0:12

There is a statistic that crops up every now

0:14

and then on social media or the news. 60%

0:17

of adults say they are living paycheck to

0:19

paycheck. The new report finding more Americans

0:21

are living paycheck to paycheck. The problem

0:24

is though, it's not true. At

0:27

least not in the way you'd usually understand it. And

0:30

another economic myth. Our trade

0:32

deficit with China. This false

0:34

idea, advanced here by Republican

0:36

Senator Josh Hawley, that the

0:38

trade deficit is always bad.

0:40

Every dollar of that deficit

0:42

represents blue collar jobs

0:45

destroyed. Another economic myth I

0:47

always hear is about a different

0:49

deficit, which is the US government's deficit.

0:52

And this idea that we could just get rid of it

0:54

by taxing the top 1% of earners. Here

0:58

is the former US Labor Secretary

1:00

under Bill Clinton, Robert Reich. The

1:03

super wealthy have to pay their

1:05

fair share. The truth,

1:07

as we often find out, isn't

1:09

as simple. This is The Indicator

1:11

from Planet Money. I'm Darien Woods. And I'm Adrian

1:13

Ma. Today on the show, economic

1:16

myth busting. We take three

1:18

factoids about the American economy and run them

1:20

through the fact checkers. No mercy

1:23

for anyone. That's after the break.

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every day and also those who listen.

2:35

So it's economic myth busting time and

2:37

up first we're looking into this claim

2:40

that most Americans are living paycheck to

2:42

paycheck. Matt Darling knows a

2:44

lot about this one. He's a senior employment

2:46

analyst at the Think Tank, the Niskanen Center.

2:49

And Matt dedicates a good share of

2:52

his free time to one particular hobby.

2:55

Arguing to people on Twitter. It sounds

2:57

like a losing proposition. You'd think so.

2:59

But like every once in a while you have

3:02

someone come like, oh, that really changed my mind

3:04

on things. And you know, and then that

3:06

keeps you going for another three months of losing those.

3:11

One of those arguments Matt is obsessed with,

3:13

by the way, is this notion that most

3:15

Americans are just destitute the day before payday.

3:18

He says, on the contrary, the median American household has

3:20

a net worth of $193,000. Yeah,

3:24

but a lot of that wealth is

3:26

often tied up in retirement accounts and

3:28

housing. So you can't necessarily draw down

3:30

on those assets like an ATM if

3:33

a big expense comes out. Exactly, exactly.

3:35

But we also do have stuff for, so we

3:37

do know the middle household, the medium household

3:39

has about $8,000 in checking and savings accounts.

3:41

Okay, that's money you can use. That's money

3:43

you can use. It's not necessarily a ton

3:45

of money. It's not enough money to get

3:47

you past like a big medical expense or

3:50

if you lose your job, but it's

3:52

enough hopefully to survive to the next

3:54

paycheck. A lot of Americans do

3:57

have solid savings. One survey

3:59

found about how Have three months

4:01

of expenses save up. Not the case

4:03

I, just me or most Americans are

4:05

just sort of waiting for that next

4:07

paycheck before they can buy groceries. So

4:10

it's really fuzzy to understand what exactly.

4:12

These surveys, which often done by financial

4:14

companies what they actually mean met the

4:16

first to look at the poverty rates.

4:18

As of Twenty Twenty two, the official

4:21

poverty rate stood at twelve percent. Still

4:23

a problem, but a different type of

4:25

problem that if sixty percent of Americans

4:27

weren't making ends meet, And

4:31

that brings us to our next

4:33

economics sex taking mission which is

4:35

the trade deficit. That's the gaps

4:37

that shows that the Us buys

4:39

more from the rest of the

4:41

world than it sells. He has

4:43

Donald Trump's former Us Trade Representative

4:45

Robert Light heizer these massive train

4:48

death as as that we run

4:50

our transferring our wealth. But. As

4:52

the trade deficit always a problem. To.

4:54

Walk us through this we cannot marry.

4:56

Lovely senior fellow at the Peterson Institute

4:59

for International Economics and Mary told us

5:01

that the deficit is not the result

5:03

of so called unfair trade deals. Some

5:05

that is good. So. It really

5:08

depends on what your it using the debt

5:10

for. Marry. Points out that

5:12

we use debt to pay for

5:14

both consumption which is spending for

5:16

today and also investments. There

5:18

is a difference. Their investment of course helps

5:21

to see more productive and richer in the

5:23

future and so it eases the burden of

5:25

paying back the debt. When the time. Comes

5:28

this is a familiar arguments one

5:30

the defenders of the government's deficit

5:32

also use. We talked about this

5:34

a couple weeks ago and that's

5:36

familiarity. makes sense because the government

5:38

deficit contributes a lot to the

5:40

trade deficit. There is no

5:42

clear cut relationship between trade deficit

5:45

saying gross in the wider economy,

5:47

but the Us has headed trade

5:49

deficit since the nineteen seventies and

5:51

dependent have gone like this. The

5:53

U borrowed from overseas to invest

5:56

or spans and the economy grew.

5:58

Americans became well there. They paid

6:00

back that it and they borrowed

6:02

more. They invested more, they spent

6:04

more and grew more. And so

6:07

when marry his headlines about say

6:09

a record trade deficit, I mostly

6:11

ignore it. We could play

6:13

out the scenario: what would be

6:15

needed to close it quickly and

6:18

one way to did deficit would

6:20

closes if spending sell rapidly in

6:22

the U and spending would fall

6:24

during a recession. Would anybody

6:26

prefer that situation to where we are

6:28

today? Know. Marry says it

6:30

can be risky for lower income countries

6:33

to borrow too much, unlike in the

6:35

U S. those countries chance often borrow

6:37

in their own currency. The. United

6:39

States borrows in it's own currency.

6:42

Ah, it just will not run

6:44

out of dollars to pay back

6:46

it's creditors. That's. What overseas

6:48

investors believe says they have

6:50

continued to invest and lanes

6:52

to Americans. And

6:55

this gets us to conversations about

6:58

the related but different deficit. The.

7:00

Federal government's deficit which is the difference

7:02

between with the government takes it in

7:05

taxes and what it spends. And.

7:07

The federal deficit is large and

7:09

growing, and there's a proposed solution

7:12

typically touted by politicians and advocates

7:14

team to maintain or even grow

7:16

with the current level of government

7:18

spending. Here. Is President

7:20

Joe Biden on taxing the very

7:22

wealthiest Americans? Or W doesn't. Matter

7:25

with you? Do. From. Cutting

7:28

the deficit to provide for childcare

7:30

that's related to our third economic

7:32

mess that only taxing the top

7:34

one percent of at his can

7:36

raise the Federal government's budget deficit.

7:38

And for this we found Brian

7:41

Riedel. He's a fellow at the

7:43

Manhattan Institute and lives and breathes.

7:45

The Federal budget is advised. Think

7:47

tanks is advised. Republican Senators Mitt

7:49

Romney and Marco Rubio in their

7:51

presidential campaigns. I wrote. Nearly.

7:54

Six hundred studies and articles on

7:56

deficits since two thousand and One

7:58

Six hundred? Yup. And

8:01

to be clear, Brian is not saying

8:04

that taxing top earners couldn't be part

8:06

of a solution. He just says that

8:08

doesn't mathematically work out to be the

8:10

only solution at the moment. The deficit

8:13

around six percent of Gdp and growing.

8:15

You. Could probably get at most

8:17

one to two percent of gdp

8:20

in new revenue is from taxing

8:22

the rich, and that's if you

8:24

set every tax the rich policy

8:26

at its revenue maximizing rates with

8:29

no regard for how it affects

8:31

the economy or anything and he

8:33

said are only goal is to

8:35

extract as much money from rich

8:38

people as possible. You could get

8:40

about one to two percent of

8:42

gdp. that's real money and doesn't

8:44

get you off. The Hook for

8:47

making difficult decisions elsewhere. Now.

8:49

The Congressional Budget Office does projects that

8:51

the top end of this estimate we

8:53

are when you're soaking the reds as

8:56

much as he can. That amount could

8:58

stabilize the government's debt as a share

9:00

of Gdp, but is your goal is

9:03

to reduce it then you need to

9:05

find more up since those difficult decisions

9:07

could include spending less or if we

9:09

keep current spending plans while trying to

9:12

reduce the deficit, that would mean raising

9:14

taxes on more Americans the middle class

9:16

is gonna have to pay to close.

9:19

Most of the Gap. That's for

9:21

Europe, does it. They don't do

9:23

it by taxing the rich higher

9:25

than the United States on average.

9:27

Virtually the entire difference between Europe

9:29

and the Us is value added

9:31

taxes. A value added tax is

9:34

similar to a sales tax, and European countries

9:36

often have these taxes set at a higher

9:38

rate than in the Us. and if you

9:40

even want to go to Scandinavia, The.

9:42

Entire difference is payroll taxes and

9:45

value added taxes which are broad

9:47

based in effect the middle class.

9:50

That's. Where most of the money is?

9:52

Yes, Oh Brian, think set a lot

9:55

more money. Could be sad for the

9:57

many Americans who are not living. Paycheck

9:59

to Paycheck. Matt Darling at the start

10:01

of the show says, you know when he's arguing

10:03

of people on Twitter, he's able to convince a

10:05

small number of people with the facts. But.

10:08

I know there anything we have done

10:10

that it was dubbed as one misleading

10:12

economic idea. I'll be happy. In

10:17

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