost year that came on the heels of two weak ones.

We have held back calling this flatline a recession, and with it, held back the weight and seriousness that that word conveys. In a recession, Congress needs to do something. They need to help the unemployed, expand benefits, give money to states to keep services flowing. And in a recession, we get the acknowledgement that lasts throughout our worklife that we made it through a bad labor market, even if we still carry a lot of scars from it. No recession means no help and no recognition.

And it also means Americans are grappling with what is going on and are looking for a story that makes sense of all this.

4 The Story

The story they are jumping on is AI. We are growing without jobs because AI has taken them. It’s appealing. AI companies and AI proselytizers are certainly happy to fan the flames because it all creates a sense of urgency that everyone is using AI everywhere and if you haven’t then you’re behind. And given that AI investments are the only tailwind in the stockmarket right now, firms are eager to claim that they are using AI if only to keep their stock price up. The evidence that AI is replacing workers, however, is scant. It takes time for technology to be tested in the workplace, time for firms to adopt it fully, and time for that adoption to make workers obsolete.

The real story is longer and really is about the long tail of recovery from the pandemic and the economic problems it caused in the labor market and in prices. Here’s the tick tock:

• 2020: The pandemic craters the economy. More than 22 million jobs are lost in less than 5 weeks. By the end of the year, the US still posts 9.8 million fewer jobs. Consumer spending radically changes to accommodate new pandemic preferences and restrictions.

• 2021: The pandemic starts to end as vaccines become widely available and restrictions lift. The newly elected Biden administration passes a recovery package to keep the economy afloat and public services flowing. Jobs are recovered at a quick clip and consumer spending radically changes again. By the end of the year, inflation, which is considered okay so long as its under 2%, starts to jump up.

• 2022: The Fed, which has been waiting to raise interest rates because they were worried about jeopardizing the fragile labor market recovery, starts to raise them in March. In the summer, it’s extreme: the labor market is the tightest its ever been and inflation is the highest its been in 40 years. The Fed keeps aggressively raising rates, and both the labor market and inflation start to cool.

• 2023: There is widespread worry that a recession is coming. The Fed continues to raise rates through August, capping 18 months of increases. The labor market is weakening, inflation is weakening. The question is when it all bottoms out.

• 2024: Inflation continues to fall and the labor market continues to weaken. By the fall, price growth has fallen enough that the Fed lowers rates to stabilize the labor market. By the end of the year, four full years since inflation first started to increase, it seems over. Price growth is falling, on its way to 2%. The labor market is starting to put up big numbers for job growth. The economy is, we think, back to normal.

• 2025: The new administration pursues two contractionary policies and one inflationary policy. Firing federal workers and deporting unauthorized workers both hurt growth in the labor market. Increasing tariffs increases prices. All three policies lead to uncertainty among employers. The fallout is swift if not severe. The labor market loses jobs in 5 months of the year. Inflation still has not reached 2%. The Fed lowers rates a bit, but not enough to turn the weakness in the labor market around.

And here we are.

At some point, the economy will break in one direction or the other. But my mind keeps going back to the HPW Tightness chart, the decline that looks worse in shape than some of the recessions that came before it, and the people looking for a job right now. Declaring an official recession won’t change how they have struggled but how others see it, and the story we tell about it. It’s a failing of the economics language that that’s the case.

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I am deeply biased when it comes to the discussion of trad wives, but not for the reasons you’d think. I have three kids, a PhD in a male-dominated field, and a career that currently comprises my own business (Keds), a nonprofit enterprise and eponymous podcast (Optimist Economy), and an opinion column (Bloomberg). Surely the opposite of staying at home is having as many jobs as kids.

But my bias really comes from my mother, who was a family law attorney for 45 years and brokered some part of the end of hundreds of marriages, often representing or advocating on behalf of children.

When I think of trad wives, my bias is: divorce hits them very hard.

Even the most pro-marriage advocates estimate that 40% of marriages will end in divorce (a fact they celebrate because it used to be closer to 50%). Being the “right kind of mom” or the “right kind of wife” is not some kind of inoculation that prevents the demise of a marriage. Divorce happens, even to trad wives.

So this is a letter to trad wives to consider what that means.

And as a spoiler, the conclusion here is not “don’t be a trad wife” or “moms need to work.” Y’all, do what you want and what you can with what you have. I have no place telling people how to family. It’s not about their choices, it’s about their economic security.

1. Consider The Risk Facing Nonworking Spouses

2. Consider The Harsh Reality Facing Single Moms

3. And Act Accordingly

Consider The Risk Facing Nonworking Spouses

Family law is different in every state, and the application of that law is different in most courtrooms and in most cases. But there are certain bedrock principles: marriage was a partnership, children need looking after once the partnership ends, and parents are not absolved of responsibility for their children simply because the marriage ended. In practical terms, marital property is typically split 50-50 and custody of children comes with monetary support. It all comes down to how the decree is negotiated, but these are at least the starting points, or guiding principles.

Not a bedrock principle: That a working spouse should pay money to keep a soon-to-be-ex spouse not working.

To start, not all states include an entitlement to spousal support (also called alimony or spousal maintenance). Even if a state does have spousal support, it can have limits on how long payments are sent (say, shorter in duration than the marriage), in what circumstances they are awarded, and how much they are for. Some states say explicitly that spousal support is for necessities, not lifestyle, others say spousal support can go to training or education costs only. In some places there are requirements that the spouse seeking support must find work. In some places support won’t be awarded if the spouse seeking support had an affair or some other impropriety.

In the end, getting a judge to enable a nonworking spouse to remain fully financially dependent on their partner even after the marriage ends is a tough ask.

My mother would counsel women that if they wanted spousal support, they needed to stop unnecessary personal care and dress modestly in the courtroom. Women may dream of the revenge dress a la Princess Di, but a well-manicured, well-coifed woman with botox, filler, and expensive clothes will not garner much sympathy from a judge she’s trying to convince to award her enough money to keep her from having to get a job.

My mother would also say that many nonworking spouses think, wrongly, a female judge will help their case. But it’s hard to convince a woman successful enough in her career to be on the bench that an otherwise capable woman shouldn’t have to work if she doesn’t want to, or frankly that kids are better off if their mother is at home. If that judge is herself a mother, that case for generous spousal support rests on convincing the judge her own choices were harmful to her children.

And then there’s all kinds of cascading disappointments from there. Like retaining ownership of the primary home, for example, doesn’t necessarily come with money for the mortgage, utilities, or property taxes. Or that child support has caps in most states and the richer you were in marriage, the higher likelihood that child support caps out below your previous lifestyle.

It’s cruel, to think that staying at home with children was the right thing to do, only to find that it doesn’t get you that far in divorce. But even if a judge doesn’t order a nonworking spouse to get a job, they’ll probably need one anyway.

And this is what makes me recoil in the face of the trad wife trend. It’s advocating for women to put themselves in an incredibly precarious economic position. Totally financially dependent on your husband during marriage translates to an abrupt shove into financial independence if he (or you) even decide to end the marriage.

Consider the Harsh Reality Facing Single Moms

It’s one thing to be totally financially dependent on a husband, it’s another to do it in a country

1) whose categorical disapproval of nonworking people in general and nonworking single moms in particular has led to a gross underinvestment in families and

2) whose labor market isn’t always a welcoming place.

Think back to 1996 when cash welfare was ended. This country kicked 10 million single moms off welfare and shoved them into work, without requiring work to have paid sick days or paid family leave, without investing to make childcare affordable or available for working mothers. And not only did the US do this without blinking, it has largely remained committed to the notion that the greatest risk of any public program is that it may result in a single mom working less.

As a relief during the pandemic, the Biden Administration expanded the Child Tax Credit so that it went to all children in the US. It created a universal basic income for children, a backstop against deprivation and an investment in their economic security. Millions of children were lifted from poverty. Yet, the push to make the expansion permanent failed because conservatives were worried some moms wouldn’t work as a result.

Having been married to a man for a time doesn’t absolve women of the torrent of judgement single moms face. A nonworking mom might see her mothering as necessary, as noble, as what her children need, as something she was lauded for, as something that was held up as a model. But as soon as her husband leaves her, none of that matters because none of that is valued. She’s either a worker or she’s lazy, there’s no in between.

Many divorced women do return to work, but that has challenges of its own. Resume gaps—the years spent out of the labor market—can be a hindrance to getting a job, a decent salary, or both. In technical terms, a woman’s human capital has assumed to be devalued from lack of use. It’s incredibly harsh, but employers do not value parenting skills so time with children is basically treated like labor market atrophy.

(^yes, this is the key plot motivator for the book and tv series Younger, in which a divorced and now single mom has such a hard time finding a job as a 40-year-old she pretends to be 26.)

And sadly, getting a job in the US is far from a guarantee of quality or dignity. Keep in mind, the US has gone 17 years without raising the minimum wage, has almost zero regulation of shifts or scheduling, does not guarantee access to paid sick days, and has little enforcement for things like making sure your employer actually pays you instead of stealing your wages. It’s a lot easier to sit on the side lines and lament that ‘no one wants to work’ or blithely say ‘anyone who wants to work can get a job’ but low-wage work in a labor market with little regulation can be cruel.

And Act Accordingly

No one thinks that their marriage will be the one to end, that they’ll be the couple that breaks up, that they’ll be the mom whose child support barely covers the mortgage and food and is forced to go back to work at a significant pay and title cut.

But to be fair, I also don’t think that when I get in my car it’ll crash, or that when it rains my house roof will cave in, or that when I ride a bike I’ll fall and break a leg. I don’t expect the worst, but I also don’t ignore it as a possibility. This is the nature of risk: it’s not just about what I expect to happen, but what could happen. I can’t erase risk so I mitigate it and insure it. I drive the speed limit, I trim the trees, I wear a helmet and of course have car insurance, home owners insurance, and health insurance.

Being a trad wife has an economic risk. It’s a risk that all married people face: that your economic situation in the event of divorce is worse. However, trad wives are especially at risk, not because their marriages are any weaker but because the economic consequences can be so severe and the change in situation so dramatic.

So mitigate and insure.

On an individual level, it’s certainly an argument for getting a prenuptial agreement to build some protection in from the beginning. (I think it’s only time before enterprising lawyers set up a booth at these trad wife conferences and meet ups advertising their services, if they haven’t already). But those aren’t free and of course, require the soon-to-be-husband’s permission.

On some fundamental level, though, the only way to deal with the economic risks that come with being a trad wife is to change how our economy treats children, mothers, and workers.

The logical conclusion is that trad wives should be fierce advocates for whatever reduces the cost to parents for raising children: universal child eligibility for Medicaid, universal child care, universal child cash benefit, universal school meals. They should also be advocates for labor market rules that acknowledge that many workers are parents, like paid sick days, paid family leave, and shift regulation.

I’m sure for some of you, this conclusion is less cold logic and more heroic leap. After all, we’re all trained by the culture war, we’ve been taught that trad wives sit on the opposite side of working moms, and by extension, trad wives oppose whatever working moms want and need and vice versa.

But if you were to ask me, admittedly biased economist, if trad wives are economically secure, I would say emphatically that they are not. Stable ground counts for little in our economy; security is a matter of your backup much more so than your current status. There’s a reason there’s not a companion trad exwife trend, or trad nonwife trend—they don’t exist.

Advocating for single moms and for better workplace policy, it’s advocating for an unlucky version of yourself.

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But the real ugliness was in immigration. The bill’s jaw dropping price tag helped sneak the largest increase to US law enforcement spending in US history through the door: $170 billion, almost all of it dedicated to immigration enforcement. Compared to the overall bill, it’s next to nothing. Compared to almost anything else, it’s unfathomably large.

Immigration Enforcement

1. …Versus Other Federal Law Enforcement

2. …Versus State and Local Law Enforcement

3. …Versus Pandemic Relief

4. …Versus Children

5. And It’s Terrible Costs

Preface: What does $170 billion mean

Part of the immigration money in One Big Beautiful Bill goes to enforcement agencies and increases their budget (i.e. more money for ICE), and the other part of the money goes to one-time spending (i.e. money to build detention centers). That one-time spending has a four-year deadline, it has to be spent by 2029 or the money is lost.

So one way to think of this money is it’s $170 billion. Full stop.

The other way to think of this money is that it’s $170 billion over four years, so $42.5 billion a year.

Keep in mind, the government already spends a lot of money on immigration enforcement. This is just the additional funds. So add the $42.5 billion from the One Big Beautiful Bill to the funds already going to immigration enforcement:

• Customs and Border Patrol’s $19 billion,

• ICE’s $10 billion, plus

• $2.2 billion of the Coast Guard’s budget and

• $3.2 billion of the Department of Homeland Security’s budget that is used for enforcement.That brings the total to $76.9 billion a year.

The One Big Beautiful Bill brings the total immigration enforcement up to $76.9 billion a year. I’ve summed it up here:

…Versus Other Federal Law Enforcement

In the table below, I show the enforcement area, the agency in charge of it, and their 2025 annual funding. Hat tip to the devoutly Libertarian Cato Institute, who put these figures together on the enforcement side, and the deeply progressive Economic Policy Institute for doing the same for labor law. Add these all together and you get $16 billion annually.

Before beautiful bill: immigration enforcement is double all other federal law enforcement combined.

After beautiful bill ($76.9 billion): it’s nearly five times more

In other words, the federal government devotes more than 80% of law enforcement spending to immigration and less than 20% to all other federal laws.

If you wanted to nitpick, you would point out that this is not the total federal spending on enforcement, these are just the largest agencies. Or that I shouldn’t just look at enforcement dollars, but total budgets (so the entire $9 billion the FBI and not just $4 billion the agency spend on enforcement). You could try to make this as generous as possible and the fundamental imbalance won’t change, maybe it would go from 80-20 to 60-40. The conclusion is the same: the federal government devotes a wild, incredibly lopsided amount of money to immigration enforcement.

…Versus Other State and Local Law Enforcement

To be fair, most law enforcement happens at the state and local level and just a fraction happens at the federal level. Imagine the number of cops in your city versus FBI agents, workplace inspectors, or tax collectors.

In fact: if you were to add up spending on every police department that exists in the US, it came to about $135 billion in 2021. That’s the latest year of complete data we have, so we can assume it’s increased over the past few years. Say it’s $150 billion now. Or even $160 billion.

After beautiful bill ($76.9 billion): immigration enforcement spending is half the size of all state and local law enforcement spending.

Policing 330 million people in the US and enforcing nearly all laws that are on the books gets twice as much money as policing 14 million people in violation of one.

And if you think these law enforcement numbers are wild, just wait to you see how much it compares to spending on children and families.

…Versus Pandemic Relief

So, I hate to ask but: remember the pandemic?

If you think of this $170 billion of immigration enforcement as a short-term, emergency spending, pandemic relief spending is a pretty fair comparison. How much money did pandemic relief spend, and on what, compared to immigration enforcement this summer in the One Big Beautiful Bill?

The big ticket items during the pandemic were economic impact payments to families (aka the three stimulus checks), unemployment benefits for workers who lost their jobs, and the paycheck protection program; each were more than a half a trillion dollars in size. Smaller items include support for state and local governments, K-12 schools, higher education, school meals, to keep workers employed in airlines, restaurants, and entertainment venues, and grants to help child care businesses. And in 2021, the Child Tax Credit was expanded so that all families received it, it was increased to $3,000-$3,600, and deposited directly into bank accounts for six months.

So how does it all stack up? I’ll show this first in dollar amounts:

The One Big Beautiful Bill’s infusion of money for immigration enforcement is on par with how much the government sent to K-12 schools and state and local governments in the pandemic, and dwarfs the emergency spending on the expanded Child Tax Credit, higher education, airlines, child care, school meals, restaurants, and entertain venues.

For what it’s worth: developing, testing, producing, and purchasing the Covid-19 vaccine was $32 billion.

…Versus Children

After the beautiful bill, immigration enforcement came to $76.9 billion a year. In comparison, spending on social programs is scant.

The federal government’s commitment to helping families afford child care is the Child Care Development Fund, which sends grants to states to distribute to families. It’s just $12.3 billion in 2025.

When it comes to food, the government is more generous. It funds childhood nutrition programs (like school lunch), Supplemental Nutrition Assistance for low-income families (which used to be called Food Stamps, but the name changed when the government phased out paper stamps), and the Women Infant and Child program that buys very low-income young families formula and certain food items. But of course, all three of those items combined is less than $76.9 billion ($28.2 billion in 2024 for childhood nutrition, $40 billion for kids on SNAP, and $7.2 billion for WIC).

Arguably the most expensive thing the federal government buys for families is health insurance, and it definitely spends a lot of money on Medicaid. But here’s the thing, Medicaid isn’t a flat allotment, i.e. everyone with Medicaid gets $15,000 a year for their health. Instead, it’s a payer based on consumption: the cost of putting a person on Medicaid depends on how much health care they actually consume. So, a 75-year-old who is an elder care facility that Medicaid is paying for costs a lot more than say, a health five-year-old kid.

In fact, just 15% of total Medicaid spending goes to children, accounting for $115 billion. That’s because despite covering half of all kids in the US, kids don’t use that much health care outside of routine visits, so they don’t cost Medicaid that much.

In short: $115 billion to make sure 37 million kids have health insurance versus $76.9 billion to target 14 million unauthorized immigrants for deportation.

I can put this in starker terms.

The Urban Institute, a think tank in DC, puts together an analysis every year called Kids Share, where it combs through the federal budget and tax system and calculates how much goes to children. It then puts it in per person terms: how much does the federal government invest in children on a per child basis?

In 2023, it was around $8,990 per child. That number was expected to fall in 2024-2027 because the last of pandemic funding was winding down and settle close to $8k. (It could fall even more after the One Big Beautiful Bill’s cuts to Medicaid and SNAP, but some of the tax provisions will partially offset it.)

$76.9 billion in immigration enforcement for 14 million unauthorized immigrants comes out to $5,492 per unauthorized immigrant.

Frankly, I don’t like how close those numbers are. About $9k for each child but $5.5k for each unauthorized immigrant.

And It’s Terrible Costs

Sure, all this immigration enforcement costs money. $170 billion in spending costs $170 billion. And while I can show you in painful detail as I have here that that total immigration enforcement is more money than the federal government spends on child care or food for children, and in fact rivals the total federal investment in children, it’s not as if they are in competition. If this $170 billion went away, the money wouldn’t go to children instead. Money isn’t stopping investments in children, a lack of priority is.

So maybe another way to put it is, what does spending $170 billion to target 14 million people risk? A lot, as we see every day in the news. But I wanted to talk about one in particular. Targeting 14 million people indiscriminately for deportation risks 14 million people’s integration into society.

You’ll have probably noticed that I use “unauthorized” rather than “undocumented” throughout, and that’s because undocumented is an inaccurate term. It implies that there is a mass of people in the US that essentially live off the grid, apart from society, existing only in informal economies and off-the-book transactions. But that’s not the case. Unauthorized immigrants are enmeshed in our society with have lots and lots of documents, from tax returns to mortgages.

And there’s a reason for it: up until the dramatic turn in enforcement taken up by the Trump administration, most of our economic and social system was aligned in trying to encourage unauthorized immigrants to participate in society to the fullest extent possible.

Some of it is just a tax calculus. Unauthorized immigrants pay sales taxes for the things they buy. Even without a proper work permit, they pay into Social Security and Medicare through their automatic payroll tax contributions (they aren’t eligible or earning credits for either program) and pay income taxes through automatic withholding.

On top of this, around 5 million, or about half of the undocumented population, voluntarily pays federal income taxes through the use of ITIN aka individual tax identification numbers that are a substitute for a Social Security number for people who don’t have one. They also use ITINs to get driver’s licenses and even apply for a mortgage (yes, they pay property taxes too!)

It’s estimated that unauthorized immigrants’ total tax contribution is over $100 billion.

But a truly inestimable part of it is that the American economy—and our communities—benefit from having 14 million people on the grid, as opposed to off it. Get a job, put kids in school, call 911 when there’s a crime, go to church, get a driver’s license and car insurance, pay taxes—be good, law-abiding citizens in all but name. Those 14 million unauthorized include 9.1 million workers, 4.1 million parents of citizen children, and 6.1 million people who have resided in the US for more than 20 years.

We are risking so much more than money spent, more than taxes not collected, but creating a self-fulfilling prophesy of creating the undocumented in the place of the unauthorized.

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As many of us think about our New Year’s Resolutions, I want to expand on last year’s post and the empowerment trap many women get snared in.

1. Women: Try Harder and Be Better

2. Women: Don’t Try At All?

3. Symptom vs Disease: The Example of Unilateral Divorce

4. Empowered To Do What

Women: Try Harder and Be Better

I think and dream in excel, so I’m going to explain the Empowerment Trap in two tables. Starting with: table of things you, as a woman, probably failed to accomplish.

On the left, we have three of the common problems women face in their lives: they want to earn more, get a promotion, but struggle with work-life balance. On the right are the pearls of wisdom that are often offered in response: ask for a raise, lean in, make your husband do more.

Table of things you, as a woman, probably failed to accomplish.

On the surface, it all seems reasonable, even within your reach.

And should you want help, the internet is more than happy to provide you with some advice. Forbes, LinkedIn, The Balance, The New York Times, Clever Girl Finance and probably hundreds of others publish how-to guides on asking for a raise. Sheryl Sandberg has a whole book directing women how to be more assertive at work. Truly, biggest kudos goes to “make your husband do more” for generating internet advice columns from such eclectic sources as How Stuff Works and WikiHow, both of which publish step-by-step pictorial guides in changing household chore allocation.

Is it ironic to have a 15-step process in order to achieve less work? They don’t really say!

But all this advice has an insidious component. Take “ask for more.” It’s basically saying that the problem with your employer is that you haven’t fixed them. Think about it: the notion of asking for more is premised on the fact that you are undervalued by your employer. Your work, contributions, skill, leadership, performance aren’t appropriately reflected in your pay. And you know whose fault that is? Yours!

Same with “make your husband do more.” You haven’t made him better. The onus is on you. That your husband, like your employer, is underperforming is your fault.

“Be ambitious/assertive/lean/etc” is a little more nuanced if no less judgemental. The problem there is that you haven’t made yourself better. Male personality entrenched in power structures has awarded bold aggressive ambition—and you’ve failed to mimic it!

It's remarkable how much becomes your fault, how much it’s just women doing things wrong.

Let’s try this again, but this time, we’ll aggregate individual problems and do the same for the solutions. Our individual problems translate into broader problems quite accurately. Women earn less, are promoted less, and do more housework and childcare (at least in heterosexual partnerships). But the solutions, applied to all women, are ridiculous.

Table of things women do wrong?

Do women earn less than men in nearly all occupations because those women aren’t asking for raises? Obviously not. Are we simply running out of ambitious women so there are few in leadership? Again, no. Are nearly all married hetero women bad at getting their husband to do more? Again, no.

In each case, there is something structural that is acting as a disadvantage to women. The individual advice ignores these structural issues. This is the trap. You internalizing as an individual problem to be solved a structural failing you can’t chance.

Women: Don’t Try At All?

To be fair, advice like “ask for a raise” is often genuine. It’s not given with malice. Women need and/or want help. It could be considered cruel if someone were instead to say, “Actually this is all out of your control and no individual effort will result in meaningful change so you ought to give up. You’re welcome.”

And that’s the tension. Women want to improve their individual circumstances with changed behavior, but women and their behavior aren’t the root of the problem.

I’ll say it again, in special font:

Women and their behavior aren’t the root of the problem.

If it were, then it’s just a matter of choices: that there is some constellation of choices that result in women being equal to men. We just have to choose better—all of us—and voila, done.

Advice like “ask for more” or “lean in” emphasizes individual strategies to help one woman deal with tough circumstances, but in a way, it becomes a get-of-jail-free card for people in power who have the ability to change women’s circumstances. It’s focusing on the symptom, not the disease. The symptom can be helped with changes of behavior, but the disease needs a change to law, or public policy, or employer behavior.

I think an example makes this clear.

Symptom vs Disease: The Example of Unilateral Divorce

It doesn’t matter how unhappy or abusive a marriage was, for a long time in the United States, getting a divorce was very—and intentionally—difficult. To be clear, going through a divorce is still emotionally and financially difficult, but in earlier time periods, getting legally out of a marriage was sometimes near impossible.

For women, it could require their husband’s permission, because both parties had to agree to the divorce for it to be granted. If one partner was at fault, the marriage could be dissolved, but establishing fault was also very—and intentionally—difficult.

Divorce without fault and divorce without partner permission wasn’t standard until 1980, though a few states took even longer to grant it. These two changes are grouped together as Unilateral Divorce because however the law was changed, it had the same effect: one party could leave.

Economists have looked at the outcomes of women in the US before an after they had access to unilateral divorce. Some of the findings are interesting, like married women worked more as a result. Other findings are quite sobering. Access to divorce reduced domestic violence of, homicide of, and suicide of married women. These effects weren’t small. Here’s a quote from the authors’ summary:

“In states that introduced unilateral divorce we find a 8–16 percent decline in female suicide, roughly a 30 percent decline in domestic violence for both men and women, and a 10 percent decline in females murdered by their partners.”

It’s not as if women before 1980 never tried to pick a good husband or tried to make their marriage work or tried to mitigate the triggers of aggressive behavior. They probably did the same thing we do: get advice, make new years resolutions, read self-help columns, and so on. Yet, the bone-chilling statistics on violence, homicide, and suicide make clear that individual behavior can’t achieve the same thing as structural change. In this case, trying to be better at marriage isn’t a substitute for the right to leave one.

Whatever we do as individuals, structural change is necessary.

Empowered To Do What

I think of all this as The Empowerment Trap because women today have so much individual power—rights and agency and opportunities that no generation that came before can claim—that it’s easy to hide society’s failings behind our own choices. It’s not like any of those litany of articles advising women how to ask for raises mention that the US doesn’t have paid family leave, or help for child care, or good labor laws with adequate enforcement funds.

I love empowerment, and being empowered. I’ve reveled in the feeling of taking control over my career, I’ve reveled in the feeling of ignoring my career for the sake of my family, I’ve asked for raises, I’ve gone part-time, I’ve put in work after putting the kids to bed, I’ve given advice, I’ve taken advice, I’ve even purchased tea towels with feminist icons on them.

Embrace the new year, embrace empowerment, but don’t let Congress off the hook. This country’s leaders have long hidden their own failure behind your behavior and choices. No amount of individual empowerment can compare to the structural change we need.

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I said something like, “I look forward to his fall into total obscurity.”

(I’m not a robot, obviously I brought up every gossipy detail like how in 2005 Summers and his new wife took Epstein’s private plane to their honeymoon, with Maxwell on board, and visited Epstein’s island during the trip.)

I try to use this platform to educate, explain, empower, and help people feel like they can understand the economy that determines so much of their lives. But you know what, sometimes I might just use it to rant a bit. Like now.

Larry Summers can go F%#@ off back to Epstein’s island: he didn’t deserve the influence he had. He was his own brand of devout misogynist and he used his considerable intelligence to make it seem like if you called him a misogynist, you just weren’t capable of understanding what he said.

It’s not all a rant, I think there’s a lesson here about diversity, but not the one you think.

1. Larry Who Did What Now? Part 1: The Emails

2. Larry Who Did What Now? Part 1: The Speech

3. “Issues of Intrinsic Aptitude:” Larry’s Three Reasons (But Really Two Reasons) There Aren’t More Women Scientists

4. Issues of Intrinsic Arrogance: Kathryn’s Reasons Why Larry’s Arguments are the Work of Self-Serving Smug Nepo Baby

5. Is This Really A Rant?

Larry Who Did What Now? Part 1: The Emails

Larry Summers is probably the most influential economist of our time, he has lived and worked in close proximity to power for the better part of three decades wielding an enormous, incalculable influence over economic policy. He worked in the Clinton and Obama administrations, as well as serving as an unofficial economic-advisor-cum-consigliere for Biden.

The big tranche of Epstein emails shows that Summers was in touch with Epstein regularly and in fact, was discussing with the sex trafficker about how he wanted to have sex with a younger female economist. The Harvard Crimson newspaper has detailed coverage of the exchange.

It’s been a quick and brutal fallout: he’s either resigned in disgrace or been kicked out of almost every professional post he has. He’s no longer a member of the American Economic Association, even, and he might even be the first person truly expelled from it.

But there’s a nugget in those emails that has been overlooked or downplayed. Among the sex pining, seduction strategies, comparing a weekend with his family to an Ibsen play, notes of “going horizontal” with a woman seeking professional advice from him, Summers wrote to Epstein in 2017:

“I observed that half the IQ [in the] world was possessed by women without mentioning they are more than 51 percent of population…”

Translated to, “Women don’t have as much IQ as men do, on the whole.” It’s a reiteration in another setting of the same argument he made in front of a room of female scientists in 2005 when he declared women weren’t as smart as men.

And then he just got to go on having power, influence, and privilege.

Wait, Larry Who Did What Now? Part 2: The Speech

In 2005, while president of Harvard (for those keeping track, about 11 months before his Epstein honeymoon collab), Summers gave a speech to a group of women scientists about “the issue of women’s representation in tenured positions in science and engineering at top universities and research institutions.” When it was over, it became a full-fledged she-said, he-said battle. Many of the women in the room said he claimed women are less intelligent than men, something the press quickly picked up on. He said he has never thought or claimed women were less capable of a career in science. He resigned the presidency the following year.

(Full remarks here. Full apology here.)

For twenty years, he won. He served in the Obama administration and was massively influential in crafting the federal response to the financial crisis, housing crisis, and recession. He was on corporate boards, including OpenAI. He was a fellow at a half-dozen think tanks.

Truly it’s amazing to me how much rewriting of history Summers was able to pull off after this talk, how successful the spin and how long it endured. Check out this line in a Wall Street Journal piece about Summers’ expulsion from the American Economic Association:

“Summers’s Harvard presidency was marred by a 2005 incident in which he suggested at a conference that women might have less aptitude for math and science—a comment that Summers later said had been misunderstood.”

Translated to, “Larry doesn’t hold problematic views! It’s just a one-time thing where a group of women scientists were really sensitive and took his words too seriously and also didn’t understand him.”

Turns out they did.

“Issues of Intrinsic Aptitude:” Larry’s Three Reasons (But Really Two Reasons) There Aren’t More Women Scientists

In this January 2005 talk, Summers lays out three arguments why women are less represented amongst tenured science research faculty.

1 “The high-powered job hypothesis”

Jobs at the very top, whether they are in banking, academia, the arts, etc, require a level of time, emotional, and mental commitment that typically only married men have been able to make. He careful to say that’s not necessarily how it should be, but how our economy and society are structured at that elite level. Spending 80 hours a week at a job is not for everyone, and married men, married women, unmarried men, unmarried women will opt into a career that requires as much commitment at different rates.

2 “Different availability of aptitude at the high end”

Here’s where he gets ugly, but you have to understand a bit about averages and the distributions behind them to get it.

• Say I have ten people who are all 6’ tall—their average height is 6’.

• Say I have ten people, five are 5’ tall and five are 7’ tall—their average height is 6’.

• Say I have ten people, six are 6’ tall, one is 5’ tall, one is 4’ tall, one is 7’ tall, and one is 8’ tall—their average height is 6’.

They all have the same average but if you were to line them up and stand them against a wall, these groups of ten people would have a very different outline, one uniform (all 6’) and the others more varied. The people in the middle would be near the average and the people at the end are what we call “the tails.”

Summers’ main point is that if you were to map the intelligence of men and women ala lining them up by height, men and women could have similar averages but different tails. In this example: women’s intelligence is more like the group of 5’ and 7’ tall people, but men’s intelligence is more like the group of 4’, 5’, 6’, 7’, and 8’ tall people.

It’s not that men are necessarily smarter than women, it’s that men’s intelligence has a longer tail, a thicker tail, so that it produces more men who very, very, very smart: the truly brilliant. It takes ‘tail-level intelligence’ to be a tenured research scientist. Or to keep the example going: the elite is at 8’ or higher.

He’s not saying that women can’t be brilliant, he’s saying that there are more brilliant men. So pointing to any number of extremely intelligent women wouldn’t refute his point; he’d say that they exist, but men of such brilliance exist in higher numbers.

3 “Different socialization and patterns of discrimination in a search.”

After making clear that he thinks 1) the demands of the job and 2) the natural capability of men relative to women explain most of why men are more likely to be tenured research scientists, he then talks about socialization and discrimination.

For socialization—the idea that as they are raised and entered into society girls are conditioned to have less ambition, to not pursue science, to value motherhood, to care more about appearance than intelligence, and so on—he remarks that he thinks socialization is blamed for too many things.

For discrimination, he says that were women discriminated against, it would mean that there’s a pool of just as talented women that are mal-employed and an enterprising employer could snatch them up at a deal, i.e. the market would correct for discrimination.

In his words, emphasis mine:

“So my best guess, to provoke you, of what’s behind all of this is that the largest phenomenon, by far, is the general clash between people’s legitimate family desires and employers’ current desire for high power and high intensity, that in the special case of science and engineering, there are issues of intrinsic aptitude, and particularly of the variability of aptitude, and that those considerations are reinforced by what are in fact lesser factors involving socialization and continuing discrimination.”

Issues of Intrinsic Arrogance: Kathryn’s Reasons Why Larry’s Arguments are the Work of a Self-Serving Smug Nepo Baby

Pretend for a second that instead of asking him to explain why women are not represented among tenured research scientists, he was instead answering why he himself is included in the realm of tenured research scientists. After all, it’s the same basic question: for there to be less women, there need to be more men.

By this account: he’s willing to forego time with his family and children in order to give the job his mental attention, and he is brilliant, really as brilliant as possible. That’s what mattered most.

Generalizing his case: men who are more dedicated and more brilliant. Indeed, the group of dedicated, brilliant people who exist in the world are majority male, by a wide margin.

^Now imagine someone saying that, with a straight face, who is himself a nepo baby.

Summers got his undergraduate degree in economics from MIT in 1975, where his Nobel-prize winning uncle Paul Samuelson was on faculty (Samuelson was awarded the prize in 1970).

Summers got his graduate degree in economics from Harvard in 1982, where his other Nobel-prize winning uncle Ken Arrow was on faculty (Samuelson was awarded the prize in 1972 and left Harvard for Stanford before Larry finished his degree).

That’s right—both his mom’s brother and his dad’s brother were both Nobel-prize winning economists, and if that weren’t enough, his parents were tenured faculty in economics at Penn, itself a formidable department on top of being in the Ivy League. As far as economic goes, Summers is the equivalent of being from the royal family. There’s no comparison, no one comes close this pedigree.

I’ve always found that people have a way of showing their hand, and Larry’s here is on full display. Emphasize the natural advantages in intelligence that men like him possess, downplay the social advantages and preferential treatment that men like him—and himself in particular—possess.

Convenient to his own self image, no?

Is This Really A Rant?

No. It’s a warning, an on-the-record reminder that in case anyone forgets, do not let this man return to power and influence. His public life should have ended in 2005. Let’s not give him a third chance.

But it’s also a chance to say: we don’t need him or his thinking.

He presents the world of elites as if they are the chosen few, the only ones capable of making it to a position like tenured research scientist at Harvard or Treasury Secretary. As if there are only a handful of people who could possibly have what it takes.

That’s dead wrong.

When I applied for my PhD in economics, I was only accepted at the University of Wisconsin, and was rejected from seven higher ranked schools and seven lower ranked schools. That didn’t make sense to me. I thought that rejections would come like an ordered ranking, some cutoff above which I wasn’t good enough and below which I was. Once I was good enough for a department I should be good enough for all the ones worse than it, right? Apparently not.

I asked the faculty member in charge of admissions about this during my first year. How did I get in, and why didn’t get in anywhere else? He explained that over 500 people applied for the roughly 20 spots they filled in my year and probably a quarter of them had the metrics of those admitted—perfect scores on the GRE, top GPAs in undergrad, some research experience, and so on. If there were a capability cut off, it’s much, much lower than the admission cut off. Schools essentially had their pick, and so he filled out a cohort to bring together people from different backgrounds, interests, and skills among the capable to try and foster the best research and learning environment.

Research, he said, needs contrast. Twenty identical people will not come up with as good of a solution as twenty very different people, at least not to the type of questions economists ask. And then he added, it doesn’t serve students well in their career to not give them that during graduate school.

This answer stuck with me, as did the many lessons it contained.

Summers is wrong about men—they aren’t preternaturally smarter. Summers is wrong about elite positions—there are many more capable people than there are admitted people. So he misses the consequence of being wrong about men in elite positions: it’s a worse way of approaching the problems they take on.

Don’t ever let Summers or men like him fool you, and remember the most devastating thing you can say to them is the one that is also true: they are replaceable.

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Rather than having some set of weeks in which I’m paid my usual salary, this maternity leave is really just a matter of how long I’m willing and able to forego earning money. I run on an “eat what you kill” business model: I bill for work performed, with a lag. I’ve had months where no money comes in, and months in which I’ve netted a quarter of my income for the year.

No performing means no billing means no income.

So here’s a question: What would need to happen for me—not tethered to an employer, taking home an erratic amount of gross, pre-tax income month-to-month—to have a paid maternity leave?

Honestly, not much.

1. Paid Family and Medical Leave in 90 Seconds

2. That’s It?

3. What Am I Missing?

4. The Question (and Distraction) of Duration

5. The Question (and Battle) of Coverage

6. What Leave Means

Paid Family and Medical Leave in 90 Seconds

Expand Social Security to cover paid family and medical leave. Right now, the program covers 1) Retirement 2) Disability and 3) Death of a Worker (aka Survivors).

Add 4) Paid Family and Medical Leave.

Everything you need for a universal leave program is there:

• the administrative infrastructure,

• coverage of virtually all W2 employees (whether they are full-time, part-time, in one job, in five jobs, or hopping between jobs),

• all self-employed workers,

• a method for collecting taxes,

• and field offices for processing claims located throughout the US.

Paid family and medical leave would require a new payroll tax that the worker and employer contributes to, a new trust fund that receives those tax deposits, and an investment in field offices to handle leave claims. Those leave claims would be more complicated than retirement or survivors claims but less complicated than disability claims.

Done.

Really, done!

Congress just needs to fill in the details, like how generous benefits are in terms of replacing wages, how long benefits last, and what the appropriate tax rate is given the generosity and length of coverage. They aren’t flying blind: 13 states have already designed a similar system.

When a worker needs to go on leave because of illness or caregiving for an ill family member, they’d submit a claim to their local Social Security office and then, based on some combination of how much they earn and how much time they need on leave, the worker would get a weekly amount from Social Security that replaces all or a portion of their paycheck.

Boom! Paid leave.

That’s It?

Yes. In fact, expanding Social Security to include Paid Family and Medical Leave has been proposed in every Congress since 2013. It’s called the FAMILY Act. You can read about it here.

What Am I Missing?

The problem isn’t with Paid Family and Medical Leave—we know exactly how to set up the most efficient, effective, fair system with universal coverage—the problem is with Social Security.

Congress needs to reform it to address long-term shortfall in the retirement program. For decades, Social Security collected more in taxes than it needed for benefits and saved the rest. But starting in 2010, Social Security started collecting less in taxes than it needed for benefits and dipped into that savings. The savings account, called the Trust Fund, will be depleted by 2033-ish (it’s a projection and so it can move around). At that point, benefits will automatically be cut.

Congress could act now. I mean, let’s be real: they could have acted when they first learned about this long-term shortfall back in the early 1990s, or when tax collections fell during the Great Recession fifteen years ago. But they won’t act now or even soon. They will likely wait until the last possible moment to address it.

(I’d put my money on New Year’s Eve 2032, where Andy and Anderson’s usual CNN coverage is split between Andy merrily and tipsily awaiting the ball drop in Times Square while Anderson is planted at the capitol in DC counting down time until a Social Security benefit cut or reform.)

TO BE CLEAR: There’s no practical reason why Congress couldn’t pass the FAMILY Act and start a paid family and medical leave program—Social Security’s long-term shortfall presents no impediment or obstacle—it’s just a political issue. We could have this system up and running in a matter of months.

While we are forced to wait, let’s think about what we want paid family and medical leave to look like. I think there’s two big questions: duration and coverage.

The Question (and Distraction) of Duration

How long should paid family and medical leave be? Depends. Paid Family and Medical Leave covers:

• You getting sick

• A family member (like child, spouse, or parent) getting sick

• Newborn care

We’ve kind of inherited the “Family and Medical Leave” moniker from the 1993 Family and Medical Leave Act, which established unpaid leave via job protection. But the program we need is really: Medical leave, family leave, and newborn leave, the three areas of coverage enumerated above.

Medical leave and family leave have duration dictated by the nature of the illness, so leave would be dependent on a doctor’s assessment. This is how private short-term disability insurance, unpaid leave (through FMLA), and paid leave in states that set up a program currently operate. Your wife needs a hip replacement, recovery is expected to last 6 weeks, so the doctor recommends that she get 6 and you, caregiver, get 4.

So the only open question of duration—a duration that Congress would determine—is newborn leave. How long should new parents have paid wages to be at home with their kid? There’s a medical answer to that question, surely, but a social and economic one that encompasses what we think parents and newborns deserve and how we value that time.

I’m maybe a bit too realistic here: so long as health insurance is provided by employers, our hands are tied. Leave will be fairly short, probably 12 weeks, maybe 16. Much longer than that though, and it invites a host of pretty nasty incentives and steep costs borne by employers.

And before you say, “I don’t care, soak ‘em! Employers should bear costs!” Think about how this plays out.

Let’s say we want one year of paid leave for newborn care. Paying for wages through a public leave system is easy—it’s just a matter of setting the tax contributions high enough. But

1. Should the year of leave also have a year of job protection? And if so,

2. Should the year of leave also have a year of employer insurance coverage maintained?

If the answer to both is ‘yes,’ employers are essentially on the hook for a year of health insurance coverage for an employee who isn’t working, who they can’t fire, and who they probably need to replace at least on interim basis until they come back. That’s an enormous costs. Employers would pass it on: women of childbearing age would be assumed to be more expensive in the long-run, meaning they’d be hired, promoted, and paid less.

^That’s what happened after the Pregnancy Discrimination Act of 1978 prohibited the differential treatment of pregnancy in employment, which meant employers had to start covering prenatal, postnatal, and labor and delivery in their health insurance plans.

Is there a way around this? Eh, no path is great.

One alternative:

Have paid leave, job protection, and health insurance coverage around a newborn be different lengths. So a worker can get a year of paid leave through Social Security, but only (say) two months of health insurance from their employer and four months of job protection. Well, paid leave de facto becomes two months long for everyone who needs health insurance from their employer, four months for anyone afraid they won’t be able to find a job, and a year for whatever few people remain.

Leave can very easily generate incredible inequality, if not designed with inequality in mind.

Another alternative:

Expand Medicaid so that the newborn is covered for the length of leave of the parents. If the employer ends private coverage, or even if the parent no longer has a job, they at least have some income from paid leave and health insurance from Medicaid.

This is truly the “mouse a cookie” scenario because if you are covering postnatal care through Medicaid, you should cover prenatal care too. And if you’re covering the infant, you should cover the mom too and probably any siblings. And if you’re covering the newborn and mom and siblings for 1-2 years anyway, you should cover both parents. And depending on sibling birth distance, you might have random gaps in Medicaid coverage between pregnancies or encourage pregnancy timing based on Medicaid coverage, so you should extend the Medicaid coverage for something like the length of mom’s fertility. And if a worker is eligible for Medicaid, then employers would be much less likely to offer private coverage to them.

I should say, I kind of love this scenario because I think all children should be eligible for Medicaid from -1 to 18 years old so they never have a gap in health insurance or any costs in accessing health care. But, from the perspective of paid leave, this is an even bigger hurdle than reforming Social Security.

In sum:

It’s a tangled web of incentives to work around employer sponsored health insurance, and I don’t think Congress will take it on. I think they’ll design newborn leave of a short length to avoid it. It’s why I think the duration question about what new parents deserve is kind of a distraction. A long duration requires a fundamental change in how health insurance is provided in the US.

So if we’ve got to make due with a shorter newborn leave in the meanwhile, let’s focus on

The Question (and Battle) of Coverage

If the US faces some roadblocks for having generous newborn leave duration, then let’s go big where we can: coverage. Y’all, I want the most liberal paid leave program we can get. Liberal in the truest sense of the word. There’s three big asks:

1 Medical Leave That Prioritizes Health

Medical leave is fairly straightforward: if you get sick or injured and need to be home from work longer than what would typically be covered by sick days or paid time off, you take medical leave. Rather than being paid by your employer for work performed, you are paid by the medical leave program.

Your employer may offer a similar benefit for you right now; in the private sector it’s referred to as short-term disability insurance. This insurance is structured to kick in on, say, the 8th day after an incident. So you get in a car accident on a Monday, you’re expected to use sick days (if you have them) for 7 days, disability coverage starts on the following Monday. It’s often tiered—the first two weeks of disability coverage you are paid 100% of your prior wage, the next 6 weeks you are paid 70%, the next 12 weeks you are paid 50%, and so on.

So let’s design medical leave so that the north star is health and recovery.

First: Have the tiers of wage replacement be very generous and have them cohere with job protection and health insurance guarantees.

Second: Have coverage include recovery. If you need to go to physical therapy three times a week for 8 weeks after you get out of the hospital, medical leave needs to cover that time as well. Don’t create a gap between <very sick> and <fully recovered>. Recovery includes rest and rehabilitation, and medical leave should cover it.

Third: Include labor regulations that give recovering workers the right to work from home or work asynchronously.

2 Family Leave That Gets “Family”

Family leave is really about caregiving: a sick person needs/deserves a caregiver, so a family leave program pays a family member’s wages for a period of time so that they can give that care.

At some point, when Congress creates a paid family and medical leave program, they’ll have to decide what constitutes “family.” Children, siblings, parents, spouses—sure that’s easy. But what about unmarried partners? In-laws? Friends?

What is the advantage of having Congress put a limit on who that caregiver can be rather than letting the sick person pick who they want? If you have a serious heart attack and need to recover, should you get to pick a caregiver from a) who you know and trust to help you or b) a list of individuals whose relation to you Congress has approved?

Not everyone likes their family. No to mention, being family doesn’t make you a good caregiver, doesn’t mean you are in a convenient place with work to take time off to caregive, and doesn’t mean that you want to caregive.

Don’t waste regulations trying to find people whose proximity Congress approves of. Empower the sick person to choose a caregiver.

3 Newborn Leave That Doesn’t Undermine Maternal Recovery

Here’s something that, if you haven’t had a kid, you might not realize. Paternity and maternity leave is a voluntary benefit that some employers provide (it’s about a fourth of workers in the US who have access to it at all). It’s paid time off specifically for newborn care and bonding.

But, that’s not how most people end up staying home with a kid. About half of workers in the US are covered by short-term disability insurance through their employer. After childbirth, delivering moms make a disability claim through this private insurance program which typically approves 6 weeks for vaginal and 8 weeks for c-section. So the mom has a period of time where she’s paid to stay home, and *technically* it’s to support her physical recovery from childbirth, but in reality, she’s taking care of the newborn.

This disability insurance structure is one reason why moms are so much more likely to stay at home with the baby than dads, why gay parents, adoptive parents, or parents who use a surrogate can have no leave at all, and why leave is so short.

So let’s not replicate any of that in a paid leave program and, while we are at it, let’s be upfront that after childbirth a delivering mom will in fact need time to recover and need a caregiver for herself. No more designing a system that moves her straight from the hospital room into full-time caregiving, alone.

Structure newborn leave so that: 1) up to two parents can take the full amount of leave regardless of whether they delivered and 2) any delivering woman is eligible for her own caregiver. So:

• Adoptive/surrogate parents: the delivering woman gets medical leave and a caregiver during that leave, the parents get newborn caregiver leave.

• Delivering mom + partner: the mom gets medical leave and a caregiver during that leave, the partner gets newborn caregiver leave.

This design basically says 1) every baby gets two full-time caregivers and 2) every delivering mom gets a caregiver.

It’s a win for non-delivering parents that their access to leave is a right not conditional on delivery, and a win for delivering moms who can get a non-partner caregiver right after delivery (think mom/sister/best friend/cousin).

I’m tempted to put here some pretty horrific stories of what recovery from childbirth can look like even in a routine delivery, but I shouldn’t have to resort to that to make the case that moms deserve help to heal.

What Leave Means

When I talk to fellow moms, I hear a lot about how long they want to stay home with a newborn. For the record, not all of them want six months or a year; some moms want to get back to work. But paid family and medical leave is so inextricably linked to newborn leave, and newborn leave inextricably linked to the question of duration, that we can lose sight of all that’s at stake.

A long newborn leave will be the hardest victory for the US to get, and there’s so much to win in the meantime—universal coverage for all workers regardless of employment type, medical leave that supports health and invests in recovery, family leave that empowers the sick and meets their preferences instead of Congress’, newborn care that doesn’t erase the health of mothers.

So much to win.

For what it’s worth, I look forward to the day when I get to regale younger moms with the “back in my day” stories about having a family before paid leave was a universal right. I can’t wait to see their eyes go wide in a disbelief that we would have to go through all this alone, that’d we risk our income, risk our jobs, risk our health and our infant’s health when the solution was so easy and obvious in front of us. I’ll relish their shaking head as they say “But that doesn’t make any sense—did you all expect babies to take care of themselves? How could you not have paid leave?”

And I’ll be glad to look back on this time before paid leave as backwards and shortsighted and wrong, because it is.

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I’ve kicked off a new collaboration with MomsRising, a grassroots organization that brings moms’ voices to national conversations. They are doing a campaign to encourage moms to post about their cost of living and their budget struggles in order to bring attention to the economic need of families.

As part of that, I’m writing a monthly explainer column to accompany their work to bring the backstory and context to what’s going on today. You can find the campaign site and post via their website, but I’ve also expanded on it here for the Kedits subscribers with a little bit more data:

1. A decent life

2. Affordability is a two-way street

3. Runaway prices…

4. Meet uneven wages

5. Putting it together

6. But What About…[politician/political party I don’t like]?

A decent life

Why does it feel like it is so hard to afford a decent life? Not decadent, not luxurious, just decent. And why does it seem like it used to be easier to afford that decent life? There is a very straightforward explanation that answers both of these questions. An economist would say, it comes down to the ‘relative growth in prices and wages.’

So what does that mean?

My name is Kathryn Anne Edwards. I’m a PhD labor economist. I used to work at a research institute in what was mostly a steady and predictable 9-5 job. But after I had two kids during the pandemic, I found even steady and predictable was too much for me to manage. I quit and started my own business so I could have more control over my schedule. I had to give up a lot of what I worked on in my career, but I gained a lot of freedom and room to be creative. I built up a client list and embarked on becoming a social media influencer, explaining the economy one video and tweet at a time. I’m now a columnist for a national publication, have a quarter of a million followers across TikTok and Instagram, and started my own podcast Optimist Economy.

Our lives have to change after we have kids, and we don’t know how it will change us and what that will bring. It helped me find my voice in bringing explanation and clarity to the issues Americans want—and deserve—to understand.

Politicians, pundits, talking heads—they aren’t so good at cause and effect because they have an agenda. They talk about the economy in a way to get you to agree with them. I talk about the economy in a way to get you to understand. My agenda is for you to be informed. Economics is hard and complicated, but we all live and depend on this economy, which means we all have the right to understand what’s going on.

Starting with: Relative growth in prices and wages.

Affordability is a two-way street

The idea of something being cheap or expensive isn’t just about its price, but its price relative to your earnings. Is $100 for a dinner cheap? Depends. It’s cheap if you make $250,000 in a year, but it’s expensive if you make $25,000. If something is hard for you to afford, it’s a function of both how much it costs and how much you have.

The question about affording a decent life is big—it’s not just dinner, but all the things that comprise a decent life, from things you need to have to things you feel you ought to have—but it comes down to the same concept of how much it costs (price) and how much you have (earnings).

On paper at least, Americans are richer than they used to be.

It’s easiest to see this over long periods. In 1973, the average hourly wage in the U.S. was $3.90 and by 2024 it was $34.27. That’s a 778% increase over those forty years! Prices were growing too, 607% over the same time. Put them together and you get average real wage growth—the growth in wages net of the growth in prices—of 48%. Put differently: If you look at the average wage and average price, a typical hour of earnings in the U.S. today should be able to buy much more than that same hour of earnings would have been able to buy in 1973.

Instead, it feels like it’s getting harder to afford things, rather than easier.

So, what’s going wrong?

Runaway Prices…

A big part of what’s going wrong is that not all prices grow at the same pace as the average. In the table below, I take a set of goods and services and arrange them by whether their price is growing slower or faster than prices overall since 2001. This data goes through 2024, the last year of annual data; you can think of this as the ‘origin story’ for the bad situation we’re in today.

The first two columns list out things with slower than average price growth and the right two columns list out things with faster growth. I’ve highlighted in red what I think are some key goods. (For exact percentages, see the postscript.)

Source: Bureau of Labor Statistics

Consumer goods—think of this as what you could bring home from a Target or Best Buy run—have become relatively cheaper over the past 25 years because their prices have been rising slower than average. In fact, some have fallen outright.

Necessities, on the other hand—housing, food, utilities, prescription drugs, health care, child care, elder care, higher education, gas—have gotten relatively more expensive because their prices have been rising faster than average.

In sum: It’s getting easier to afford non-essential stuff as it’s getting harder to afford the essentials, the hallmarks of a decent life.

In the grand scheme of things, most of us live in some kind of modern luxury of consumer goods, but struggle with the basics. We have the comfort of a refrigerator, TV, car, microwave, all the furniture wanted or needed inside and out, a closet full of clothes, a smartphone, and whatever music, movies, or tv show on demand. And yet it can feel like we are living on the brink.

We can afford things that aren’t needed and struggle to afford things we need like childcare and healthcare. Frankly, it’s exactly what the relative growth in prices would predict. And that’s only half the problem.

…Meet Uneven Wages

High prices, even for the necessities, aren’t a problem if wage growth still outpaces them. For instance, the cost of college tuition has increased 169% since 2001. That’s a problem if wages only grew 100% over the same period, but an inconvenience if wages grew 200%.

Much like prices of different goods and services growing at an uneven rate, wages also have not grown at an even rate

I said earlier that since 1973, the average wage in the US grew 778%. But those gains weren’t steady over those 50 years, nor were they shared. Not all workers saw their wage grow at the same pace as the average did. In fact, most didn’t.

If you were to line up every wage earner in the U.S., rank them from lowest to highest earning, and divide them into ten equal size groups, the cutoffs between the groups are called the ‘decile cutoffs.’ The US has 161 million workers today, so the ten groups would each have about 16 million people in them.

So here’s how wages did. In the left column I show growth since 1973, and in the right I show growth since 2001.

(Why both? Well, the story of wage inequality definitely starts in the 1970s and takes off in the 1980s. I want to show that. But the price data doesn’t get detailed until the 90s so I want to 1) show you to full story but 2) also give you the right window for price comparisons).

Source: Economic Policy Institute data library

Every wage group except for the top 10% grew slower than average since 1973, but the slowest growth was seen in the middle—the 4th, 5th, and 6th deciles. The very bottom group did better since 2001, but the middle is still moving slowest.

Granted, all of these wages were still higher than average prices, but you’re starting to see the problem: if middle wages grow slower than average wages and the price of say, health care, grows faster than average prices, a hallmark of a decent life gets harder and harder for the middle.

In the next table, I give a summary of U.S. hourly wages in 2024. The table shows the average across all workers (in the first row) and then the decile cutoffs (in the next rows). For example in the second row of the table, the lowest 10% of earners are those 16 million workers who earn at most $14.26 an hour. In the last row of the table, the top 10% are those 16 million workers who earn at least $62.75 an hour.

Source: Economic Policy Institute data library

So who can afford things in 2024? That’s a two-part question of: 1) How much they earn in 2024 and 2) How those earnings have grown relative to prices.

For reference, a person who worked every hour of the week every week of the year at $20 an hour would bring home just under $3500 a month, quickly outstripped by the typical monthly costs for rent ($1400), a new mortgage ($2300), utilities ($385), child care for one kid ($546-$1300), food ($830), health care ($500), and the cost of maintaining a car ($550).

In other words, the bottom earners don’t earn enough to afford these necessities, however much they’ve benefited from faster wage growth recently.

In contrast, a person who worked every hour of the week every week of the year as a top earner at $62 an hour would bring home $10,750 a month. It’s healthy enough to afford the necessities even as they become more expensive.

The real problem is that most people are in the middle, and the middle is not doing as well. Their wages aren’t high enough to overcome the high price of necessities, while at the same time necessities are becoming less, instead of more, affordable.

Putting it Together

In the next table, I compare price growth and nominal wage growth since 2001.

As you can see, college, gas, nursing homes, car repair, medical care—their prices have risen faster than anyone’s wages. Utilities for housing are not far behind them, rising faster than the wages of most earners. Meanwhile for the middle earner, their wages are barely keeping up with housing and food.

This is a table with a lot of numbers, and the numbers don’t really mean anything—what’s 91% versus 108%, really?—but consider what this table should look like. It should be that wage growth for everyone working in the economy outstrips the price of things we all need to live in the economy. But instead it shows workers, especially those in the middle, struggling to keep up.

This isn’t the full story, by any means. To start, this is just hourly earnings. It doesn’t include other sources of income, like investments, or things that aren’t income, like employer health insurance. It also doesn’t account for having two earners in a family or other factors, like if someone owns their home outright or if they are in an expensive city.

And this discusses wages for all workers; it doesn’t take into account the big gaps in earnings between workers: women make about 18% less than men, while Black and Hispanic workers make about 12% less than white workers. And it’s not as if the disparity stops there, motherhood is associated with a significant pay penalty, and moms of color experience compounded disparities. (More on this in future parts of this series.)

But, what I’ve written about here–explaining the relative growth of wages and prices–gets at the heart of what’s driving many people to feel and experience that a decent life is harder to afford in America today: the price of a decent life has shot up, while their wages haven’t.

But What About…[politician/political party I don’t like]?

Americans did not start struggling to afford a decent life in January of this year. The problem we feel at this moment was truly decades in the making. On some level, putting it this way leaves a lot of room for people who want to blame a politician or political party they don’t like. If the problem developed over a long period of time, people get to pick who in the past they blame for it.

I’m empathetic with a need to point fingers, but I can be pretty dismissive of it. What matters more is correctly diagnosing the problem in order to find the most effective solutions. And in my experience, blaming someone is just a way to give cover or provide motivation for more terrible policies.

Whatever the intentions of past leaders, this is the result. Our intention now has to be to look forward and build a version of America without this problem.

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Here’s the detailed price growth chart, and I figured if you were interested in the actual nominal price growth percentages since 2001, you’d want to see since 2007 and 2019 as well. I picked 2001, 2007, and 2019 because those were peak years—just before a recession took hold. Enjoy:

The big headline a few weeks before that was that Trump successfully fired Erika McEntarfar from the Bureau of Labor Statistics and slandered her, accusing her of manipulating data for political purposes.

Safe to say: August 2025 was a historically bad month for female PhD economists.

Why is he attacking these people? What’s going on in the economy? Truly, it’s a very confusing time.

The short version is that Trump wants interest rates lowered to boost the economy, but its very much a having-your-cake-and-eating-it-too type of campaign, because he also doesn’t want to admit the economy is in trouble, because then he’d have to admit its his policies causing the trouble.

Confusing, and borderline doublespeak. Hopefully I can explain this. If you can stand it, the easiest way to parse through all this is to understand interest rates.

In this letter:

1. Up or Down (Or Stay in Place)

2. Why Right Now is Confusing Part 1: The Actual Economy

3. Why Right Now is Confusing Part 2: What Trump Says

4. Coda: There’s Always Hope

Up or Down (Or Stay in Place)

The Federal Reserve is the U.S.’s central bank and it controls monetary policy. Monetary policy covers a lot things that the bank can do as a lender to and regulator of the private banking system, but the biggest and most important policy is interest rates. Whatever the Fed sets as its interest rate is very influential of interest rates throughout the economy.

The Fed uses interest rates to manage household and business spending in the economy. When the economy needs less spending, the Fed raises rates, when it needs more, the Fed lowers them.

Say your car is stolen, or breaks down completely, and that tomorrow you have to go get a loan and buy a car. The size of your car payment will vary based on the interest rate you get. The car costs $40,000 and you had to borrow $20,000. If you borrowed $20,000 at 8% you’d have a much higher car payment than if you borrowed at 2%.

So if the Fed sets interest rates high, you’ve got a high car payment and the money that could have gone to a vacation or new clothes is now going to interest on the car. If it sets interest rates low, you’ve got a lot more cash to spend than you would have with the 8% loan. By manipulating the price of borrowing, the Fed has influenced spending in the economy.

You’ve lived through this in both directions.

The pandemic crash: get the economy going

When the pandemic took hold in March of 2020 and the economy shed over 20 million jobs in a single month, the Fed dropped interest rates to 0% and kept them there for about two years. The relief from Congress was much more visible—unemployment benefits, support for state governments, student loan forbearance, stimulus checks, money for food stamps, and so on—and meant to prop up households in crisis. The Fed’s policy is more subtle and less targeted: help anyone who has or needs debt by reducing their borrowing costs.

The US economy has four components that, when added together, equal the size of our economy (aka GDP).

1. Household spending

2. Business spending

3. Government spending

4. Net exports

Household spending is BY FAR the largest component, typically around 65%. Keeping people spending is a way to stabilize the economy. Lowering interest rates helps juice spending. For reference, here’s consumer spending from the 25 years. You can see the difference between a small recession (2001), a large recession (2007-2009), and the pandemic (2020).

So:

Economy in trouble —> lower rates —> people have more money to spend —> spending boosts economy —> hopefully economy in less trouble.

The inflation spike: slow the economy down

Inflation increased nearly every month in 2021. It started the year at 1.3% year-over-year growth but ended the year at 7.1%. You can see the spike in this chart, showing the inflation peak in June of 2022. For reference, the Fed’s target is to keep price growth at 2.0% year-over-year. (If you are wondering why it’s not 0% instead of 2%, I put in a post-script.)

At the start of 2022, the Fed raised interest rates and by the summer of 2023, interest rates were above 5%.

This hurts. And it’s meant to hurt. It’s again more subtle and less targeted: hurt anyone who has or needs debt by increasing their borrowing costs. Having less money to spend means spending less, and spending less puts downward pressure on prices, curbing growth.

Hang on you just said that consumer spending is most of our economy and now you’re saying that high interest rates reduce spending. Isn’t that bad???

Yes it is. In fact, most of the time in order to bring price growth down to target levels, spending pulls back so much that the US tips into recession. One reason why there’s been near constant speculation about the US entering a recession over the last two and a half years is because of that historical prediction. The hope from the Fed was that they could lower inflation and avoid recession, which they call “The Soft Landing.” It’s quite hard to pull off.

So:

Price growth too high —> higher rates —> people have less money to spend —> less spending hurts economy —> hopefully price growth falls —> hopefully there’s no recession.

It’s a real fingers-crossed-emoji economic era we’ve been living through, and all that was just the run up to the second Trump Administration.

Why Right Now is Confusing Part 1: The Actual Economy

By December of last year, it really looked like Powell and the Biden Administration had pulled off The Soft Landing. Inflation was falling, it was below 3% and on its way to 2%; GDP, consumer spending, and business spending were posting stable growth, and the unemployment rate was sitting around 4%.

Cracks were showing, though, especially in the labor market. The hiring rate cratered. People weren’t getting laid off, but they were having a hard time finding a job. The unemployment rate of young workers with less experience was ticking up. Wage growth also slowed.

The consensus at the start of this year was: so long as price reports keep showing inflation marching back down to 2%, the Fed would cut rates before the labor market got any worse.

And then, tariffs!

Tariffs raise prices. Put a tax on a good that is sold in the US or used for a good made in the US, and prices for both will increase. In fact, Trump made the big Rose Garden announcement of the new tariffs imposed on nearly every country we trade with on April 1—inflation has increased every month since.

And if that weren’t worrying enough, there’s reason to think that most of the tariff-inflation hasn’t even hit yet. Businesses have been trying to shield their customers from price increases—they’ve said so in surveys, in earnings calls, and in the meantime they stocked up on as much goods as they could before the April announcement. That can’t last. Prices will continue to go up, it’s just a matter of how high and for how long.

But the cracks in the labor market are also getting bigger, a lot bigger. The overall unemployment rate is ticking up a tiny bit while more groups within the labor market are experiencing visible pain through high unemployment, long lengths of unemployment, and still low hiring. Businesses have also said in surveys and earnings calls that layoffs may be necessary in the near future.

Beyond the direct impact of tariffs on prices and business operations, there’s a secondary impact of uncertainty. What will tariffs be when all the negotiation and showboating is done? When will those tariffs be set? Is a court going to invalidate all of this anyway? A lot of businesses are idling in place, just trying to hold steady while the tariff policy shakes out. That uncertainty is also dragging on the economy. If you can’t plan, you can’t grow, if you aren’t growing, you aren’t investing and you aren’t hiring.

So now for the $30 trillion question: what should the Fed do?

• Option one: Prices come first. The full extent of tariff-inflation isn’t done or known. If the Fed lowers interest rates too soon and prices take off, it’ll have to raise rates again. The backtracking of interest rate policy is doubly harmful, not just because interest rate increases cause pain but the Fed loses credibility.

  • In sum, keep rates where they are and be ready to raise them.

• Option two: Unemployment comes first. If the Fed waits much longer to cut interest rates, the labor market could decline enough to kick off a recession. All it takes is a few months of elevated layoffs for the unemployment rate to jump, businesses and households to panic in response and pull back further from economic activity.

  • In sum, give the economy some juice and lower rates ASAP.

The textbook prediction of tariffs is that they could cause stagflation, the unique and awful combination of high inflation with stagnated growth. One calls for higher interest rates, one calls for lower interest rates. We are seeing that play out in real time, ever so slowly. By all accounts, the Fed is waiting to see which one hits first and worst.

Why Right Now is Confusing Part 2: What Trump Says

Trump is his own worst advocate here, for pretty obvious reasons.

He wants interest rates lowered, immediately. He was returned to office on the promise of his economic management. A recession wouldn’t be good for midterms or his legacy. He wants rates cut so Americans get some relief.

Given what I explained above: if you wanted to make that case, you would use every microphone in front of you to talk about how weak the economy is right now and how precarious its current position is. In other words, you’d want to persuade the Fed that the first and worst problem is the labor market.

Trump can’t do that, because if the economy is weak right now, it’s entirely due to his own mismanagement and terrible policy of tariffs and trade wars. He wants the Fed to ease the pain that his own policies are causing without admitting that they are causing any pain.

So his tack is to 1) insist on every level that the economy is AMAZING thanks to the BEAUTIFUL tariffs while also 2) pressuring the Fed.

What happened in August is that these two prongs both reached a historical apex. The Bureau of Labor Statistics released in its monthly jobs report that job growth is low, even lower than was previously thought, a sure sign the economy is slowing down. This is probably the single most influential data point that you could hand over to the Fed to implore them to lower rates. Instead, he fired the Commissioner and said that the weak data was the result of her manipulating the report which she did for political reasons.

I cannot overstate how impossible that would be, how it is unequivocally and categorically not true, and how interfering with the independence of the statistical agencies risks so much more than a rate cut.

Then a few weeks later, the Chairman of the Federal Reserve Jerome Powell gave a speech in which he said that tariff-inflation was just beginning and he didn’t know how high, how quickly, or how long prices would rise for. Within hours, Trump announced that he wanted to fire one of the Fed governors.

Interest rates are voted on by the Board of Governors. Trump is trying to get majority on the board to get the Fed to do what he wants, so if he fires a Governor, he can replace her with someone who will do what he says.

Again, I cannot overstate how interfering with the independence of the Federal reserve risks so much more than a rate cut. You can see it all here. Trump, like most politicians, want the economy juiced via lower rates so that people can spend money and are happy. Which is why whenever there is interference with a central bank (it hasn’t really happened here in the US though Nixon tried it to some degree, but its happened in other countries) the result is inflation. Politicians don’t have the stomach or the strength to look at economic data and know that the pain of higher interest rates is the only way forward.

Coda: There’s Always Hope

Listen, everything I just explained above augurs a future that promises inflation, recession, possibly both, and the loss of integrity at critical institutions regardless. But we can step back and see the real problem here: Congress.

If tariffs are hurting the economy, who could act to turn them off? Congress.

If critical independent agencies that produce economic data or use that economic data to maintain economic stability are under attack, who could guarantee that the leaders of those agencies serve the economy first, and not the president? Congress.

Sure, it’s not *inspiring* much. I don’t look down at this photo and feel more confident than I did before:

^Senator Majority Leader John Thune of South Dakota

The question isn’t “Will Trump’s policies harm the economy?” because they actively are. The question is, “How long will Congress allow him to do that before they intervene on the economy’s behalf?”

That’s a different answer, one with a lot of possibilities. It ain’t much, but it ain’t nothing.

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P.S. Why is the price growth target 2%?

This can feel counterintuitive—wouldn’t we want price growth to be zero? Zero sounds nice but it’s too close to negative price growth aka deflation for comfort.

That also feels counterintuitive—wouldn’t it be good if prices fell? Again, sounds nice but it portends an economy in crisis and a ‘death spiral’ of spending that is associated with depressions as people wait to spend until they think prices have bottomed out, which pulls down the economy, we further drops prices, and so on and so on.

Put differently: we want prices to fall for the right reason, like a technological advance or a newly efficient supply chain. That happens to specific prices all the time! But falling because the economy is crashing and pulling down all prices as as result, that’s bad.

Also, keep in mind that 2% is a target, an outcome, and a signal.

• Target: This is the rate of price growth the Fed wants to achieve

• Outcome: A steadily, sustainably growing economy produces stable price growth.

• Signal: The commitment to 2%, and hitting that mark most of the time, signals that our economy is well managed and that we have a strong, skillful central bank.

Writer Brigid Schulte interviewed me for an essay she was writing for the series on how to square deepening inequality with the American Dream. She liked my comments so much she published our conversation as a Q&A and, with her permission, I’m republishing it here.

(And sure, I could just jump right to the actual conversation, but I’m definitely including all the nice things she said about me to preface the Q&A, because sometimes you gotta brag.)

From the Better Life Lab, though I added section headers:

Where we are

The promise of America, the American Dream that has fueled so many families’ hopes and drawn so many immigrants here over the last 250 years, holds that if you work hard and play by the rules, you can live a stable, comfortable life.

You’ll have a safe place to live, enough to eat, and a stable job that pays a living wage; there will be a good education system for your kids; time for your family, friends, and community; parks and libraries to visit; and opportunity to meet new challenges, grow, and climb the socio-economic ladder. Living the dream means having the freedom to pursue happiness and create the life you want. In essence, it is the ideal that, in America, a “Good Life” can be available to all who work hard enough for it, and that we’ll all benefit as a result in a prosperous and fair society.

But that dream was never true for everybody. And it’s less true now. Economic inequality has been growing at a rapid pace since the 1970s. The rich have only gotten richer, and the poor, poorer. And the likelihood that your children will be better off than you has fallen dramatically since the 1940s. Many Americans are stuck, frustrated, and angry.

And yet, Americans continue to support politicians who promise to restore the American Dream but instead cut taxes for the wealthy and slash funding for supportive policies like health care and food aid. These politicians fail to invest much at all in things families need to live their American Dreams, like affordable child care, housing, transportation, and living wages. President Donald Trump’s recently passed tax law, which cuts taxes on the rich and big corporations and throws millions of people off Medicaid and food aid, is a case in point.

Congress hasn’t raised the $7.25 an hour federal minimum wage since 2009. And politicians have crafted a system that taxes the fruits of that hard labor as much as 37 percent. The rich, on the other hand, get most of their income through investments, which are taxed at a much lower rate of 20 percent.

Does hard work pay off anymore?

To make sense of the current state of the economy, inequality, the beliefs that shape our policies, and the pathway to recapturing the American Dream, I reached out to economist Kathryn Anne Edwards.

She’s super smart and funny, and can make complicated economic issues as clear as day. At the research organization RAND, Edwards and her colleague calculated that, between 1975 and 2018, nearly $50 trillion of wealth transferred from the bottom 90 percent of households to the top 10 percent in the United States. (A RAND update pegged that wealth transfer at nearly $80 trillion between 1975 and 2023.)

Yet, Edwards is an optimist. She co-hosts the Optimist Economy podcast, with episodes like, “A Million Reasons to Raise the Minimum Wage.”

She insists there is a better way, that we can create more ways to reach the American dream. She made me a believer.

In conversation

Brigid Schulte: So many people are losing faith in the American Dream, that their hard work will lead to a better life. Is hard work enough anymore?

Kathryn Anne Edwards: The question for me is less about hard work and more about the returns to work. Are people getting what they’re due?

Schulte: Yes! That’s it!

Edwards: That's different from, “Does hard work equal success?” Instead, it’s “Are you getting what you deserve?” And that’s where there’s so much more dissatisfaction. Because people are working hard, and they can’t afford housing. They can’t afford food. They can’t afford health care. They can’t afford transportation. They can’t afford care for their young ones or their elderly ones.

So, the idea that “I'm working but getting nothing in return” is affecting a growing share of the population. And that's only going to go in one direction until we do something dramatic about healthcare, childcare, elder care, transportation, housing, or wages—hopefully all of the above.

If we don’t, we’ll see a higher share of Americans who feel like they can't afford a decent life. The American Dream is not an unreachable fantasy. It’s just, I have a job, and I can afford to live.

Schulte: But so many people are working really hard, really long hours, and can’t afford to live.

Edwards: We Americans love success, but we also love fairness. And so the question is, are people who are successful today the result of a fair or unfair process? I don't want to cut off the pathways for success to be a function of hard work. And at the same time, I don't like the people who have gotten ahead through something unfair.

That really colors the view of whether or not our inequality is acceptable, whether or not our tax system is doing what it's meant to do, and whether or not we are all given an equal chance.

Think of the estate tax. People are against it. But, in reality, it impacts 0.07 percent of people. I mean, you have to die with $15 million before it is applied. That's a lot of money. I don't think people understand just how few people are in that position.

Then think of unemployment. America lowkey hates unemployed people, or mal-employed people, and thinks that they just need to go out and get a job. But I've always thought that hate comes from a sense of self-preservation. Because if they are actually just hardworking people who had something bad happen to them, then something bad could happen to me. And it's a lot easier for me to judge people who are unsuccessful as being lazy than to admit that I'm just as much at risk for lack of success as they are.

Empathy goes up and down. But we consistently believe in fairness. And that’s good, because the economy today is arguably the scariest it’s been since the Gilded Age, the period right before World War II, when the U.S. was its most unequal.

Schulte: So is the American Dream over?

Edwards: The American Dream isn’t dead. We don’t want it.

Schulte: What?!

Edwards: If we wanted the American Dream, we would have equality for children who show up to kindergarten. Economic inequality is imprinted on kids as young as five, and we don't do much about it and we don't want to.

Do you want universal childcare and universal school meals? If the answer is no, you are for inequality because you want certain kids to have a head start, and you want it to be determined by how much money their dads have. So, if that's how you feel, you don't want the American Dream. You want yours and to pull up the ladder behind you.

There's a lot of people who would never be able to admit that they really want to pull up the ladder behind them, but that's what they do. If you phrase it like that, they tend to say, “Oh no, I want my children to succeed based on their own merits.”

But if they did, they wouldn’t want their kids to outperform others in school simply because those other kids were hungry.

They want their kid to get ahead on merit, but they don't quite understand how much advantage has come from their own economic circumstances.

So there’s a lot of educating to do. A lot of fear to walk back.

Schulte: One thing that has puzzled political scientists and others is how many people who aren’t able to live that American Dream of a stable life vote for politicians like Trump who say they’ll help them, but then support policies that don’t, that only increase economic inequality. [The Yale Budget Lab projects Trump’s tax bill will increase incomes at the very top and drop incomes at the bottom.] Help us understand why.

Edwards: Have you read War and Peace?

Schulte: Tolstoy? Yeah.

Edwards: There’s a metaphor I think about a lot. Tolstoy didn’t like that Napoleon was glorified and seen as a great man who changed history. He describes it like a watch. If you look down at your watch, you think the second hand is moving time. But if you turned it over and opened it up, you would see all the machinery. The second hand is just a manifestation of the gears, and not the other way around. Tolstoy felt that Napoleon was a product of his historical moment, not the one making that moment happen.

That’s like now. The era we’re in of American politics is one of both growing inequality as well as blossoming misinformation. And [Trump] is not the source. He's the watch’s second hand. There are gears behind it. What he's doing is forcing into the front of the conversation the lies and myths that people have built for a long time. He's not generating them. He’s just testing their application.

Is it the case that immigrants steal our jobs? That's a lie that people have told for a really long time. So, increase the deportation budget for the U.S. so it’s 50 times the size of the FBI budget. What happens is: we have an unregulated police department that is going to kick out a lot of people who have jobs in our communities.

You're seeing the backlash already in the polling with immigration. At the start of the Trump administration, versus even six months later, the number of people who think immigrants should have a path to citizenship has already increased. There's a backlash to testing out the lies. [editor’s note: Support for Trump’s immigration policy continues to drop, while record high shares of Americans now say immigration is good for the country.]

The truth is there. It's just a matter of getting people to arrive at it.

Schulte: I was just reading some research that found that, as economic inequality increases, so, too, does our sense of individualism. What will it take for us to start caring about, not just ourselves reaching the American Dream, but all of us?

Edwards: Leadership.

Immigration's a great example. America has been on the fence about immigration, holding incredibly contradictory views for a quarter-century.. But the surge of undocumented immigrants mainly occurred before 2007. And we have absolutely failed in the two decades since to voice any type of coherent policy about what needs to happen. If you don't have leadership, the vacuum that's left is one that hate fills.

We've had stable levels of undocumented immigrants for two decades. We still haven't passed the peak of 2007. Yet we're manufacturing a crisis to deport them in really cruel ways.

You need to give people an alternative policy and sell it in every way you know how, based on truth and experience, as opposed to letting hate build up to the point where it's empowered by policy.

Schulte: So many politicians have been too afraid to address it.

Edwards: They were all too afraid to say the truth, which is that we need immigrants here. They're in your community. So if they're good citizens in all but name, let's make them citizens, so we don't have employers take advantage of their lack of legal status in order to push down the wages of Americans.

I've never heard a federal politician say that, even though probably the single worst thing that immigrants do in our labor market is be exploited.

Have you ever heard a politician say, “Here is why we need free child care,” or free school lunches, or paid sick days and paid family leave for all workers? We have had little leadership on any of these policies to pursue the American dream. So fear dictates both sides.

But truth is power. Evidence is power.

So is the American Dream really dead, or did politicians just stop fighting for it?

Schulte: So how would you articulate a policy goal to the American people, say, why they should support universal child care?

Edwards: Do you want me to talk to a Republican mom about who plans on staying home about why we need universal childcare?

Schulte: Yes.

Edwards: I would say childcare is a system that includes a couple of components: The first is paid family leave so parents have more time to care for their newborns. And the second is an actual childcare system. The vast majority of women would tell you they don't have a choice about whether or not they can stay home or work. Some type of economic circumstance is going to force their hand in either direction.

So if you felt empowered to choose to stay home, you should know you're in a privileged minority. Most women don't have that luxury. You might not like what they choose, but do you want them to stay as trapped as they are?

Did they get paid family leave? Their employer decides. Did they get health insurance? The government decides. Could they afford childcare? The market decides. You're taking all these decisions out of the hands of moms. They know what's best, like you do, and yet they don't get to decide.

So when I say I want a child care system, I'm not telling you, “You have to go to work.” I'm telling you, “I want more women to decide what's best for their children.” And not a for-profit childcare sector that does a bad job. Not an employer who's going to tell them that they don't deserve to stay home for six weeks. Let the mom decide.

If you strongly believe that women want to stay home with their kids, you should give them a four-month head start with nationally guaranteed paid family leave. See how many go back to work. That's a choice. Without paid family leave, there is no choice at all.

Schulte: I love that, focusing on just how much choice we really have. Or don’t.

Edwards: I can go further. A lot of women who stay at home with their children get to the point where they have a new baby that they essentially don’t get to pay attention to because the four-year-old or three-year-old takes all their time. And some of these mothers really want child care so they get to have more time with the baby.

Schulte: I remember when I was interviewing Pat Buchanan, who was so instrumental in killing the bipartisan universal childcare bill in the early 1970s in the Nixon administration. He said, if mothers want to work, it’s a free country. But if you want me to pay for your child care, “No Way, José,” was his direct quote. I’ve heard a similar sentiment from a number of policymakers over the years.

What’s your argument for someone like Pat Buchanan? Who had no kids of his own, by the way.

Edwards: It depends on how feisty I was feeling. On one level, I would say, it takes a lot of arrogance to tell women what they need to do with their children.

Most people are under the gross misconception that what determines a kid's outcome is the type of care they receive from zero to five. That doesn't matter as much as their parents’ income. So to tell a woman she needs to stay at home and not earn money, in an economy where income determines a child's outcome, is a little two-faced. You either need to do something so that income doesn’t play as big a role, or you need to let them work because they're trying to do the best for their children. You, Pat Buchanan, are saying, “The kids of rich women do better, but I won't let you be rich.” That’s not fair.

The other argument is a little bit more feisty: “I find it shocking that a Congress that would repeal the entitlement to cash benefits for women with children would turn around and say, “It's your choice whether to work.” Food stamps, TANF, [Temporary Assistance for Needy Families] and Medicaid all have work requirements. So no, they don't really have a choice to work, do they? You've actually guaranteed that they don't. You just don't want to support them. Just say you’re cheap. That you don’t like these women and don’t want to help them. But don’t make it about them and their choices. It’s about you and your prejudices.”

Schulte: That’s pretty feisty.

Edwards: The last argument I would make is that it's a dereliction of duty on the federal government's part to leave so many families vulnerable to the whims of the childcare market. “Families don't need you to tell them what to do with their kids, Pat Buchanan, but they do need you to use your ability as a market leveler to make childcare more fair and affordable.

“Child care is a market failure. It gets more expensive every year, rising faster than the cost of prescription drugs. So you are not doing your job as a market regulator. Then you go around blaming women for wanting to work. They’re a convenient fall guy for you being bad at your job.”

I’m an economist. I see through that.

Schulte: One last question. I’m puzzled. I’ve been talking to a number of people from all walks of life about the American Dream for some research we’re doing. I’m shocked about how so many people are struggling, and yet they still believe in not just the American Dream, but the American Fantasy of a rags-to-riches life. One home care worker and widowed mother I spoke to barely makes minimum wage, and scrapes by with about six different jobs. Yet she’s convinced she has an invention that will make her a billionaire one day.

But the inequality data is pretty damning. I’m thinking of the research on The Great Gatsby Curve that shows that in countries with high levels of economic inequality, like the United States, there’s less social mobility. If you’re born in the top 1 percent, your kids are likely to stay there. The same appears to be true for those at the bottom, and then there’s a lot of precarity in the middle. Other research found the odds of the typical American reaching the top 1 percent and staying there are .06 percent. The best predictor of those that do are that they’re educated, married and white.

Edwards: Having upward aspirations is such a key part of our economy and it's not the fault of the woman you spoke to that she’s not making it. The federal government has actively pursued a policy of economic inequality for the past 30 years. We have decided that the rich need more money from the government and that we will not support broad investments in children.

Those are two decisions that we have made. As a government, we have passed tax cuts totaling over $11 trillion within a 24-year time period. So people's aspirations to be billionaires, which we know, based on the evidence, are ridiculous, are not the problem. The problem is everything that policy has gotten wrong.

Americans have crazy aspirations, and I'm like, “Yeah, we do. Yeah. You go girl. I want you to be a billionaire too.”

Schulte: I want that for her, too!

Edwards: It's actually a bigger risk to convince her that she’s at the bottom and always will be, because there is a magic to her belief that people in a lot of other countries don't have.

Policy’s job should be to create the right conditions and give her a shot. I don’t think she’ll make it, but I also love that she wants to. And that’s more important than adding a work requirement to Medicaid.

All this evidence about why it wouldn’t work, we can at least try to fix. These are things that policy can change.

But we should never try to change the idea that so many people have that they’re one good idea away from being billionaires. That’s something intangible and important in America, and if we ever lose it, we'd never get it back.

It's the intangibles that make us American, and it's not necessarily a dream. Maybe it's our positivity, maybe it's our aspirations, maybe it's our delusion, whatever. We're impractically aspirational. Policymakers can do a better job of meeting us there.

You can't make people aspirational. But you can help them meet their aspirations.

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And I did!

Thank you to the Roosevelt Institute, which published my proposal, Whole Child, Whole Day, Whole Year: Assembling a Comprehensive Child Development System for America. You can read the whole report in detail (I take pride in my liberal use of references!) and I’ll summarize it here, talking about:

1. The Problem Isn’t Child Care

2. We Aren’t Starting From Scratch…

3. But We Are Going Big

4. A World of Possibilities

5. Development Isn’t a Word

6. The Money Talk

The Problem Isn’t Child Care

The problem is that families are trapped between an unstoppable force and an immovable object: the labor market and the K-12 public education system. Families need income to provide for themselves, but the vast, vast majority of jobs don’t align with K-12, which doesn’t start until age 5, ends by 3:00pm, and breaks for the summer.

Families have to bridge this gap by stopping work, working less, or buying care. All three come with incredible costs, whether it’s money spent or money lost. Nothing invites judgement like being put in a hard position and making a different choice than somebody else. Nothing—except maybe parenting. The result is a toxic and distracting mix of societal debates about which parents are making the ‘right’ choice that has resulted in almost no change to any part of this situation.

The lens of ‘labor market vs K-12’ is a way to sidestep those societal debates and focus instead on the practical constraints introduced by a conflict no one can really disagree occurs: jobs and K-12 simply don’t match, and they never will, because neither will ever change. And with that fresh lens, the problem gets much bigger: it’s not a child care problem, it’s a child care/after school/summer problem, and each part brings its own challenges and costs to families.

My proposal is to create a Child Development System that covers all three—child care, after school, and summer—in a single program that is:

• unified: only one source of funding and administration;

• universal: there’s no income test or requirement or limit.

You can think of it as free care, but it’s really about taking the empty space between the labor market and schools and filling with intention. If we need a place to keep kids safe while their parents are at work, we might as well take advantage of that need to create the best system possible.

A system that of course, remains up to parents whether to use.

It’s a subtle point but really important. We—whether that’s we as a country, economy, or society—need to fill this gap. But that doesn’t mean all parents need to use it. What’s required for a country, or an economy, or a society isn’t required for all families in it.

It’s that old phrase: it’s better to have it and not need it than need it and not have it. So let’s build a Child Development System.

We Aren’t Starting From Scratch…

A Child Development System needs three things:

1. Providers

2. Someone to pay providers

3. A price

I think it’s easy for people to fall into the assumption that if the government pays for something it means they also provide it, but that’s not a requirement. The government can directly provide something, or they can reimburse a provider using a pay rate, called a reimbursement rate. In first version, the government sets up a summer camp, runs it, and pays for all the costs associated. In the second version, an independent provider sets up that camp, runs it, and then bills the government for costs at some agreed upon rate.

The way that I designed this system was to think about what we currently have in the patchwork of parent-procured early childhood, after school, and summer and build from there. We don’t have the luxury of starting from scratch, and we shouldn’t throw away everything good we’ve got in hand. Here’s what we have:

• A lot of providers of early childhood, after school, or summer including

  • private providers (e.g. home-based, center-based, attached to an employer, summer camps, YMCAs, some for-profit, some non-profit, etc.)

  • public providers (e.g. Head Start, public schools, city governments, etc.)

• A lot of funding streams, including

  • three primary streams of federal funding for child care and after school

  • a dozen more than can be used for either early childhood or after school

  • funding for Head Start

The last thing we have is:

• Ways to calculate per child cost

In other words, we’ve got providers, we’ve got money, not enough of either but a way to link the two through reimbursement. The first half of the Child Development System is already built, we’ve just got to put the pieces together and expand.

…But We Are Going Big

Each part of the current system—providers, government, and reimbursements—need to expand, and there’s lots of choices that have to be made along the way. I’m going to ‘follow the money’ from the federal government on down to the provider.

First, the feds get the money together

Congress takes all the various pots of money that go to early childhood, after school, and summer, combines them into a single fund, and increases it enough to cover all children.

• I call it this the CDS Fund. It pays for care; so when a provider bills for reimbursement, it bills this fund.

Congress also creates a new line of funding to support capital grants to existing or new providers to expand the number of spots available. Think of it like the church that needs money to convert some space into a functioning after school program.

• I call this the CDS Grant.

And then it creates a federal office to 1) administer the CDS Fund and the CDS Grant, 2) set the reimbursement rates, and 3) set the minimum standards for a provider to be eligible for reimbursement.

And we’re good to go! Money to send! An office to send it! Now where does it go?

Next, we pick our ‘Lead Agency’

A Lead Agency is in charge of overseeing the program’s development, expansion, implementation, and performance in an area. They are like the COO of the Child Development System for whatever area they cover. They receive federal money and distribute it.

It’s a big question of who the Lead Agencies should be, because they could be a local, regional, state, or federal public agency. Regardless of who we pick, their task is the same.

Then, providers enroll in the program

Being a Child Development System provider will come with some strings attached—licensing, inspection, safety, etc. If a provider meets those, they become a recognized provider in the Child Development System. The Lead Agency oversees all of this.

Then, families enroll with providers

Families who are looking for early childhood, after school, or summer programming find a Child Development System provider and enroll their children. The Lead Agency facilitates all of this.

The Lead Agency fills the gaps

The starting point of the non-system we have today doesn’t serve most children, so the Child Development System will need to expand to establish more spots. What’s nice is this can be done based around what communities need and communicate to the Lead Agency.

Boom! We have a Child Development System

Instead of billing families, providers bill the federal government (via the Lead Agency) to be reimbursed for all of the kids in their program.

Is that it?

No. And yes! That’s basically it. There are a ton of details to work out, and those details are SO HARD AND IMPORTANT, but they are really a question of how to make the system work best, not whether it can work at all.

And consider the alternative is defending a system that isn’t enough for families, isn’t affordable for families, and will only get worse. I’d take a tough implementation question about the Child Development System over frantically hitting refresh on the summer camp sign up page, because even though it’s 5am and I’m on vacation in February, I’ve got scant minutes to secure camp enrollment.

Sometimes, optimism about the future is just knowing there’s a better set of problems you could have.

And don’t forget:

A World of Possibilities

The fundamental change between what we have now and the Child Development System I propose is money. Right now, child care, after school, and summer are all about what makes market sense. Even for a non-profit, it still has to be a viable endeavor and make enough money to stay afloat. Money determines what the system looks like.

In the Child Development System, providers bill for costs. It’s not about whether it would make enough money, but whether families want it. Hence, families determine via their preferences what the system looks like.

A lot of people stand to benefit in the world where families have more power.

Care workers

can get paid better. In the Child Development System, their pay is mostly set by the reimbursement rate. Higher wages means longer tenure, less turnover, more skills, and more returns to education. You could set up a registered apprenticeship for Child Development System workers, you could spin off Associates-level specialties like nutrition, health, development, behavior, or social work or specialities in specific stages of development from early childhood to adolescence. You could require that large enough centers have a nurse.

And Child Development System workers could also be employed by the system but not assigned to a specific center. Think of something like, a team of social workers, child psychologists, education specialists, health care workers that covers a region who visit each provider regularly but are also on call for support.

Schools

get some help. Think of schools and the Child Development System working in partnership, complementing each other and the help, support, and education they provide children.

Schools must prioritize academics. Kids need to learn subjects and skills; they’re tested to make sure they have. But they need more than subjects and skills as they grow up. Schools know this, and incorporate things like socioemotional learning into their curriculum, but they’ve basically been asked to do more with less. The Child Development System can complement academic instruction with non-academic instructions, offering places for enrichment, support, and growth outside the classroom.

For what it’s worth, parents love this.

Surveys of parents who enroll their kids in after school programs and summer camps say that they want their kids to grow, explore, experiment, be challenged in a place without an assessment that lives on their permanent record. You can fail science class but you can’t fail science camp. You can fail a test on Shakespeare but you can’t fail theater camp.

Employers

can apply to open up on-site centers, whether that’s for early childhood, after school, or summer. It doesn’t add to their costs or come out of their profit, so it’s really a matter of it they think it’ll be convenient and helpful to their staff, not how much money they’d have to sink into it. The world doesn’t operate 9-3, but it doesn’t operate 9-5 either. Hospitals, police departments, and factories, for example, don’t close up shop at 5pm.

Communities

get the chance to foster “ecosystems of care” for children and families. You might have heard of something called Positive Youth Development. It’s a research finding: certain protective factors can help young people succeed and keep them from having problems, whether they are academic or behavioral or emotional or substance or so on.

And what are the protective factors?

Basically positive influences and experiences. Kids need the chance to develop skills and confidence under the guidance of adults. All kinds of afterschool and summer programs have been evaluated under this framework, from sleepaway camp to 4-H clubs. Here’s a list of what makes a program a positive influence:

• Physical and psychological safety and security

• Emotional and moral support

• Supportive adult relationships

• Opportunities to form close, durable human relationships with peers that support and reinforce healthy behaviors

• A sense of belonging and personal value

• Opportunities to develop positive social values and norms

• Opportunities for skill building and mastery

• Opportunities to develop confidence in their abilities to master their environment

• Opportunities to make a contribution to their community and to develop a sense of mattering

• Strong links between families, schools, and broader community resources

It was actually a summer camp director who explained to me that the biggest win of the Child Development System I proposed would be to bring Positive Youth Development to more communities in a permanent way.

Development Isn’t A Word

It’s a mission.

I called this the Child Development System intentionally. Yes it’s about finding a safe place to keep children. Yes it’s about making it easier to go to work and bring home income. And there’s another system you could design that’s functional and meets those concerns.

I used ‘Development’ because I am swinging for the fences, for children. The expectation is built right into the name that this is a place for children to grow. And the way its designed is to take as a starting point that there’s not a single path to thriving.

We have been conditioned by scarcity for so long to have the lowest expectations. I hope that anyone who hears about what I propose can have that creative part of their brain activated to think, “Oh here’s what we could do in my community,” or “If it’s not about money than I would love for my kids to do XYZ after school,” or, “If the city gets to decide where to open a child care than I’d want it at XYZ.”

It takes confidence to be creative, and we’ve been insecure in care arrangements.

The Money Talk

I find it very inspiring —and telling—that the number one objection I hear in response to my proposal is that it’s too expensive. It comes out like a sigh of wistful regret: but we can’t have nice things. Or, of course I want to be ambitious about the community we could build to help all children and empower families, but I’m not allowed to.

It’s too expensive? Y’all, keep in mind you probably have no idea how much this system, or really anything, costs the federal government. We have all internalized years of political rhetoric rather than looking under the hood. Did you look at a cost comparison of 15 federal policies and this one was at the top? No, and if you did, it wouldn’t be.

Put your political leanings and support aside and consider just the numbers.

The One Big Beautiful Bill includes over $4 trillion in tax cuts. What does that mean? Well, the cost of any federal policy is given over a ten-year timeframe (it’s because policies almost never spend the same amount of money in a year as they scale up or get rolled out).So, $4 trillion over ten years is roughly $400 billion a year.

Here’s some accounting:

• Biden proposed a near-universal child care system in 2021 that was projected to cost $38 billion a year.

• Assume that they underestimated in 2021, and assume that child care is just a fourth of the total cost of the proposed Child Development System. That could push its cost to $200 billion a year—still less than half the size of the tax cut just passed.

• Assume that rolling out the Child Development System comes with pressure to increase investment in kids in other places.

  • It’s a little cruel that we’d have universal access to early childhood care but not paid family leave when a kid is born. That’s estimated to cost $25 billion a year.

  • If we are expanding a universal floor for children, that should include some investment in schools too. That’s mostly done through local funding, but the feds pay for lunch and breakfast, and they could max out that investment. The current school lunch and breakfast program costs $22 billion a year and covers about half of kids. Assume a universal free school meals program would be double that cost, or $44 billion a year.

  • Parents who want to stay home, especially when their kids are under 6, feel shortchanged by the Child Development System, like they are paying for something they don’t want to use. So Congress reestablishes the 2021 expansion to the Child Tax Credit which sent almost all kids $3000 a year regardless of parents work status. That would cost $160 billion a year.

If you’re keeping track, we are at $429 billion a year. So for about the same amount of money for the tax cut that was just passed, all kids in the US get: paid family leave as a newborn, early childhood care, lunch and breakfast every day they are in school, after school programming, summer programming, and all while their parents get $250 a month in help.

Like I said, we’ve been conditioned to be insecure and unambitious. I say with confidence: We can do this. And I say with passion: We should.

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You can read my testimony or watch it.

I struggled with the defeatist mindset of the hearing, like we can’t have nice things in our economy because there are old people. I felt like the older population was being used as a bogeyman to justify spending cuts. I pushed back hard: investing in the young—in workers and families—is the only path forward for fiscal sustainability.

As we watch Congress limp towards a terrible debt-ridden bill, it’s helpful to remember that whatever damage they cause today, the solution the economy and budget needs for the future is the same.

To Stop the Fiscal Apocalypse, Bet on the Young

The only viable way to support an aging population is to make working people richer and more plentiful.

Published November 2023

Have you heard about America’s impending fiscal apocalypse? It’s that moment in the not-too-distant future when there will be too many elderly people for younger generations to support, rendering the federal government incapable of meeting its obligations.

The apocalypse can be averted. Just make the young richer and more plentiful. Fantastic as that might seem, it’s entirely attainable.

Policy makers are rightly concerned about the country’s demographics. Over the next 20 years, the number of Americans over age 65 will grow 50%, from 54.1 million to 81.5 million. This, in turn, will radically increase the cost of programs that serve the elderly, including Medicare, Social Security, Supplemental Security Income and Medicaid.

Making the old cheaper isn’t much of an option. The biggest cost driver is their sheer number, and the second biggest is their increasing longevity — two things one shouldn’t want to change.

Thus, the only viable solution is to make the young more capable of bearing the cost. This doesn’t necessarily require making individuals wealthier, as long as generations as a whole have greater resources. Given that the majority of income comes from earnings, the key is to increase the number of people working.

The good news is that there’s a lot the US can do. The federal government has so far failed to implement numerous policies with a proven track record of increasing labor force participation. And there’s plenty of room for improvement: Among 38 countries in the Organization for Economic Cooperation and Development, the US ranks 29th by share of the population employed.

Some policies would have no direct cost for the government. If it mandated a minimum number of paid sick days, the right to work part-time and the right of tenured workers to request flexible work arrangements, it would help mothers, the disabled and the elderly work more. Instituting paid leave for family and medical reasons — financed with a payroll tax paid into a separate trust fund -- would help all workers stay employed amid various crises and life events.

Other policies require investment. Subsidizing child care arguably has the highest upfront cost, but also offers massive potential gains. In the short run, it would increase the percentage of women working. In the longer run, it would likely make their children more likely to work and to earn more when they come of age.

Another way to enrich a generation is to increase its size. To that end, immigration policy must recognize that the US needs workers, and that having millions of people in the country not able to fully participate in the economy is a bad idea. Whatever their citizenship status, people who are here should be allowed to work.

Boosting fertility can help, too. The US is experiencing a 15-year decline: What started as a slide attributed to the 2007 recession is now a generational trend. One in five couples struggle with infertility. Yet the combination of poor insurance coverage and high medical costs means that in-vitro fertilization can cost tens of thousands of dollars per kid, and even a regular delivery costs on average $2,600. That’s a tax on childbirth. No wonder surveys find as many as two thirds of families with children citing cost as the reason they won’t have another.

What seems lost on Congress is that if the US fails to enrich younger generations, the burden of an aging population won’t go away. If the elderly lose government benefits, their children and grandchildren will have to make up the difference. No matter what, the burden falls on working families. So investing in younger generations would still be the right policy, to help them prepare for what is coming.

Instead, legislators seem poised to make a bogeyman of the elderly, citing the cost of Social Security and Medicare as a justification for slashing spending elsewhere. But America can’t cut its way to growth. To prevent the fiscal apocalypse, it’s time to bet all we can on the one group of people that can hold up the future: young workers.

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I struggle to understand the rules and procedures of Congress, but here’s what I know: Republicans are using the reconciliation process to pass a tax cut that will costs around $4.6 trillion with simple majority, rather than two-thirds majority.

The origin of this cut is back in 2017, when Republicans used a similar process to pass the Tax Cut and Jobs Act. It costs $1.9 trillion. Because it was so expensive, most the provisions that applied to household filers (as opposed to corporate filers) were temporary; they expire in 2025. Republicans want to pass another tax cut to extend those rates. If passed, it will be (I’m pretty sure) the most expensive piece of legislation in US history.

And at the risk of painting with too broad a brush: nobody wants this.

We’ve had a lot of practice at tax cuts by now, and enough experience to know that they are bad policy. There is no bang for the buck.

$4.6 Trillion in Tax Cuts is a Squandered Opportunity

The Congressional Budget Office estimates the cost of proposed legislation over a ten-year window and the resulting ‘score’ is the sum over those years. So the 2017 Tax Cut and Jobs Act, which came in at a score of $1.9 trillion reflects an average $190 billion per year cost. The tax cut currently being prepared will be $4.6 trillion, or $460 billion per year. (Republicans are trying to offset the $4.6 trillion cost of the tax with cuts to spending to reduce the net cost of the bill, but that won’t change the cost of the cuts themselves.)

So let’s look at some other ten-year costs.

• Starting up a universal paid family and medical leave program scores at $200 billion.

• Universal preschool for three- and four-year-olds as well as capped child care costs for children under 3 scores at $350 billion. So if you wanted to go fullly free and universal, a generous estimate is $500 billion.

• The federal government currently spends $250 billion for free and reduced school lunch, which goes to about half of children, so a rough estimate for the score of universal school meals is $500 billion.

• The fully expanded and refundable Child Tax Credit (which was in place in 2021, provided a minimum income for all children, and lifted 3+ million kids out of poverty) scores at $1.6 trillion.

• Congress currently owes Social Security $2.7 trillion. That’s the value of Social Security’s trust fund which is held as treasury bills. Social Security is currently drawing down this fund is expected to deplete (i.e. paid back fully by Congress) by 2035.

So let’s put that all together.

Over the next ten years Congress could start a universal paid leave program, universal free childcare for all children ages 0 - 5, two free meals at school for every public school student in the US, and establish a minimum income for children through the Child Tax Credit and the total score is $2.8 trillion. You could do all that AND have enough money to pay back two-thirds what is owed Social Security for the size of the tax bill that Republicans are trying to pass.

I reckon it would be the largest investment in children the US has ever made and it would be transformative.

If tax cuts were some magical cure all to the economy that would work just as well as paid leave, child care, school meals, and halving child poverty could, that would be one thing. But we know that they don’t, because we’ve been here before—$7 trillion times before.

Learning from a $7 Trillion Experiment, Part 1: The Economy

I’ve written about this previously, but I call this our “$7 Trillion Era” because Congress has passed four tax cuts this century. Here’s the official names and projected ten-year score according to the Congressional Budget Office:

• 2001 Economic Growth and Tax Relief Reconciliation Act: $1.26 trillion

• 2003 Job Growth and Tax Relief Reconciliation Act: $350 billion,

• 2012 American Taxpayer Relief Act: $3.6 trillion,

• 2017 Tax Cut and Jobs Act: $1.9 trillion

Which totals $7.11 trillion.

Those cumbersome names tell you a lot: tax cuts are motivated by the desire to grow the economy and provide relief to tax payers. On both fronts, tax cuts fall far short.

When I testified in front of the House Ways and Means Committee last year, I pointed out that their own research bureau, the Congressional Research Service, estimated that the 2017 law added 0.2% to GDP, which was actually below forecast, and the forecast themselves were just 0.3%-0.8%. For reference, the bill would have had to have added 6.7% to GDP to “pay for itself,” which is a ludicrous notion.

Here’s my testimony:

The other motivation is providing relief to taxpayers. Tariffs have already started to shrink the economy and banks/economists are forecasting a higher probability of recession. A lot of Americans may need relief soon. But tax cuts are an expensive and ineffective way to do it.

Learning from a $7 Trillion Experiement, Part 2: You!

The US has a marginal-bracket system; Congress doesn’t assign a tax rate to total income (i.e. you pay 15%) but a marginal rate to portions of income (i.e. you pay 10% on the first $11,600 and 12% on the next $31,000, and so on). Plus, it has ways to reduce your income or your tax bill through deductions and credits. The average tax rate is the result of all those components.

So the before-and-after picture of the $7 trillion is the average tax rate before any of these cuts (2001) and after (2021), which I show below for groups of taxpayers ranked by their income. Everyone saw a reduction:

Source: Statistics of Income, IRS.

So the net effect of the tax cuts is the difference in what the average tax rate used to be (in red) and what it is now (in blue). I can apply that to income and put a dollar amount on each income group. I do that below in the table.

For example, in the top row:

• The top 0.1% is defined as those households who earned at least $3.8 million dollars in 2021. They used to pay a 28.2% average rate, but now it’s 25.7%. Apply that rate difference to $3.8 million and they are keeping a minimum of $91,694 of extra dollars from the tax cuts.

Source: Statistics of Income, IRS

After that, I show the range of income within a group and apply the rate difference to the top and bottom of the range. For example, the second row:

• The rest of the top 1% earns at least $680,000 but less than $3.8 million. Their average rate fell by 1.67. I apply that to their income range to get a range of $16,577 - $11,407 that they are keeping from the tax cuts.

What you can see in the table is that for the bottom 95% of income filers, the net effect of the the $7 trillion era is about a thousand extra bucks a year, a little more if you earn more and a little less if you earn less.

These numbers aren’t predictive, their illustrative. They show you how tax cuts could be both enormously expensive while ineffectual at the same time. In reality, your actual tax bill would depend on your situation and how savvy you are at filing taxes. But on the whole, it’s a grand.

What $1000 Doesn’t Solve

As far as economic relief goes, giving most Americans $1000 doesn’t translate to addressing the root of their economic problems. Consider:

• Housing costs:

  • Zillow estimates the average montly rent is $1,827.

  • apartments.com comes in slighly lower at $1,624.

  • Bankrate estimates average mortgage payment at $2,225.

• Child care costs:

  • The Department of Labor estimated in 2022 that the median child care price for a single child was between $5,000 and $15,000 per year, depending on the age of the kid and the type of care.

  • Care.com surveys parents and comes in much higher in 2025, averaging $17,888 per year.

I could keep throwing numbers at you but you know the reality of your own life. I’m not sleeping on $1000, but rememeber this $1000 cost $7 trillion. And when you think of what else that money could have been spent on, it can feel even more expensive.

This is why I write off the impending tax cut with “nobody wants this.” Tax cuts can provide relief for a problem, but they can’t solve a problem. And in this case, the relief is more expensive than the solution.

I’m Still Not Mad

On one level, I get that this is infuriating. What can $4.6 trillion do that the first $7 trillion didn’t? We’ll soon find out that the answer is, indeed, not much.

I keep going back to “nobody wants this.” I’ve found it fascinating to read articles about constituent town halls where the palpable anger and frustration of Americans is directed back at their representatives. Republicans have openly embraced the policy of not talking to their constituents in any public, open setting. Check out this highlight from the AP:

“MECHANICSBURG, Pa. — Many days over the past two weeks, no one answered the phone at any of U.S. Rep. Scott Perry’s four offices.

Perry’s team did not share details about the Republican congressman’s public appearances until they were over. Even supporters who live in Perry’s central Pennsylvania district could not remember the last time he hosted an in-person town hall.

No one opened the locked door at his district office in Mechanicsburg last week when an Associated Press reporter rang the bell. A male voice said through the intercom, “I don’t have any public appearance information that I can provide.”

Y’all, do you think they are locking their doors and speaking through intercoms because they are being inundated with pleas to hurry up and pass a tax cut? Americans are mad and scared about so many things, but it’s not as if they are rising up in a chorus, united in their hope for a $4.6 trillion extension to the TCJA.

It’s bad policy, top to bottom. And every economic frustration that propelled Republicans into power will be left waiting for the next election.

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I’ve mentioned before in this newsletter that I’ve started a podcast, Optimist Economy. Each episode, my cohost Robin and I talk about a problem or solution in our economy—what do we know, what can we do, and how do we talk about it. Our goal is to leave listeners informed and empowered (and hopefully a little amused!)

The conversation also helps me synthesize what I think about an issue and how I want to talk about it. So we created a newsletter for the podcast to stay in conversation with our listeners and put my synthesized thoughts back out in the world. Our second episode was on DEI. It inspired me to write the essay I’ve previewed below. It is a reflection on fairness as much as it is DEI.

Lack of Diversity, Inequity, and Exclusion

Between Trump’s executive order and the number of private companies that are pulling back on their own efforts, we are quite possibly at the end of the Diversity, Equity, and Inclusion (DEI) movement.

What’s amazing to me, thinking of DEI truly in retrospect, is how much we failed to learn from it. Or, as I said in the show, “the two things we didn’t learn from DEI that we should talk about at its funeral.”

A note: I’m going to present this essay using black-white gaps in our labor market as the emblematic example of why DEI was needed and how people reacted to it. When it comes to discrimination in the United State, black people, sadly, come first. If I were talking about male-female, straight-gay, cis-trans, native-immigrant, the supporting evidence would be different, but the conclusion would be the same.

First, What We Already Knew

If there were a way to sum up the motivation for DEI in one figure, it would be this one: the unemployment rate of black and white workers since 1972. What you’ll notice is that the average black unemployment rate—in good times or bad, in past decades or the present—is twice the white unemployment rate, or higher. Always.

To keep reading, head over to the Optimist Economy newsletter.

I submitted it to my editor at Bloomberg, but it wasn’t accepted. They had just published a suite of pieces about the transition. I’m a contract writer, which has the freedom of pitching whatever I’d like to write about rather than being assigned a topic, but with the catch that they won’t always take it. I wrote instead about hiring rates and return-to-office mandates, and archived the unaccepted draft.

It hasn’t been 100 days since, yet it feels like we have all been through Something. So much tumult. So much destruction. So much harm. So much lost.

I went back, and read over my predictions, which I share with you today.

The Great Leap Backward…

What can we expect from the economy in Donald Trump’s second term as president? It’s a question on many minds, no doubt, given the relative precarity of the US’s current position and the potential destruction of what he’s proposed as a candidate.

To review, in the past five years the US economy has seen: the single largest month of job loss on record, the worst unemployment rate since the Great Depression, the fastest job growth in fifty years, the highest inflation in forty years, eleven interest rate increases, consumer sentiment hanging out at lows typical for recessions while the yearly growth of the S&P 500 averaged 15%.

By some miracle, the economy has emerged from this fever dream with normalized price growth and an unemployment rate of 4.1%. Predictions abound about how the new president’s plans for tariffs, deportation, tax cuts, and the gutting of the federal government could affect this hard won but vulnerable steady state.

Those predictions live in the short term. In the long term, there’s little question that Trump will be a failed economic president—not by progressive standards, but his.

Trump’s central economic ethos is to recreate the past, and he will fail.

In the short term, any range of outcomes is possible. And it helps to remember that when it comes to the economy, Trump is truly charmed. Over the past 50 years, only three presidents have come to office in a stable economy, one that wasn’t tipping into recession or struggling as it came out of one: Jimmy Carter, George HW Bush, and Donald Trump. Though in Trump’s case, it’s true twice over—both 2016 and 2024.

This correlation between bad economies and new presidents makes sense on some level; a bad economy tends to compel voters to kick the incumbent out of office and the new guy comes in to clean up the mess. Yet, it also emphasizes that an administration born out of economic stability is a gift.

Trump’ll squander it. Maybe not immediately, or obviously. Maybe the real time performance won’t suffer much because at the end of the day even the president is no match for a $20 trillion economy.

But what we’re losing is the chance, from a position of strength, to embrace an uncertain future and make it our own. Trump’s whole ethos—clear from both campaigns—is to look backward.

White men with high school degrees used to have more opportunities for high paid manufacturing jobs.* So let’s tariff our way back there. It wasn’t that long ago that immigrants were less than 5% of the population and now they are almost 15%. So let’s send them back.

Other views he’s not espoused directly but his surrogates affirm in his silence. Working women complain about how expensive child care is, basically asking taxpayers to raise their kids. No sale. If you can’t afford to have kids, don’t have them, and if you can’t afford child care, stay home like women used to.

Problems that don’t have a neat nostalgia with the past get less attention, like wealth and income inequality, healthcare affordability, housing affordability, and the threat of AI on jobs. These get the “concepts of a plan” if they get anything at all.

Trump’s promises, and this yearning for the past translated into economic policy, have incredible appeal. But they work better in elections that they do in power, and it means that he’s guaranteed his own failure. Not on the small things—no doubt tariffs and deportation will occur to some degree—but he will fail to deliver on the big promise of recreating greatness defined by what was, rather than what could be.

We can’t go backward. And in 25 years, that will probably be Trump’s legacy. A hard learned lesson that however appealing the past, the economy moves forward with or without our policy leadership.

…Starts With Small Steps

Those were my musings before this all started, and I think what I couldn’t appreciate at the time is how violent this all would be. It’s so senseless—destruction for destruction’s sake.

But I read my words back and it felt like a friend patting me on the back reassuring me to keep a level head. Trump has backed himself into a corner. He’s going to write cruel executive orders about diversity and transpeople, but he can’t erase the people. He’s going to carry out cruel and illegal deportations, but we are still a country of immigrants. He’s going to use our economic livelihoods as a bargaining chip in a trade war, but manufacturing employment will never reach the levels of past eras.

He only has one guaranteed legacy and that’s to fail at making America 1955 again. His goal, not mine, and he’ll miss.

It’s a nice thought.

An even better one: all the ways to build and rebuild for a better future.

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*When I originally posted this article I mistyped this as “white men without high school degrees,” instead of “with high school degrees.” It caused some consternation in the comments! Apologies.

But as I wrote at the time, recessions happen. There have been 13 since World War II. The problem is less that a recession is coming—it’s like a bus, it’ll come eventually—and more that the U.S. was so unprepared for one. This is just as true today as it was two and half years ago.

Yet Again, America Isn’t Ready for a Recession

Published December 2022

Most economists believe that the US is headed for a recession, which could prove to be brutal. Is the country prepared? Judging from the system of unemployment insurance — a crucial support for the jobless and for the entire economy — the answer is a clear no.

America’s basic unemployment benefits were never very generous, and for the most part haven’t kept up with inflation. Over the past two years, only 11 states have increased their maximum payout along with consumer prices, which have risen about 15%. Another 21 haven’t changed it at all; Oklahoma cut it by 10% last year. And it’s not as if 2019 was a high-water mark. Much like on the eve of the pandemic, the system is far from recession-ready today: As of the second quarter of 2022, benefits as a share of workers’ income ranged from 49% in Iowa to just 27% in Arkansas.

Why such a meager safety net? Unemployment insurance suffers from some critical design flaws. For one, it’s financed with taxes on employers, who don’t receive the benefits and must pay more for each worker they lay off. Also, unlike federal programs such as Social Security, it delegates the administration to states.

When the program was created in 1935, these were seen as features, encouraging companies to keep people employed and allowing states to tailor tax rates and benefits to their local economies. In practice, they’re bugs: Employers try to prevent or delay workers from claiming benefits (there are even companies whose business model is to help employers reduce claims), and states competing to attract employers try to keep taxes and benefits low. Some states, such as North Carolina, openly embrace cutting benefits and reducing participation in their unemployment program. Others just let it erode.

Another issue is moral hazard: States have become accustomed to the federal government stepping in when there’s a recession. That’s what happened when the pandemic hit, to an unprecedented degree: Congress kicked in some $650 billion over 18 months to lengthen benefit periods, make more workers eligible and boost payments by $600 a week. Starting in the 1950s, Congress has financed an extension in the duration of benefits during every recession.

Legislators have long been aware of these design and incentive flaws. The 1973 recession was a major wake-up call: The program’s viability came into question after a period in which it had coasted on the wartime production economy, the post-war boom and a consistently broadening tax base. In the mid-1970s and again in the 1990s, Congress created multi-year commissions to craft comprehensive reforms. Their recommendations included changes to tax structure and regular benefit increases. None were adopted.

The Government Accountability Office has said for decades that unemployment insurance fails to meet its basic objectives — and recently put the program on its “high risk” list, noting that separate application programs in each state make the program a fraudster’s dream. If Texas figures out you applied for benefits using a few hundred stolen Social Security numbers, just head across the state border and try New Mexico.

Poorly designed, poorly maintained and at high risk for fraud — this is how the unemployment system looks with the country potentially on the brink of recession. Even a “soft landing” will be a rough ride for workers who lose their jobs.

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Optimist Economy is a labor of love. We don’t have any sponsors or backers yet, or a podcast company that is overseeing the show. My cohost Robin and I are absolute novices when it comes to podcasts, though we’ve hired an audio engineer to produce the episodes (she’s amazing!!!). We’ve been taping episodes for about a month, trying to build confidence and some production cushion.

So it was with incredible excitement that we finally shared what we’ve been doing with the world.

Kudos to one of my friend grouptext that one of the first reactions I got was a slightly sarcastic, “In this economy?” followed by a laugh and congratulations. Later I posted a video to my social media asking followers to send us their questions and worries about the US economy, and one of the first emails we got asked, “Is it appropriate to be optimistic right now?”

I think the answer to the question is an emphatic yes.

Why Optimism?

First of all, you deserve it. You deserve to feel like the US economy can be better than it is, that the best economic era is the one that we will build. You deserve to be informed about that future and empowered with that knowledge. Because it’s true!

The last 45 years have seen a stall in economic progress, as the wages of the bottom 60% stagnated. And the last 25 years have seen a near total failure of economic leadership in Congress to enact policies that help Americans and improve the economy. We have so many solutions waiting for their day in the sun and so many problems that were given too free a rein.

On Optimist Economy, we’ll talk about how to build that future, one problem and solution at a time.

Second, Trump and the destructive policies that he’s putting in place thrive on cynicism, of both his supporters and his detractors. He capitalizes on anger and frustration like no politician I’ve ever seen. I’m sure you’ve heard the reaction to the Department of Government Efficiency that rings with a cynical defeatism: the government was already corrupt and not working so might as well destroy it.

And his agenda blossoms with cynical apathy. Everything awful that he wants to do is much easier to accomplish when you’ve given up. Again, I’m sure you’ve heard the reaction or comment: …that’s assuming we even have elections in four years, which we won’t.

Y’all, giving up is giving permission. He doesn’t deserve it.

His whole movement is built on lamenting a lost past. So the best way to counter him is to focus on the bright future. He has no answer for informed optimism.

Third, in addition to being an economist I am also a human and the news is really hard to read some days. And hard to live. I live in a middle class community in DC and child’s birthday parties have turned into a hellscape of federal government layoffs that have put most of the families in my community at risk, if not out of the job already. Plus, the federal government is one of the largest employers of PhD economists and my LinkedIn feed is populated with news of layoffs and leave hitting my friends and classmates.

I need a place where I can counter the bad news, to make it seem small in comparison to what I know is coming. Elon Musk on his best day won’t accomplish a fraction of what free school lunch will do, or paid family leave, or new work rights and standards, or a renaissance of unionization. They will transform the country, and whatever he does will be reversed and erased. And if I need to repeat that to myself, I may as well invite y’all to listen in.

Keep the faith, keep the fight, and remember the only way to make sure your voice is powerless is to say nothing at all.

We’re at optimist.economy@gmail.com, send us your economic questions and worries.

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It’s a shocking statistic, but if it drives even an ounce of sympathy for the top 1%, it’s because people don’t understand where it comes from. Twenty years ago, the top 1% paid about 33% of all federal income taxes. It’s jumped to 45% since then. But here’s the catch: their tax rates have gone down. In fact, the top .1% saw the largest tax cuts over the past 20 years out of any income group.

How? How can they pay more in taxes even as they are getting the largest tax break?

Their income is skyrocketing.

The Unstated Disclaimer: This is Just Federal Income Taxes

Before getting to any of that, let’s pause and remember that this fact is pretty misleading because federal income taxes are not the sum of all taxes. Rather, just under half of all tax collections are the federal income tax (45%).

About 22% are social insurance payroll taxes, the largest of which is Social Security, and 16% are sales taxes. Those two are both regressive (the effective average tax rate is highest for people with lower income). Another 11% is property taxes. Corporate taxes are the remaining 6%.

Source: Tax Foundation

The Necessary Context: We Are in An Unprecedented Era of Tax Cuts

I call this our “$7 Trillion Era” because Congress has passed four tax cuts this century. Here’s the official names and projected ten-year cost according to the Congressional Budget Office:

• 2001 Economic Growth and Tax Relief Reconciliation Act: $1.26 trillion

• 2003 Job Growth and Tax Relief Reconciliation Act: $350 billion,

• 2012 American Taxpayer Relief Act: $3.6 trillion,

• 2017 Tax Cut and Jobs Act: $1.9 trillion

Which totals $7.11 trillion. If Republicans pass the tax cut that they are trying to get through Congress right now, it’ll jump to $11.5 trillion.

Part 1: Who is the Top 1%?

Proverbially, the top 1% is shorthand for the richest/wealthiest/top. But in reference to their tax burden, we are talking about a very specific group that is defined by IRS filing statistics: it is the top 1% of households based on the adjusted gross income they paid income taxes on. In 2021, 154 million households filed tax returns so the top 1% is 1.5 million households, the top .1% is about 154,000 households.

In the first figure, I show the taxable income needed to be included in each group in 2001 (before our $7 trillion era began) and 2021 (when its in full effect). The top 1% has at least $682,577 in adjusted gross income and the top .1% has at least $3,775,593. As the chart moves left to right, it’s moving down the income distribution, all the way to the top/bottom 50% at $46,637.

Another way to read this: half of households have less than $46,637 in income.

Source (for this and the remaining figures): IRS Statistics of Income

You can kind of see the problem already: the income cutoff for the top .1% has nearly tripled. Remember these cutoffs are the bottom of the income within a group, the minimum to be included, so the top .1% average income could be $5, $10, even $20 million. It’s also a good reminder that households aren’t permanently included in a group, inclusion varies year by year depending on income.

Part 2: What Are The Top 1%’s Tax Rates?

The US has a progressive federal income tax system: the more you earn, the higher share of your income you have to pay.

The US income tax system uses a “bracket” approach that taxes income at marginal rates (i.e. 10% rate on the fist $12,000 in income; 15% rate on the next $40,000 in income, all the way up to 37% on income above $600,000). The effective tax rate is the rate they actually paid, not the individual marginal calculations.

In this next figure, I show for each income group their effective tax rate, which is their total tax bill as a share of total taxable income. Income is also arranged from top to bottom in mutually exclusive and exhaustive groups: the top .1%, the next .9% (aka the rest of the top 1%), the next 4% (aka the rest of the top 5%) , the next 5% (aka the rest of the top 10%), and so on.

You’ll notice:

1) as income falls (left to right) so does the tax rate

2) each rate has fallen between 2001 and 2021.

But who saw the largest cut? Who saw the biggest gains from the $7 trillion era? Just take the difference between the orange and blue lines and surprise surprise: the top .1% is the winner, their rate dropped 2.43 points, and its the biggest by a decent stretch!

Part 3: How Much Does the Top 1% Earn?

I already showed you the dollar amount of their in the first figure: top .1% is minimum $3.7 million in income, top 1% is minimum $680k. In this next one, I instead show the share of all income earned by each group in 2001 and 2021. To calculate this, the IRS adds up all of the income tax collected across all taxpayers and then divides out the share paid by each income group.

To me, this is the shocker.

The top .1% went from earning 8.1% of all taxable income to 14.3%. By comparison, the bottom 50% went from earning 14.4% of all taxable income to just 10.4%. The richest 154,000 households earns more than the bottom 77 million.

The rest of the top 1% also saw big growth, from 9.4% to 12%.

Combined, the top 1% earns a quarter of all income.

Part 4: So What Do They Really Pay 45% of (federal income) Taxes?

Yes. The figure below shows the share of taxes paid by each income group. Despite their falling tax rate, their income is rising so fast it’s pushing up their tax bill.

Conclusions

If you hear this 1%/45% talking point, clap it back. Oh, it’s unfair that the top 1% pay 45% of income taxes, but it’s fair they earn a quarter of all income?

And you probably will hear this talking point.

Republicans have adopted the 1%/45% as a key talking point for their proposed $4.5 trillion tax cut. It’s almost like they’ve given up on defending their tax policy as benefiting the majority of Americans, and acknowledge that it flows to the top but hey, the top needs a break! They also treat it like proof-of-concept for spending cuts. Something like: Look at how much the rich already pay, we can’t tax them any more. Ergo, deep spending cuts are the only option.

Or, to say what they are saying but being explicit: taxing the richest Americans who have the fastest growing income is unfair, so we should cut Medicaid.

You can see this in action: Check out this video from Rep. Maloy (R-UT), where she explains why taxing the richest more won’t help our budget problems:

(If you want to know my thoughts on the video, check out the comments. I was bored on a plane and basically wrote an essay in response, thinking it was a DM. And of course the wifi was spotty so it went through twice.)

For me, I focus on the top 1% earning 25% of all income. That’s proof positive that our economy is generating far too much income inequality and that in turn is creating structural insecurity. Instead of manipulating the tax code so the top 1% are less burdened, lets address the inequality it reflects.

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So which is it? Do we need child care for kids? for workers? for the economy?

All of the above.

The Basic Argument for 0-5 Child Care

Child care is an investment in children’s early education and development which bears lifelong fruit. It supports parent’s employment, which does the same. The latter benefits the economy in real time, because the size of our economy is directly predicted by the number of people working in it. The private market for care is failing, hurting families and curbing our economic potential.

Easy enough.

The Objections

Are wildly diffuse.

• Public Child Care is Having the Government Raise Our Kids

• Moms Don’t Have to Work, They Choose To

• Don’t Have Children if You Can’t Afford Them

• Child Care is Expensive, But it’s Just a Few Years of Pain

• The Federal Government Wouldn’t Know How to Create a Child Care System

• I Shouldn’t Have to Pay for Someone Else’s Children

• Child Care Doesn’t Make a Difference, We Could Spend that Money in Other Places

Let’s get to it. I have a few different tacks for each of them, depending on how saucy I’m feeling.

Public Child Care is Having the Government Raise Our Kids

Cool Headed: The private provision of child care is a market failure. The government isn’t intervening in the family, it’s intervening in a failing market.

Feeling Saucy: This is a horribly arrogant posture that you’d never see applied outside of care. Congress passes a defense funding bill, do they put stars on their sleeves and say they’re all four-star generals? They fund NASA, do they don flight suits and claim that they are astronauts? But they take over child care and get to claim they are *basically* parents? No.

Moms Don’t Have to Work, They Choose To

Cool Headed: Labor market income is a necessity for families, that’s why two-thirds of mothers with children under 6 are working. They want money, stability, and security for their children. Unafforable or inaccessible care discourages work, in effect making that money, stability, and security a privilege for the richest who can afford care.

Feeling Saucy: What a remarkable declaration in a world in which federal policy has declared unequivocally that poor mothers MUST work to get public help. The entitlement for cash support for poor families was ended in 1996 and replaced with a program that has a work requirement, one so onerous that the number of women receiving help goes down during recessions. Those are the same type of work requirements being added to food stamps and what Republicans have said they’d like to add to Medicaid. They have to work if they’re poor but they choose to work if they’re rich? Please. This is not how we design economic policy. If you hate women, write a blog post, when you’re ready to design smart policy to support labor supply, give me a call.

Don’t Have Children if You Can’t Afford Them

Cool Headed: Parents don’t earn the same salary their entire life; as they age and gain work experience, their earnings grow. Most have children near the start of their work life, and therefore near the bottom of their lifetime earnings. In addition, the cost of the first few years of child come as a sticker shock for many, who do not understand that childbirth incurs thousands of dollars of out-of-pocket costs, that family leave is mostly unpaid, and that putting two kids in child care costs more than a mortgage in 45 states and DC, more than rent in 50 states and DC, and more than in-state tuition in 39 states and DC.

Feeling Saucy: This is wild classist! The implications of this objection is essentially that having a family ought to be a luxury in the United States. You want to operationalize this through some kind of income test? Show your W2 to the OB to see if you still get to have a kid?

Clap back: This is your answer? We have a failing market for child care, families are paying through the teeth, women are either dropping out of the labor market or putting their kids in low quality care, and your solution is no more kids? That’s uncreative blameshifting.

Child Care is Expensive, But it’s Just a Few Years of Pain

Cool Headed 1: The child care bill is up to five years long, but the consequences of that payment can last much longer than five years. First, families can go into debt to afford care, including through expensive borrowing avenues like credit cards. Second, the national average price of care is $11k per year, coming to a total of $55k per child, or over $100k for a two-child family. That’s $100k that isn’t being spent on housing, on retirement savings, on enrichment, on anything other than care. And, it’s worth noting, this is a $100k tax on work.

Cool Headed 2: The pain to families may be temporary but the affect on the economy is not. If someone cannot work because of child care, we lose five years of labor force participation at a minimum. That’s also five years of skills and experience being eroded and five years of earnings lost (and the taxes they would have paid on them. And if the parent never goes back to work, it’s closer to 35 years lost. This absolutely makes our economy smaller.

Feeling Saucy: This an admission that the system is broken, but policymakers are fine with the pain because the people experiencing it don’t matter. You don’t have to like children, or their mothers. Inflicting pain on them benefits no one, least of all the economy.

The Federal Government Wouldn’t Know How to Create a Child Care System

Cool Headed: The federal government has already created a child care system through the Military Child Care Act of 1989. It wasn’t an overnight success and like all social services, it’s a work in progress. There was legislation introduced last year to continue to expand and improve the program. But it’s been three decades and the military has better child care—and clear avenues to improve it—than the private child care sector. On the civilian side, the federal government has directly provided child care through Head Start since the 1960s. Like the military program, it is not an overnight success and is also a work in progress, but delivers high quality care, higher quality than families can buy

Feeling Saucy: No one would design the piecemeal private system that we have. If you wouldn’t start with this why are you making families end here.

I Shouldn’t Have to Pay for Someone Else’s Children

Cool Headed: The education of children is an economic investment that you benefit from. Those children grow up to be your doctors, engineers, builders, or any number of people you rely on in the economy. Their parents work, adding to the economy and paying more in taxes.

Pretending to be nice but actually throwing a little shade: Most people fail to appreciate economic investment that doesn’t flow directly through them. But this myopic, self-centered assessment does not make good economic policy. I don’t personally benefit from a new bridge in Minnesota, or rebuilding efforts after a hurricane, but I benefit from being in an economy and society with good infrastructure, that supports people hurt by a disaster. We assess economic policy by its return, not by your individual benefit.

Rolling eyes: Someone invested in you. Someone who wasn’t your parents and wasn’t yourself subsidized your upbringing. Our country is always investing in children. So really this isn’t about paying for someone else’s kid, it’s about those kids getting an investment that you didn’t get. So how should this work? It doesn’t matter what we learn about how to help children or how the economy changes, we can’t give kids today anymore than you got as a kid? Pettiness doesn’t make for good policy, especially when its spiting children.

Child Care Doesn’t Make a Difference, We Could Spend that Money in Other Places

Cool Headed: The gross economic inequality between rich and the rest of us in the United States is already imprinted on children by the time they show up to kindergarten. This is called the “school readiness gap” and its exactly as it sounds, the difference in readiness for kindergarten between children who come from different income households. The cause of this gap is not a mystery: it’s predicted by the same inequality children experience in the quality of early childhood care. And the consequences of this gap aren’t small, starting school behind can put children at a lifetime disadvantage. Kids don’t have an equal start, money guarantees that and always will. Comprehensive early childhood care is a thumb on the scale to fight that influence.

Swinging for the Fences: You want to know the truth about the American Dream? Is it alive? Have we ever had it? All wrong. We don’t want the American Dream, we don’t want every American to have an equal chance of success because that chance doesn’t start at age 18, it starts at birth. We’ve got definitive proof that by age 5, that dream is dead. And either you don’t care or you like it that way. Prove me wrong.

The Kicker

I have no doubt that child care—federally funded, free or near free care—is coming. Demographics like falling birth rates and labor force participation will eventually force the government’s hand. Childcare is a barrier to having kids and it’s a barrier to work. We need babies and workers. Ergo, it’s just a matter of time. And sometimes that’s the only argument that someone will hear. It doesn’t matter if you don’t like it, you can’t hold back the tide.

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I got a text from a friend who, like most of us, immediately equates news of layoffs with being in a recession. “How worried should I be?”

This newsletter is somewhat of a primer of layoffs and the labor market.

But first a quick disclosure: I find the denigration of civil service to be awful, and I am sad for these workers and our country. We are losing so much more than just jobs. However, this newsletter is going to talk about the economic dynamics in a clinical and somewhat cold fashion. It’s not because I’m not sympathetic or don’t see humans behind these numbers.

Layoffs are a Part of the Economy, All the Time

The US economy is very large. It has just under 159 million jobs in what we call ‘payroll employment.’ That’s exactly like it sounds, it’s the number of active jobs on the payroll of an employer. It could be part-time or full-time, could be seasonal or temporary (we count all of that separately too, but this is just to give you an idea of size). The labor market boasts 170 million workers, most of them in jobs, some in two jobs, some of them self-employed, some looking for work.

This massive market is always churning. Every month, people get laid off, quit, find a new job, switch jobs, retire, start looking for a job, stop looking for a job. Specifically:

• Over the last three years, there was an average of 1.6 million ‘layoffs and discharges’ each month, which includes layoffs, fires, business closures, mergers, and the end of seasonal or term jobs. Basically, the person isn’t in the job, and they didn’t quit, retire, or die.

An additional 220k extra workers being laid off in a month is large, but it’s not catastrophic. Put differently: an increase in layoffs in a month does not mean a recession must come, or a recession is somehow unavoidable. That’s in part because:

Layoffs Don’t Always Reflect Overall Economic Activity

The federal employee layoffs will reduce the number of jobs in the economy. But that’s not “recession-ary” per se because it’s not signaling that the economy has taken a turn. On a mercurial whim, and motivated purely by power and retribution, these jobs were ended. That’s different from, the economy is so slow we could no longer afford staff.

Big layoffs that don’t reflect economic activity (and therefore don’t instill panic) can and do happen. The Census Bureau, for example, hired half a million people for the 2020 Census. The survey ended, so did the jobs, and it didn’t automatically usher in a recession simply because it was a large number (granted they weren’t all let go the same month, but you get the idea).

Another example is natural disasters. To be a job counted in payroll employment, it must be filled, paying, and present. Someone is in the role, being paid for work, and is at work. A natural disaster can sideline tens of thousands of workers because they aren’t at work, similarly reducing the number of jobs in the economy. But again, since it doesn’t reflect the real-time strength of the economy, it doesn’t indicate a recession and isn’t interpreted as a harbinger of one.

[[SIDEBAR: If you are curious how all this works, economic data is based on surveys that ask about a specific time period within a month. So you wouldn’t be asked, “Do you have a job?” you’d be asked “Did you work for pay for an employer the week beginning February 10th?” This is called the reference week and it is whatever week includes the 12th of the month. For this reason, the federal layoffs will likely not ‘show up’ in this month’s economic data because the reference week was the week leading up to the layoffs. We won’t see the total scope of layoffs' impacts on overall economic statistics until the first week of April, when the March data is released.]]

It is completely plausible that even with a high number of laid off federal workers, the economy is fine. It certainly doesn’t guarantee a recession.

That Said, Layoffs are Very Dangerous

What most people get wrong about recessions is that they assume they are characterized by layoffs, i.e. a recession is when a lot of people lose their job. But that’s just how recessions tend to start. What really characterizes a recession is hiring, i.e. a recession is when a lot of people can’t find a job.

You can see this in the data. Here’s the number of layoffs and discharges in each month since 2000.

Obviously this chart is unreadable because of how drastic the pandemic layoffs were (13.5 million in March of 2020 and 9 million in April). I’m going to remove those two months of data so you can actually see something, I could just never present altered data without showing you unaltered data first.

Layoffs tend to be really stable. They jump up in recessions but that jump doesn’t last long. The 2007-2009 recession aka The Great Recession really only saw 5 months of very high layoffs before they dropped down to normal levels. It falls as fast as it rises.

That’s not true when it comes to hires. Here’s the number of hires in the economy over the same period (again with the 2020 spike removed so you can see the trend). Hiring fell below 5 million per month in March of 2008, when the economy was a few months into the recession. It continued to fall through June of 2009. It didn’t get back up to 5 million until the summer of 2014.

I overlaid these two data series and put them on separate axes so you can compare their shape side-by-side. They aren’t the same.

And of course, if you look at the tail end and the last few years, these lines are ‘heading towards each other’ again (it’s not actually towards each other because they are on different axes and hires is always much higher than layoffs, but you can see the direction and it ain’t great.) I wrote about recently how the fall in hiring is evidence of a labor market that is much weaker than it appears.

So the mechanics of a recession are: a lot of people are laid off, but they aren’t absorbed quickly into new jobs, increasing the unemployment rate. This reduces economic activity through:

1) direct channel: the people without jobs spend less

2) indirect channel: the people who have jobs see the high unemployment rate, worry that they’ll lose their job and spend less

3) feedback channel: both the increased unemployment and worry over unemployment saps workers of bargaining power, depressing wage growth and by extension spending power.

A jump in layoffs is danger territory for the economy because it’s how recessions tend to start. But, the real recession factor is how quickly they get hired back into work. It’s simply too soon to know how that will play out. It could be a blip. It could be a bump. It could be a jump. (All technical terms, mind you!) Either way, the largest employer in the US both shedding jobs and not hiring while the labor market is in a weak place—that’s playing with fire.

If you’re worried

The most important thing to remember is that recessions tend to tell us they’re coming. The pandemic was an exception to this because it wasn’t a result of the state of the economy, but the lockdowns. Most of the time, the economy gives us a lot of warning and that leaves room for policy to make a difference.

And while you might not have much faith in Congress or their motives, an economy spinning into recession within 12 months of Republicans coming to power—when they inherited a 4% unemployment rate and a mandate to help people struggling with the effects of inflation—is bad for them, and they know it. If nothing else, their political self preservation is aligned with a good economy. It’s not much but I’ll take it.

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