NOTE: This transcript is automatically generated and cleaned up by AI to make us look like most of the time we speak complete sentences. It may not be verbatim and could contain mistakes that are different from the mistakes that we make on the podcast. Reader beware.
ROBIN: Today on Optimist Economy, we’re gonna talk about an essay that made the rounds while we were on hiatus, suggesting that the new “poverty line” is $140,000. Kathryn has thoughts.
KATHRYN: Spoiler: it’s not. It’s not. Just FYI. Spoiler: it’s not. But we’ll talk about why.
ROBIN: At the top of our show, a couple of announcements. Big announcement, which is I’m in Houston with Kathryn, but after much travails, we’re in two separate rooms trying to record this podcast.
KATHRYN: Fam, we wanted to be in the same room talking to each other. It did not work on many levels. It didn’t work, and luckily we didn’t do it because I think at some point one of us would’ve died when we tripped over all the cords we unconnected. So this is a safer, better way to podcast—to have a conversation when you’re actually like 25 feet away in the next room over. This is better.
ROBIN: It feels more natural.
KATHRYN: It does feel more natural.
ROBIN: So instead, we’re just gonna get beers after the show together and not record.
KATHRYN: But you can trust it’s happening this time. So this is gonna be our first five-minute episode.
ROBIN: And thanks for coming.
KATHRYN: And that’s it. Y’all, we’re in Houston together, so we gotta go. Bye.
ROBIN: Yeah. Bye.
KATHRYN: Okay. So in summary, announcement one is that Robin and I are hanging out without you.
ROBIN: Yeah. Announcement number two is, I forgot to say last week we had four people become spiritual sponsors of Optimist Economy while we were on hiatus, which was so, so amazing and so sweet. So specifically this week we want to shout out Rebecca from Hillsborough, Oregon, who was one of them. And you too can sponsor our show at the spiritual level or any level that you’re comfortable with at optimisteconomy.com.
Retcon
KATHRYN: Our next segment is Retcon.
ROBIN: It is only our second episode of the season. Do we have retcon?
KATHRYN: I actually don’t think I have a retcon. I mean, I could definitely try to think of one if I wanted to, but I don’t think we have anything to apologize for at the moment.
ROBIN: Except for the thing we’re gonna retract that we haven’t retracted yet. Yeah.
Terms & Conditions
ROBIN: Yep. Terms and Conditions. Did you look anything up this week, Kathryn?
KATHRYN: I actually took a very small—some would say maybe a little bit dumb, how short of a vacation I took—to London. But I was across the pond, so.
ROBIN: Oh.
KATHRYN: Hmm. So I didn’t, you know, I looked up really simple stuff, like words that are in English, but I didn’t know what they meant because I was in another country. But we don’t need to go over that now. I’m just bragging about being in London.
ROBIN: You are, you are. I looked up hedonic adjustments.
KATHRYN: Hedonic.
ROBIN: Hedonic, because it was in this essay and he used it as the, quote unquote, “hedonic lie.” And so it took me a while to figure out that he was referring to hedonic adjustments. As far as I can tell, this is an adjustment that the BLS makes to how much something costs related to how much more valuable it is and how much more value or usefulness it provides.
KATHRYN: And he called it a lie.
ROBIN: Yeah. Maybe you can explain it better than I did.
KATHRYN: Hedonic is a really cool concept that’s hidden behind economics language that makes it so inaccessible, but you absolutely understand. So if you think of a house, that house has a price. Let’s say this house is $500,000. $500,000 encompasses what we would call many differentiated characteristics of the house. Hedonic pricing is the idea that there is a price component of the quality that is not necessarily just the overall price. Hedonic pricing would be the price component of a house that comes down to how nice the park is at the end of the street, or if it’s next to a power plant. And we think of hedonic pricing as a way to discuss the implicit prices that make up the overall price. It is the quality that makes up a big price. I’m willing to pay for a good school. I’m willing to pay for a nice street. I’m willing to pay for lots of windows. And all of those are the components of this overall sticker price. And so those are the—we—you can think of them as implicit prices, component prices, hedonic prices. They’re all kind of different, but they get at the same idea that each aspect of the house that you buy has its own price.
ROBIN: But this is used, I mean, in the definition I was looking at, related to CPI, right? Which is the Consumer Price Index. I mean, a house is something you buy one time. I think for the CPI, don’t they adjust things like, I don’t know, a car adjusted for inflation would cost this much, but a car that now has airbags and antilock brakes and all these additional features, there’s more value to the vehicle.
KATHRYN: Yeah. So the hedonic pricing adjustments to the Consumer Price Index are getting at this idea that the components of the overall price have changed. So the way that I always thought about it is that most of the time when you go shopping, you’re actually shopping on a hedonic price. And then the price tag is almost like an afterthought.
ROBIN: Like, does it match? Does the price tag match what your hedonic—
KATHRYN: I’m willing to pay. Say one were to testify in front of Congress and wanted a new suit, right? I’m gonna go shopping for a suit. I’m shopping for components, right? I’m shopping for a color that’s really just gonna bang on camera, right? And I’m shopping for a fit and quality that, if I get something on it, it won’t show, right? I’m shopping for all of those components, and you can think of each of those components as having an implicit price where I would pay 20 bucks extra for a really good color. Versus, I’m shopping for a suit that costs $99. Like, you shop hedonic. You are buying on that margin. But when it comes to aggregate statistics of prices, I mean, this is so hard. This, in my mind, this is one of the hardest things the BLS has to do—is somehow put into statistical terms the quality adjustments that we know and see in our everyday life, and have that make sense over time. There’s lots of ways that they go about doing it, but it’s not perfect. And of course, being the BLS, when they think they’ve missed, they’ll go back and they’ll say, we think we were wrong. And they’ll issue a correction.
KATHRYN: Alright. We’re gonna take a quick break and then we’ll be back with our centerpiece discussion, or the Big Pilcrow. The Big Pilcrow. The biggest Pilcrow.
Centerpiece
ROBIN: Okay. We’re back for our centerpiece discussion today, which is about this essay that appeared during our hiatus. And we both were asked about it, and I think Kathryn has a lot to say about it. I actually stumbled on this piece on Substack before it blew up. I was googling something for something else. I was editing. One thing led to another, and somebody in another Substack said, “If you haven’t read this, you should.” So I was like, well, okay, I’ll read it. But then my mother sent it to me in a text and said, “I wanna know what Kathryn thinks about this.” So the original essay on Substack was called “My Life is a Lie,” I think.
KATHRYN: Yep. Part one, “My Life is a Lie.” This is where I’m gonna say the subhead is “How a Broken Benchmark Quietly Broke America.” And this is—that’s like when I started to get a little pissed off, but.
ROBIN: Yeah. And you weren’t alone. You know, it went a little viral in sort of finance bro kind of social media circles. And it got picked up by The Free Press. The original version is like 3,000 words long. They did an edited version, and I think the headline on that was something like “$140,000 Is the New Poverty Line.” So it was written by a guy named Michael Green, and he’s a strategist at a financial advisory firm. They’re focused specifically on exchange-traded funds for alternative investments. I think that gives him a particular point of view that comes through in this piece—this idea of trying to look beyond something, to try to find something that’s not obvious to people. So it wound up not just shared kind of virally, but it also wound up—the Washington Post wrote an article about what economists thought about what he said. Which was mostly, he doesn’t understand the poverty line, but he’s touching on something that clearly touched a nerve. And that’s where I’m gonna hand it to you.
KATHRYN: Well, you sent me this article because you were like, “Hey, my mom”—and like, moms come first. So you said your mom wants to know what I thought. And so I, at some point during some maternity leave haze, had like clicked on it and started to read it, and I just had a really hard time getting through it because, like, the opening salvo is the broken measure where he’s both right and wrong, and he correctly describes the genesis of the poverty measure. But he incorrectly describes the logic behind it.
ROBIN: What’s been—
KATHRYN: Yeah. And in the kind of genesis sense, it was a little too like “poverty is three times food. I felt sick to my stomach.” I was like, come on, like, get it together. So I kind of read through the rest of the essay and I was like, okay, this is what this guy’s doing. And then by the time I got to the end, I was like, well, he’s still going, and I skipped. So then separately, many of y’all are Money with Katie listeners, and she just ended her show. She’s taken a break—an indefinite hiatus—and on her last episode she had a bunch of people back as like kind of a “best of” conversation, and I was incredibly honored to be among one of these “best of,” and she was like, “I wanna know what you think of this essay.” And I was just honest, like I had a hard time finishing it. I didn’t really like it. And I tried to explain in this interview what my hesitations were, and I got one of the more personal and nastiest DMs I have ever gotten where I was called a “dismissive little B-word” for ignoring the troubles of people.
ROBIN: Hmm.
KATHRYN: I underestimated how much this essay resonated with people. We don’t have to repeat the conversation I had with Money with Katie—like, y’all go listen. That was my kind of formal introduction to it, is that I didn’t take it seriously enough and I wasn’t respectful enough of it. And someone was just like, “You are an awful person for ignoring Americans”—like, just this nasty screed about how people like me are what’s wrong with America. So. Second verse, same as the first. Let’s talk about it this time and see if I can not get people mad at me.
Poverty Line History
ROBIN: So, if you haven’t listened to our “What You Don’t Understand About Poverty” episode, that might be a really good background. You can just hit pause, go listen to that, come back. But it explains how Mollie Orshansky came up with the poverty line as the idea of what deprivation looks like.
KATHRYN: Keep in mind that she’s doing this without a computer. She doesn’t have regular survey data. She has very little at her disposal, not even a good measure of income in the United States. She has really two pieces of data. One that says Americans spend about a third of their money on food, and one that is an estimate from the US Department of Agriculture of how much food costs for family sizes. The logic is if people need this much food to live—say it’s like, I need a hundred dollars to buy food, and people spend a third of their money on food—then $300 a month is the poverty line. And it was to—or $300 a month is a measure of adequacy. And so Johnson’s kind of brain trust within the White House that is directing the War on Poverty adopts this measure and calls it the poverty line. What I think is the most interesting part, which this guy totally missed, is that if you go back and think about the Great Depression and unemployment—we did an episode about this—we didn’t have a measure of unemployment going into the Great Depression. We didn’t have a reliable and uniformly and consistently measured measure of unemployment until the late 1930s, really at the earliest you could claim is the late—
ROBIN: Late. Late in the Depression. Yeah.
KATHRYN: We have tried to piece together how many people were unemployed, but we don’t really know. Same thing when the US decides it’s gonna declare war on poverty: we don’t have a measure of poverty. It’s not adopted, it’s not accepted. We don’t have a way of doing it. We kind of find one and take it. And both of these measures have trade-offs. They have advantages and disadvantages, but it’s like we recognize the problem before we measured it. And then we went back to trying to find a measure that worked. I think the era that we’re in now is we’re in this affordability crisis and we can’t measure it because we don’t have a measure of affordability.
ROBIN: Hmm.
KATHRYN: That is the more interesting notion—that we’re seeing these massive turning points, these huge epochs in the US economy of the problem is mounting and part of the problem is that we can’t measure the problem and people feel like they’re not seen or that what’s going on doesn’t matter. Which is suggestive of like, we are at a focal point, right? Like, to me, the fact that people are so mad at the poverty measure as like not measuring affordability, which it’s not supposed to do—that is the interesting part. I think I didn’t say what I wanted to say, which is kind of shocking given how much I talk, but I didn’t say what I really wanted to say, which is like, he was so close, but he just kind of wasn’t there.
ROBIN: Yeah.
It’s Actually Affordability
KATHRYN: The big picture is affordability. This is what the US—like, the average American is circling around—is that they cannot afford their life and they can’t prove that they can’t afford it. It’s like they have to convince politicians that they can’t afford it, and we don’t have a way of measuring it.
ROBIN: Yeah. And that’s kind of what he attempts to do in the second half of this essay. He makes some obviously really bad leaps. One of which is going from a measure of deprivation, right? Of bare sustainability. And then saying, okay, now I’m just gonna look at averages. I’m just gonna look at the national averages. And then try to call the new—the national average—if you’re below the national average, that you’re poor. Which you’re just like, okay, like, not an economist. Famously not an economist. And even I can tell you that doesn’t math. Like.
KATHRYN: It’s—I thought there was a little bit of irony here of like, oh, so you’re gonna trash a woman in the 1950s who didn’t have a computer and came up with one of the first measures of inadequacy and deprivation, and how hard that was for her. And then you’re gonna put together your own measure and you’re gonna get trashed for it. And you’re like, oh, it does remind me of that Onion article about Bill de Blasio of like, “Oh, not so easy to find a mayor who doesn’t suck shit, huh?” I am like, oh, not so easy to put together a number that describes a primary feature of the US economy that people are gonna get really mad at you for.
ROBIN: For people who haven’t read this, I do worry that this is gonna be hard to understand if you haven’t read this [essay]. He feels like three times food does not adequately reflect our current reality because people don’t spend a third of their income anymore on food. So then he tries to reverse-engineer Orshansky’s system, which makes zero sense. And many, many of the critiques of his piece are like, that part of what he does in this essay makes zero, zero sense. He then, though, goes on to basically tally up what it takes for a family of four to get by right now. That’s the part that really resonated with people. And he says, like, look, you can’t just have a landline phone anymore. You have to have a cell phone. You have to have broadband access because you need it to communicate with your child’s school. You need it to do your job. And he calls this, what does he call it? Like the “price of full participation in the economy” or something like that.
KATHRYN: Alright, so he—this is what this guy does. He takes the average price of various goods and services that he deems as necessities and he adds them up, and whatever they come up to for a family of four, that’s poverty. It’s $140,000. I’m gonna give you two numbers to put into context why, kind of—I don’t say flabbergasted that often, but I was flabbergasted by $140,000.
The first number is that if you were to line up all households in the US from richest to poorest, inclusion in the top 25% starts at $150,000 a year. So $140,000 is going to be more than what probably 70% of American households make. I thought that was kind of incredible.
Another way to think about it is, okay, so lots of households might have young people, old people, people who are retired, just have one person. Maybe it’s not the same—he thinks it’s just a family. So another way to think about it is that if you were to just look at workers, not everybody, just workers, and look at the median full-time workers—so this is someone who works 40 hours a week, 52 weeks a year—the middle person of that group of workers earns $63,000 a year. So by his metric, two median full-time workers would not make enough money to be out of his measure of poverty. That’s how high this number is.
Now, the problems in our economy can be high enough so that people making that much money can be in a struggle. But it is describing well over 60% to 70% of Americans, whether you look at workers, whether you look at households, whether you look at families. I mean, that’s a really high number.
And I had this really—I mean, I just got mad when I read it because my first reaction was: this is a guy who doesn’t understand the income distribution. To say that $140,000 is poor when $150,000 is the top 25%—this is someone who has never met someone who makes less money than him and only knows richer people, so he thinks he’s barely getting by. That was the first reaction.
But the second reaction—less about him and more about the response—was this kind of conflation that people have, that if they’re struggling, they’re poor. If they’re having problems with rent, if they’re having problems with their cell phone, that that is poverty. Poverty is not not being able to afford things. Poverty is poverty.
We have a categorically cruel social welfare system in the US that helps very few people. We either push benefits through the tax system where you’re more likely to get it if you’re high-income, or we have a paltry, meanly distributed social welfare system to only the very poorest of the poor — and then we do a lot of things to sabotage them even getting it if they’re eligible. That’s how we help people. That leaves out a bunch of people in the middle.
But the answer is not let’s make all those people poor and so then we can help them. Let’s just do a better job managing our economy and not reward poverty like a little letter jacket that people get to say, “I’m poor. I get to have help.” Now, our economy has problems. The answer isn’t, let’s all be in poverty. And it’s really messed up toward people who are in actual poverty to say, “I make a hundred thousand dollars a year and I’m poor.”
ROBIN: Yeah. There’s a whole section in this essay that he calls, I think, “the Valley of Death,” which is where he’s talking about how as you’re trying to climb from $40,000 toward the hundred thousand dollars, you hit these tiers of income where you begin to lose these benefits. And when this piece came out, we were having a lot of that discussion around the Affordable Care Act healthcare subsidies. So I think that it also fed into that narrative in the political moment about people potentially who didn’t have their health insurance through their job but had to buy it on the marketplace, potentially looking at this really big jump in monthly premium costs. And that this government help that they’d been getting would go away. But he also suggests that people are getting huge childcare subsidies. And I was like, in what planet? And basically suggesting that you begin to—like, you earn another $10,000, but because you essentially step beyond the subsidy level of some sort of government assistance, you actually wind up taking on all that expense. And then some. All of which seemed pretty farfetched.
KATHRYN: There is a very large part of the poverty and social benefits literature that looks at this kind of—they call it the marginal tax on income, the marginal tax on labor. The idea that if you moved up an income and you lose benefits, the value of the extra income is worth less than the value of the benefit that you’ll lose. And this is why a lot of public programs have been redesigned so that benefits phase out.
So, you know, if you have ever applied for food stamps, the amount that you get is a function of your income, so that your income can rise and your benefit kind of falls accordingly so that there’s no cliff of benefits that you fall off of. The one that’s very hard to price this way is Medicaid, ’cause there’s no way to phase out Medicaid the way that you can phase out a weekly or monthly food benefit the way that you could phase out cash if we had it. But this idea that you lose benefits and that you have this disincentive to earn extra income has been a part of the economics literature for decades.
There’s a poverty researcher—there’s an economist at Johns Hopkins who was pioneering in this field, and I heard him give a talk a few summers ago where he said that he thought that the research had been quite effective and that this idea that you have to phase out benefits and be careful about five benefits all phasing out at the same time—those benefit cliffs. We now have programs that take these into account. Things like the Earned Income Tax Credit basically kicks in to boost the return to earned income as program eligibility is phasing out. And so they’re basically coming up with a work bonus through the tax system so that if you are losing benefits—you’re losing food stamps on the right hand, but your left hand is getting more money from work because you’re gonna get a work bonus from the government. I mean, they did try to think of these things thoughtfully. It’s a lot harder at the bottom when there’s up to six programs or seven programs that you could have a family be eligible for. But where this research lives now is the understanding that the vast majority of people will not collect a benefit for everything that they’re eligible for. Say that again?
Not Every Eligible Person Gets Benefits
KATHRYN: So, in theory, if I am making $10,000 a year and I have a kid, I should be—I mean, food subsidies, health subsidies, housing subsidies, energy subsidies. I mean, I should be eligible for—and I should, like, arguably maybe even get cash from the government. It is actually rare that someone will get all of the benefits that all the programs that they’re eligible for, right? Like, housing—
ROBIN: They just don’t know about all of them? They don’t apply for all of them? They just don’t get qualified?
KATHRYN: Yeah, it’s a combination. So housing subsidies aren’t an entitlement. You can have the income low enough to get housing help from the government, but they don’t have enough money to go around, so you don’t get it. You can have income low enough to get childcare help from the government, but they don’t have enough to go around, so you don’t get it. So there’s that problem. Then there’s a problem that you have to know to apply. You have to fill out the application, and that process has to be something that you can navigate. Some states have been really active at trying to come up with almost like a common application, or when you apply for food stamps, you’re automatically applying for Medicaid and just trying to get you all the benefits you can. Other states will make it as hard as humanly possible so that you get deterred from applying and don’t actually finish it. So this came up a ton in the pandemic when unemployment insurance claims spiked, and some states had so cruelly designed their application process with the intention of getting people to quit before finishing the application that now all this federal money is on the table and states are basically now desperate to try to—
ROBIN: Yeah.
KATHRYN: So Florida was the case where they had just paid millions of dollars for someone to redo their online application for unemployment insurance, but they had done it in a way to make it harder to apply. It really broke down was that every time you answered a question, you had to go to a new page. So the number of times you could crash was high. So Florida ended up having parking lots where they printed out applications and handed them to people through the window to work on and then bring back, right? You couldn’t come inside and get the application. All of this was a way—we call this administrative burden. We’re gonna make it hard for you to go get the benefit. So the point that he brings up about the idea that you could lose a benefit as you make more money is a universal problem in any program that you design in any place. But in some ways it’s not very—it’s almost like a really early nineties problem. You know? The problems that we have now is getting people connected to the benefits that they’re eligible for—for people who have low enough income to be eligible—is getting people connected to those benefits and getting them enrolled and knowing that, in some ways, the people who deliver those benefits are actively operating in a way to make sure that you don’t get them. So a great example is work requirements. Work requirements are a paperwork, administrative burden that is designed to get people to drop out of public programs.
ROBIN: We also have an episode on this from season one. You can—
KATHRYN: We do have an episode on work—
ROBIN: If you’re new here, you can go back and listen to it. It’s called “Work Requirements Don’t Work.”
KATHRYN: Yeah, but work requirements—like, the state of Michigan added work requirements to Temporary Assistance to Needy Families, which is the cash benefit that replaced welfare that is not as generous, doesn’t go to as many people, and has a time limitation. They put work requirements on TANF during the Great Recession because they needed to get people off of it. And so, you know, if people have to reapply and recertify and fill out their paperwork, you lose people at every certification. And the harder you make the certification, the more you lose people. Not harder like the income test has changed. I mean harder like it’s 30 pieces of paper and if they mess up, they lose the benefit. That is the problem that we have in benefit delivery for the very poor. So yes, if you earn more money, you could lose assistance. He brought up the case of subsidies, but there was this real—is it “forest for the trees”?
ROBIN: “Couldn’t see the forest for the trees.” Yeah.
KATHRYN: I think he was missing the whole picture, which is the problem isn’t that the poverty line is too low or that we don’t count poverty as $140,000. The problem is that we have mismanaged our economy for the past five decades to ignore market failures that make it very hard for people to afford their life. And a healthcare subsidy phasing out at around a hundred thousand dollars that someone’s gonna lose if they earn more money is very different from: we should not be selling healthcare for profit. And that’s hurting a bunch of people. Right? Like, it was a very privileged focus on, like, look at this family with a hundred thousand dollars who’s losing their health insurance subsidy. Very hard for that family, but it was making the wrong conclusions. Like, picking a part of the problem that hits a privileged set of people and then says—maybe not a privileged set of people. It was a privileged point of view.
Speaking the language of the wealthy
ROBIN: You know, this is a person who works in finance and whose clients are people who have financial advisors. Like, he’s talking to people who are well off. And in terms of sort of explaining how much people are paying to get by on middle-class and upper life and sort of spelling out that affordability situation to them, he used the language that they speak and they could maybe understand it, right? And there’s a usefulness to that part of what he was doing. But I do think it’s interesting when I went back to read this for a second time before we recorded this, you know, at the very beginning of that essay, he says, “I wanted to figure out why people are struggling to make ends meet when we’ve had strong GDP and economic growth.” And I thought, well, I got a paper you should read. You know, and in fact somebody linked to the Time Magazine article about the study that you did about why household income—taxable household income—has not kept up with GDP growth. I mean, at the end of the day, that’s the question he’s trying to interrogate, and he winds up down this other rabbit hole about benefits and things that—that’s not the source of the problem.
KATHRYN: I almost didn’t wanna do an episode on this because I feel like it’s gotten so much attention, and not that piling on is what we’re all doing—because I think it’s good to have a conversation—but I almost didn’t wanna give too much attention to what was in fact not a great essay. Like, it misses the mark on a couple levels. But I guess if so many people were interested and it hit a nerve in some way, it’s worth talking about. But I almost thought the essay is the least interesting part.
ROBIN: Mm-hmm.
KATHRYN: I mean, he misses this big question of, like, GDP is growing but incomes aren’t. That’s been a problem for a—
ROBIN: Yeah, I think he’s sort of obsessed with how much our economic outlays cost. He’s forgetting in this piece about the inputs, which are our income, right?
KATHRYN: Yeah, and I—
ROBIN: And that that’s what’s not growing.
KATHRYN: Yeah, I mean, if you’re interested in social policy, deciding that the poverty line is poorly constructed is like a pretty easy port of entry. I think it opens up the door to have these conversations about, you know, well, how do we measure struggle? But I think it’s like, don’t lose sight of what is causing the struggle. And there was a bit of just not keeping your eye on the ball kind of in the whole reaction on some level—that we have made policy choices, and we are reaping what we sow, and we need to make different choices.
ROBIN: Well, he also really hammers on economists. Like, he blames economists for saying everything’s fine when it’s not. He sort of misses the entire definition of that, that I think actually you said last week, which is what we were feeling in this post-COVID period is the struggle of the middle class. Like, the middle class is the one that got really suddenly, more suddenly squeezed. And his kind of conclusion is the middle class isn’t middle class. The middle class is poor now.
Conservative economists tore him a new one
KATHRYN: Yeah, so we can put in context that the conservative economists are who really hated—
ROBIN: They really hated it.
KATHRYN: Really hated it, and they—I mean, they really piled on and they took it down. Someone who wants to trash economists—I’m like, shoot your shot. I don’t think we’re a lovable profession. You know, there’s just pretty loathsome people who have the same title that I do. And yeah. I did—I feel like the Post article, you know, you had some liberal economists who were like, “You know, he’s trying to understand.” This poverty thing. And these conservative economists were just—
ROBIN: They’re like—
KATHRYN: “This guy doesn’t know what the hell he is talking about.” He is so dumb. I mean, conservatives were so mad at this because the conservative—I would say the central conservative argument over the past 30 years has been income inequality is not that bad. Poverty is not that bad. And that actually wages and incomes are growing sufficiently for America to be a prosperous place. And this feeling that people can’t afford enough, or that their life is hard, or that poverty is rising—that none of that is true.
ROBIN: And that if you looked at other ways to think about poverty, like poverty and what you consume versus poverty versus what you bring in, poverty’s closer to like 3%.
KATHRYN: That is their central—you know, very consistent over numerous decades—argument: America is not poor, Americans are doing well. We don’t have deep income inequality. It is exaggerated. We don’t have wage stagnation. That is exaggerated. We don’t have mass poverty. That is exaggerated. And that if you actually measure correctly, we are doing great. They—
ROBIN: If you just measure correctly.
KATHRYN: If you just measure—
ROBIN: And this is like Cato and the American Enterprise Institute.
KATHRYN: Mm-hmm. And a whole set of conservative—
ROBIN: Think tanks and conservative economists.
KATHRYN: Like, this is very fundamental to the conservative economics point of view—is that all the liberal—all the complaints of wage stagnation and income inequality and poverty are exaggerated. They are misrepresenting what is actually going on. In some ways they have to, because we are in the fifth decade of a deeply conservative era in American economic policy. We are fighting unions and not protecting them. We are letting the minimum wage erode. We are passing tax cuts and almost no social policy. We are not intervening in any type of market failure in a significant way. If something is wrong, we’ll throw a tax credit at it and some market regulation, but we will not grossly interfere. And that—I mean, we’ve passed five tax cuts this century. They have to say America is doing awesome because—
ROBIN: They got what they wanted, and if it’s not working, then yeah—
KATHRYN: Yeah, so—
ROBIN: They have to own—
KATHRYN: To say that Americans are struggling is to be liberal in some kind of fundamental way in the US economy or in the economic space because you are saying that the ruling policy agenda is failing. So to say that people are struggling is a liberal argument, which is why this guy got so dumped on by so many conservative economists of like, “This is ridiculous.”
ROBIN: And the liberals were like, “But Mollie Orshansky.”
KATHRYN: But the liberals were like me, and they were like, “You get Mollie Orshansky’s name out of your mouth, sir. And please do not further misrepresent what this pioneering woman did.” And it is one of the most misrepresented things I hear talked about in some ways in the poverty space—is what Orshansky did. And I’m sure I’m culpable in that in some degree because I feel the need to defend someone who set out to try to help children in poverty in any way that she could and didn’t like how much she gets piled on over the years as if she endorsed how we went about things. You know, his essay—he is basically saying we have these massive economic, structural, economic problems that need fixing. And I guess on some level, I just thought he didn’t say it very well. It resonated with other people. It didn’t resonate with me. And I have a visceral reaction to the casual way in which people will claim that they’re in poverty.
ROBIN: Yeah.
Low-income isn’t the same as poor
KATHRYN: So there’s this really fundamental moment for me in my economic journey where this really hits home. So I’m studying at the University of California Davis, and I take a break from Wisconsin in the middle of my PhD to go to the poverty center at Davis to do a poverty fellowship and to get exposed to different poverty researchers. And one of the professors there explained to me that they had this problem of—not necessarily a problem, but in Davis, California, they were trying to set aside money for the local school district, for schools that were in high-poverty areas and schools that needed help. And one of the schools that showed up as being kind of high poverty wasn’t high poverty per se. It had a lot of grad students, and grad students don’t make that much money. In fact, most grad students would have low enough income to be at or near the poverty—
ROBIN: I’m sorry? They were like resident in the neighborhood? Is—
KATHRYN: Like, it was a neighborhood that lots of PhD students lived in.
ROBIN: Oh, I see. And they—
KATHRYN: And they have really low income. So if you’re a PhD student, I mean, 15 to $20,000 a year is your stipend, which does put you below the poverty level. At least it was 15 when I went to school. I was like, well, if they have—if they’re low income, if they meet the measure, right? Like, they should get the money. And she was like, “Kathryn, they are not poor. They have low income. That is not the same thing as being poor.” And it always struck me, what she was trying to say, right? Like, these were students who were taking a temporary vacation into the land of very, very low income. They were gonna finish and have a high job. If they ever needed more money in a desperate way, they could immediately get it. And there was a ticking clock to their low-income status, and that was very different from being stuck there. And I think that I have that same reaction when I read something like this of like, struggle is not poverty. And we don’t just have to channel solutions in our economy through poor people. Like, y’all, our mindset is so broken.
ROBIN: Yeah, yeah.
KATHRYN: Like, do you remember that? Remember that you’ve been in five decades of conservatism. So you are desperate to show that you’re poor because you’re desperate to get help from the government because you think that the only people who are allowed to get helped by the government are the very, very poor. Your mindset is totally broken. We can have universal childcare right now, and you shouldn’t have to be poor to have a benefit from an investment in children.
ROBIN: To, yeah. To deserve it. Yeah.
KATHRYN: Yeah. And in some ways, his logic and what took off represents what is broken about how we view the economy in some way—that we don’t understand that there’s this, it’s not paradigm shift, it’s not sea change, something—it’s a word transformation.
ROBIN: Yeah, I mean, I think we’re—I don’t know if it was COVID or two Trump administrations. I don’t know. But we’re at a pivot point where we really have—people are really saying like, can this continue to go on like this? And I—
KATHRYN: It can’t.
ROBIN: And these are the big questions. I mean, I think that we’re gonna try to wrestle with on this show.
$20,000 has never been good enough
KATHRYN: But I—yeah, and no, it can’t. It can’t go on. And I think what’s been happening over time is that the number of people who are feeling like they can’t make it is just creeping up. The income distribution—and I hate to say it, but it’s finally hurting people who matter. Because the difference between $140,000 and poverty is that people who are in poverty have struggled always, and $140,000 is not good enough today, but $20,000 has never been good enough. It’s never been near good enough. They don’t have near enough to get by what—the people who are struggling with affordability—it’s just you see it go higher and higher, that as goods and services become higher and necessities get out of reach, it’s more and more people who feel the squeeze. But it’s worth remembering that there’s an order to who matters in our economy and who matters in our society. And we’re starting to see affordability hit some heavy hitters who have some sway in how we do things.
ROBIN: I mean, I think that we’ve had this problem with middle class—with pathways to the middle class and middle-class affordability—for a while. And it’s manifesting in different ways, and people’s political response to it manifests in a lot of different ways, a lot of different frustrations, different anger. So you think—you feel like it’s just climbing up out of the middle class and the upper middle class? Is that what you’re saying when you say it’s beginning to affect people who have some sway or some power?
KATHRYN: Yeah, I mean, this guy’s a finance bro, and the post is titled “My Life is a Lie.” And he’s saying that the affordability and the struggle to make it, and the paucity of government—meaningful government help to put the thumb on the scale for you—is $140,000.
ROBIN: Mm-hmm.
KATHRYN: I mean, that’s well above median income.
ROBIN: Mm-hmm.
KATHRYN: That’s well above average income for a family. He wrote an essay saying that the average American can’t afford a life, basically.
ROBIN: You’re playing—yeah, for childcare for two children. He’s talking about a family of four.
KATHRYN: Yeah. But I mean, it’s—you know, this is—this problem is seeping into many more Americans’ lives than are comfortable with it or are used to it or expect it.
ROBIN: Yeah.
KATHRYN: Yeah, and—
ROBIN: I think that the thing that he’s tapping into is the difference between, “I pretty much always have enough money. I just have to decide how to allocate it” and “Now I actually can’t—I don’t have any slack to allocate.” Right? Can I afford to buy—can I afford car payments? If I need to get a new car, can I—you know, no, I can’t. And do I need to worry about how much it’s gonna cost to insure my car if I get a new car? I mean, housing costs? People talk about insurance, insurance costs through the roof. And all of these things have added up and added up and added up.
KATHRYN: Yeah, I would—I mean, just to make sure, there’s gonna be someone who listens and they’re gonna be like, “Man, F her,” just for this final caveat of: just because I didn’t like this essay doesn’t mean I don’t think people are struggling.
ROBIN: Yeah.
KATHRYN: Or that people could be at $140,000 and struggling. I think that they’re absolutely struggling, and I think they’re struggling much higher than that. It’s not about the people’s experience that I didn’t like, or saying that it’s not true. I think, yeah, it’s that it’s the poverty thing that really—it’s like, yeah, once you’ve said it, I’ll never be able to look away.
ROBIN: Yeah.
Optimism?
KATHRYN: Yeah, but we always try to end on an optimistic note. You know, like we say, one problem and solution at a time. Well, this was the problem. This is the big problem. But I guess the optimistic thing is kind of what it was last week, which is that the more people that recognize it, the better that we’ll be able to address it. Not through shitty subsidies. I mean, actually address it. Do something bold. Do something big. And I guess the bigger the problem gets and the bigger that the problem feels, the bolder the action gets to be.
When you think about healthcare reform 15 years ago versus the healthcare reform today, I mean, our society has transformed in how it views private health insurance, employer-sponsored health insurance, health insurance in general. You know, the problem didn’t feel as big back then. Now it feels insurmountable, and on so many levels, things that might have been a problem 15 years ago feel like a battle that we’ll never win. And that means that the solution gets to be that much bigger if we ask for it, if we fight for it, if we take advantage of this boldness.
So I think that the common parlance of affordability—I think it’s only gonna be for the best. That it’s broad. It refers to a lot of things. It could mean housing, it could be transportation, it could mean healthcare. It could be childcare. Because that means we get to do a ton of stuff in response, and everything could affect affordability, so let’s do it. I don’t even actually like affordability as a—
ROBIN: As a concept?
KATHRYN: Like, as a motivator.
ROBIN: Yeah. That we have to be able to afford more.
KATHRYN: Or, just have a better economy! I don’t know. I don’t know if I really like affordability as the umbrella term, but—
ROBIN: It’s the one that’s out there.
KATHRYN: It’s the one that’s out there, and it does lead us to the same place, which is big, bold action. So that is great.
ROBIN: Yeah. Yeah. All right, we’re gonna take a little break and then we’ll be back with Executive Orders and Spiritual Sponsors.
Executive Orders
ROBIN: Hmm.
KATHRYN: Why do I—well, it doesn’t even have to go into my—ah. Wait, can you roll in one more time? Can we get a roll? Sorry, we were rolling. You don’t need to hear—I don’t need to hear you. I can hear Robin. Okay. Right. Ready in one, two. I’m gonna catch you. I need a rug. We need a rug. We definitely need a rug. This is, it’s a little dicey. Okay. So we couldn’t record the whole episode here because you’re gonna see just how close our faces have to get.
KATHRYN: I know. It’s like we’re gonna sing a duet. Yeah. In the thirties. Yeah. Just like really close. So we’re both in Houston. We’re both in Houston, and we’re gonna do Executive Orders and we’ll just pass the mic a little bit because you probably do have to get closer.
ROBIN: Oh, I don’t have an executive order, huh? Okay. It’s all you. Executive Orders.
KATHRYN: I’ll do two. Okay. So my executive order is twofold. I’m taking Robin’s order today. Executive Order one is that several members of the cast of Bend It Like Beckham need Oscars. Both of the moms absolutely need an Oscar for that performance because it’s two very different moms with very different struggles with their daughters, and they’re not one-dimensional—they have journeys as they go through—and they’re both played to perfection, especially Jess’s mom. She’s so good. Yeah. The dad definitely needs an Oscar too. This is all retroactive Oscars. Looking back, I just think it’s a movie that—it’s a retroactive, you know—we need to do an apology Oscar for Bend It Like Beckham. Y’all made a sports movie that was also a movie about community and identity and so many other things. It was impeccably—it’s impeccably acted. The moms—I just watched it again going to London. London, anyone? Yeah. Yeah. I like to watch movies that are themed for the destination. Oh, there you go. So I was going to London and I watched it. It is the first time I have watched Bend It Like Beckham since becoming a mom, I think, is probably the key thing. And so I now kind of see it more through the parents’ perspectives. Not that I have teenagers, but their characterization—I’m like, oh man, that’s actually an amazing portrayal of moms on film.
ROBIN: One of the cast members comes to the Angel City Football Club games all the time, and they always show her on the big screen and everybody goes wild. Yeah.
KATHRYN: Okay. Anyway, I need to move on from the Bend It Like Beckham show, which is what we’re now gonna be. Now, my second executive order is that we need to remake Bend It Like Beckham on the regular. Like, why is this movie not set in America? Hollywood, you could do it with so many immigrant communities in the US. You could do it with the burgeoning National Women’s Soccer League. You could do it. There’s just—I mean, because that movie is—
ROBIN: I mean, clearly needs to be a series, like a Netflix eight-part series.
KATHRYN: Yeah, every year. Every year. Yeah. New situation. New immigrant community. It’s also a movie about class, and there’s lots of ways to explore class in the US. So that is the Executive Orders.
Spiritual Sponsors
KATHRYN: Now we can do Spiritual Sponsors.
ROBIN: Alright. My spiritual sponsor this week is Carmen Maria Machado, who’s a novelist and short story writer, and I went to see her give a reading last week and she’s amazing. And if you haven’t read her work, you should.
KATHRYN: Okay. Rolling on. My spiritual sponsor are British biscuits.
ROBIN: AKA cookies.
KATHRYN: Yeah, they’re cookies for us because we’re normal. And they’re shortbread cookies, but they call them biscuits. And—
ROBIN: And she just brought some and gave them to me and my wife.
KATHRYN: Yes. I brought biscuits. I brought biscuits home from London. From London where she was—
ROBIN: Oh man.
KATHRYN: The title of this episode’s gonna be “Kathryn Was in London.”
ROBIN: Yeah. And affordability.
KATHRYN: We like Paddington too. But yes, I brought those biscuits home, but frankly I left a lot there because I ate a lot. Our show is edited by Sofi LaLonde. Our video production for social media is by Andy Robinson Video Consulting. If you like the podcast, you can share clips from the show with your friends and enemies on TikTok, Instagram, YouTube, and LinkedIn.
ROBIN: We also have a sporadic newsletter on Substack as well as an Optimist chat room. It’s just like a group text thread that’s also on Substack. Support from listeners like you helps keep our podcast going, so if you have the means to contribute, you can do so at optimisteconomy.com.
KATHRYN: Oh, and then Andy and Sofi—oh—
ROBIN: Yeah, yeah. Snapping on Andy and Sofi. Who—sorry. We had a lot of technical difficulties this time. This was so hard.
KATHRYN: It was so hard. And we didn’t even do it. Oh man. Oh wow. Oh man.