Welcome to the fourth episode of our series called Actually Making America Great! Thank you so much for tuning in and I hope you enjoy listening to this as much as we enjoyed putting this series together. This episode is much more broad, covering many different topics relating to making the economy work for the average American so instead of the normal intro, I thought I’d spend this time outlining the major things we will be covering in this segment. We will cover the history of the FDR’s New Deal and discuss the reasons why we should implement a similar policy today. We’ll also touch on the benefits of Policies like Universal Basic Income and a $15 Minimum wage as well as universal housing. This was probably my favorite episode to produce to without further adieu, let’s get into it
Welcome to the Great Depression. Economic catastrophe has wreaked havoc on the life of the average American. Food lines stretch for miles. Millions have lost their jobs as the real unemployment rate surges to nearly 20%. Millions of Americans have lost their health insurance. Evictions loom for 27 million Americans threatening to burgeon the homelessness rate.
Oh wait that’s not the Great Depression. That’s today. In the wake of the COVID 19 pandemic. Our economy, for the average Joe, is in shambles. Many people don’t qualify for unemployment and those who do just saw a reduction in their benefits. While jobs are slowly returning, many jobs are just permanently erased.
Congress’ first response? Bail out the corporations. They issued trillions of dollars in money with almost no strings attached. “Small business loans” went out to much larger corporations, including companies directly tied to the likes of, say, Nancy Pelosi. 454 billion dollars was allocated for corporations in such a way that, if they wanted, that sum could expand to $4 trillion. The Treasury allowed corporations to use the Treasury to prop up their stock prices. The Fed pumped $3 trillion into the economy and allowed companies to borrow money at basically zero interest. It was a free for all for all the richest corporate interests in the country, and the stock market boomed.
Meanwhile millions of Americans went homeless, and a third of them couldn’t pay their rent, and millions were out of work. The same companies who took government cash turned around and laid off their workforce and pocketed the money. That’s not a free market. That’s called corporate socialism. This at the very least isn’t how an economy is supposed to work. It’s called a recession, and while the richest people in this country added billions to their collective wealth, Americans suffered. The economy isn’t really run by people like you and me. But perhaps it should be.
THE GREAT DEPRESSION AND THE NEW DEAL
It really wasn’t always like this. Unemployment in the Great Depression, which is calculated slightly differently from the way it is done today, was at 25%. Our numbers today are probably an underestimate, as many people quit looking for work. Our GDP shrank by 27%. For comparison, in the second quarter of 2020, our GDP shrank by 33%. 2 million homeless were internally displaced. The situation back then wasn’t all that different from the one we have today.
The difference is how the government responded. Herbert Hoover, a staunch conservative and by no means a socialist, was leaving office right as the Recession was hitting. Even he recognized that the country would swiftly fall into chaos if the government didn’t step in to alleviate the economic hardship the American people were suffering. So he commissioned the Hoover Dam, a massive infrastructure project meant to help get Americans back to work. Their paychecks came right out of the government’s pockets.
It wasn’t enough, but Hoover was on the right track. The American people replaced Hoover with the most socialist president our country has ever seen, Franklin Delano Roosevelt. FDR realized that more had to be done. FDR set aside billions of dollars for the Public Works Administration, which commissioned thousands of infrastructure projects that put many Americans back to work. FDR bailed out the farmers who feed the country, believing the economic recovery couldn’t start if the farmers who laid the foundation of our country’s economy were bankrupt. FDR also spurred on the construction of private homes so that more people could own homes, addressing the homelessness issue. Affordable housing was soon made available.
FDR also created Social Security, which to this day remains an incredibly popular program. It didn’t just provide retirement benefits to keep the elderly afloat, but also provided a safety net for the unemployed, handicapped and needy families with children. It was funded by a payroll tax, which it still is. Any cut to the payroll tax jeopardizes the future of Social Security.
Building off the Public Works Administration, FDR created the Work Progress Administration, which also was meant to bring Americans back to work by giving them jobs building hospitals, schools and roads. But the PWA was never meant to compete with private industry, and so they paid lower wages. It was meant to simply offer a job to people who otherwise couldn’t find work. The free market went on.
How did FDR pay for all this? A lot of it was viewed as an investment in the American people and fell to debt in order to just end the recession. But he also hiked the top marginal tax bracket, and some argue he didn’t raise taxes on the rich enough (for example, the top marginal tax bracket which was 79%, was only on income above $5 million, which only applied to one American at the time). The primary source of revenue, however, was the incredibly high corporate tax rate. FDR also taxed corporations for unused funds at a high rate, forcing them to put that money toward paying their workers more and raising many out of poverty.
The Great Depression didn’t really end until WWII mobilized the entire US economy toward fighting the war. But the New Deal played a huge role in combating the devastating effects of the economic downturn. By 1937 unemployment was down to 14% from 25%. People had jobs and money to spend and the foundation had been laid for an economic recovery, which was only accelerated by WWII. And by the end of WWII, the US economy was the best it has ever been. That was when we were truly great, and it couldn’t have been achieved without the huge infrastructure and housing programs in the New Deal.
And strangely, none of this is being done now, when the economic situation today looks extremely similar.
THE ECONOMY ISN’T OWNED BY YOU
84% of the stock market is held by the wealthiest 10%. And yet, for many, the stock market serves as an indicator of how well the economy is doing. Yet, the vast majority of its ownership lies in the hands of the wealthiest.
But at least it tells us how well the economy is doing right? WRONG. It is an estimate, based on the consensus of investors, of how certain companies will do in the future based on many current variables. If all of them are wrong, and they overestimate how well the economy is doing and will do in the future, it’s called a bubble. And, as I’m sure you’re aware, bubbles have this unfortunate tendency to pop. Overspeculation and overconfidence eventually gets shattered when reality catches up to them and the result is a massive stock market crash, like what happened in 1929 to kick off the Great Depression. But no one can really accurately measure how well companies are doing; it’s always just an estimate, and that’s what the stock market is for. They can be wrong as much as they want, just until reality sets in.
The true correlation between the economy and the stock market is almost zero (r=-0.04).
That doesn’t mean the economy hasn’t been doing well, at least before the 33% shrink caused by the coronavirus pandemic. Productivity over the past few decades is through the roof! The American people bring the companies they work at immense revenue. We are some of the most productive workers in the world. We just don’t get paid for it.
If wages tracked with productivity, the minimum wage would be well over $20 an hour. Most activists only advocate for a $15 minimum wage. So where did all that extra revenue go? Largely, executive bonuses! The minimum wage has remained stagnant for two decades.
So yeah, our economy is doing great. You just don’t get to benefit from it. It isn’t for you. And when a recession hits, the government doles out cash to the corporations, but not to you. There’s no New Deal for you. Only eviction, homelessness, unemployment and poverty. But hey the rich get billions and you maybe get $400 a week. Under corporate socialism, economic inequality grows and the economy stagnates.
Proof? Our GDP shrank 33%.
Something almost suggests to me that this doesn’t work. Are we doing it wrong?
EVERYONE ELSE IS DOING BETTER THAN US
Germany almost immediately adopted a policy to supplement their workers incomes and help companies retain their employees while making them work fewer hours during the pandemic. The result was unemployment did not spike and ultimately people kept earning the same amount of money they earned while working less, putting them at reduced risk of contracting the virus. If you think fewer hours is bad for the economy, remember that the alternative is literally LOSING YOUR JOB COMPLETELY. Germany’s GDP shrank by 6.5%. Ours shrank by 33%.
France began offering small business loans and extended unemployment benefits, much like the US has done. But these loans actually went to small businesses and the unemployment benefits are on-going. Their GDP shrank by 14%.
So is the richest country in the world just worse than France and Germany? Not really. They just more closely implemented FDR-like policies, while we didn’t.
Germany and France are largely capitalist countries. What they did isn’t “socialism”. It’s just that what we did is called corporate socialism, where the economy serves corporate interests and no one else.
So what could we have done?
A NEW NEW DEAL
Our infrastructure gets a D+ rating from our own Army Corps of Engineers. That places us below some developing countries. Ironically, that’s because our infrastructure is crumbling because it's as old as the New Deal itself. It might be time to invest in updating our infrastructure to get people back to work, and also to make sure our bridges don’t just collapse.
While we’re at it, we might as well update our energy infrastructure in order to transition to cleaner, more sustainable sources of energy. This would bring us back to the same level as China and Germany, both of whom have embarked on huge programs to transition to wind and solar. This has the added benefit of cleaning our air. Air pollution currently kills roughly three hundred thousand Americans annually. Even if you don’t believe in the severity of climate change, in which case our reliance on nonrenewable energy sources is accelerating the rate at which our coasts get buried under water, we can all acknowledge coal and fossil fuels kill 300,000 Americans annually.
The important benefit of an infrastructure program would be putting millions of Americans back to work, while not just paying them to stay at home in the form of unemployment checks. The work needs to be done anyway, but it’s expensive. If we’re gonna spend on unemployment checks, we might as well put that money in the hands of people working to improve our infrastructure.
Social Security came into existence with the last New Deal. The new New Deal should include its natural counterpart, Universal Basic Income. This program is where everyone receives roughly $1,000 every month.
Universal Basic Income isn’t that radical of an idea. It already exists in Alaska, almost permanently. Kenya also has Universal Basic Income. Iran offers everyone cash when they need it in a cash transfer program. We’re frankly quite behind for not implementing this.
DEBUNKING SOME MYTHS: UBI
However, like seemingly everything in the world of monetary policy, this is highly contested
The single most common criticism of a Universal Basic Income is that it disincentivizes people to work. Well this claim is simply unfounded. An experiment was run in Canada to provide the entire town of Dauphin a universal basic income, and far from disincentivizing work, it encouraged people to open businesses they had dreamed of opening. It allowed people to leave jobs they hated and find better ones. Hospital visits went down as people’s overall health improved with the extra cash. High school graduation rates improved as parents were less stressed about cash, which made it easier for them to help their kids with school (and the kids didn’t have to worry about their parents’ financial troubles or start working at a young age). And, obviously, it helped raise people out of poverty.
In the US, a band of Cherokee Indians in North Carolina implemented UBI and it did not make them work less. Instead it reduced crime and drug addiction, and led to improved education. It literally helped them raise themselves out of poverty, giving them an edge in the American economy. Don’t you want everyone to have this edge?
In Finland, it helped people feel happier and less stressed, and didn’t disincentivize people from working.
Part of Brazil has UBI, and so does Iran, Kenya, and Namibia.
Now, yes, it does lead some people to take fewer hours at work. In other words, people don’t have to work insanely long hours to keep their family afloat and can spend more time at home with their loved ones. I’m sure everyone watching this would enjoy taking a few hours off of work to spend more time with their family if they could afford it.
And UBI doesn’t necessarily have to be “universal”. Instead of sending money to everyone, we could limit it to people who are below a certain threshold, like twice the poverty line. This saves billions of dollars on the price tag and actually gives the money to people who need it. Lost your job and now have zero income? UBI. Got a low paying job? UBI. Made it in the world and have a good paying job? Well, You’re on your own now. It’s about prioritizing the people who need the help. And it doesn’t have to be expensive.
Basically, UBI allows people to take control of their lives and brings people out of poverty. It’s an investment in people’s future so that they can break the cycle of poverty, contribute more to the economy, and give them a fighting chance at making it in the world. In other words, UBI doesn’t merely level the playing field. It puts the economy back in the hands of the people.
RAISE THE MINIMUM WAGE
Okay, I get it. Maybe UBI is too much for you to get behind. But at the very least, 2/3rds of Americans support a $15 minimum wage. While the $15 minimum wage doesn’t give people as much freedom to leave jobs they don’t like and find more fulfilling work, and also doesn’t give you a safety net if you lost your job, it still is tremendously key to giving the economy back to the people. It forces corporations to spend more of their profits on paying their employees, and not bonusing their executives.
For example, McDonalds would merely need to raise the price of the Big Mac by 68 cents, the Big Mac combo by a dollar, and the Dollar Menu by 17 cents to afford a $15 minimum wage across the board, with no changes to how it does business otherwise (no cuts to executives’ salaries, cutting costs, etc).
And all of this would only bring wages back to close to what they should be. Remember, the minimum wage should be almost $25/ hr. $15 is a far cry from “fair”, with respect to how hard Americans actually work.
DEBUNKING MYTHS: RAISING THE MINIMUM WAGE
I’m sure you’ve heard critiques of this, but they simply lack substance
Again, the main counter argument is that this would lead to mass layoffs and a dip in employment. This just isn’t true.
From a basic economics perspective, which one is cheaper: force one worker to work overtime, paying them 150% of their actual wage, or pay two workers at a higher wage. If you have to pay the high wage anyway, laying off workers is nonsensical because suddenly you have to pay a lot more in overtime pay!
And the studies have borne this out. Whenever the minimum wage is raised in various states, employment tracks with trends in neighboring states that didn’t raise the minimum wage. There’s just no evidence for this claim that “raising the minimum wage reduces employment”.
Now, would it be hard for many employers to start paying $15/hr tomorrow? YES! That’s why no one wants it to be implemented overnight. Gradually increasing the minimum wage allows time for the whole economy to recalibrate. It gradually shifts money back into the hands of workers, bringing more revenue to businesses in all sectors, allowing them to in turn pay their workers more. When you have extra cash as a minimum wage worker, you tend to spend it all on things you couldn’t previously afford. That money goes right back into circulation, raising revenue for other companies and boosting the economy. Meanwhile, this would raise MILLIONS of Americans out of poverty and be a great GDP boost.
For more information about raising the minimum wage and its benefits, I recommend reading the House Committee on Education and the Workforce Fact Sheet about it.
Universal Basic Income or raising the minimum wage, either one would be a massive improvement. But frankly no one is seriously considering implementing either. That’s because politicians aren’t very interested in doing anything to hand the economy back to the people. You have to make them.
THE NEW NEW DEAL: UNIVERSAL HOUSING
So what about housing? Clearly this talk of UBI and Increasing the Minimum Wage is great but without the fundamental aspect of housing, upward mobility simply cannot be achieved. Well look no further than the Squire of Hyde Park
FDR poured money into housing initiatives during the Great Depression. Affordable housing was made available and homelessness went down.
But why would we do that today? Oh maybe because 28 million Americans face evictions, a third of households haven’t paid rent for the last three months, rent is climbing in places like New York and Los Angeles, making it impossible to find affordable housing, and it is literally cheaper to house the homeless than leave them on the street. Oh that.
So how in the world can I say that housing the homeless is cheaper than letting them be homeless? Easy! Leaving them on the street makes homeless people much more likely to encounter police or land in the ER. Given that many homeless individuals have mental health issues, this just isn’t the best option for them. They either land in jail, which means our taxpayer dollars go towards tending to their every need when they’re in jail, or we pay their ER visits, in the form of Medicaid. We could cut down on those expenses by giving them a place to sleep, which allows them to get the necessary resources to find work or get treatment for their mental illness. Instead, we leave it to the police, whom we have to pay just to send them to jail, for which we AGAIN have to pay.
Housing the homeless also reduces addiction, which is a key step in getting them back on their feet! Not to mention that having lots of homeless people in an area drastically reduces property value, increases the crime rate, and stunts the local economy. Getting homeless people into housing returns all that lost value to the areas they currently occupy.
If you need proof that housing the homeless pays dividends, look to Australia. They offer “last resort” beds to the homeless and recent studies have shown that for every dollar they spend on those beds, the community got $2.70 back on their investment, by reducing crime, helping get people back on their feet, and reducing healthcare costs.
HOW DO YOU PAY FOR IT?
Wow, I packed a lot into that new, New Deal: massive infrastructure projects to fix our crumbling infrastructure and update our energy and clean up the airways and get people back to work. Also either a Universal Basic Income or a higher minimum wage to help people break free of poverty and contribute more to the economy. And universal housing to end homelessness and make an investment in our communities. Wow! I can hear it now! “How are you gonna pay for it”
Well, on the infrastructure point, the investment pays dividends in the long run. So does universal housing, and UBI. All three of them lead to greater economic activity, reduced poverty, more engagement of the workforce and the people having a greater role in our economic prosperity. But sure, the initial costs have to be covered.
You can easily look to the previous segment about how we have to end the War on Terrorism and re-invest that money elsewhere. Here would be a good place. Instead of spending on never-ending foreign wars, maybe we could fix our crumbling bridges. But beyond that, we could also raise the corporate tax rate to Great Depression levels, from 21% to 50% and mind you, the effective tax rate is always much lower than this number. Desperate times certainly do call for desperate measures. That means closing tax loopholes that allow American companies like Amazon, Netflix, IBM, and General Motors, to pay nothing in taxes (they all had a negative effective tax rate). This would add billions to our tax revenue without raising a single cent on your taxes. Housing the homeless only costs $16 billion. It means raising the top marginal tax bracket, which, for most of us, doesn’t even apply to us because we don’t make more than half a million dollars a year. Again, for the vast majority of Americans this wouldn’t raise taxes a single cent.
Raising the corporate tax rate doesn’t force companies to leave the US. Working in a foreign country is prohibitively expensive and causes those companies to miss out on huge government contracts and other business opportunities only available in the states. The cost to leave the US would be far, far more, than finally actually paying more than zero dollars in taxes.
The arguments that worry about the corporate bottom line really just prove: our economy isn’t built for the average American. It’s built for the profit of huge corporations. They pay nothing in taxes, but get trillions in bailouts when the pandemic hits. Meanwhile, those same companies turn around and lay off their workers and plunge the country into a recession. It’s time they pay their fair share. It’s time we have an economy that’s in the hands of the American people. Because that would actually make America great again.
This is the fourth of 5 videos in our series on Actually Making America Great. We aren't Democrat or Republican, but we try to find some common ground as we analyze 5 policies that we believe would have the most impact on the lives of the average American. These are typically issues you won't see talked about on the news or by your Congresspeople, but they should. Our goal with this video series is to make the case for these policies so that America can actually be Great. That only happens with your support. If you agree with this video, pls like, subscribe and share this video just about everywhere, I don't care.
And if you really really liked it, call your Congressional representatives and make them get behind these five issues:
1. End the Drug War
2. End the Foreign Wars
3. Universal Healthcare
4. Hand the Economy Back to the People
5. Get Money Out of Politics