Welcome to Cato Audio for February 2023. I'm Caleb Brown. In this month's offering, Martin Markary and Ari Shulman give the CDC a performance review in the wake of COVID-19. Cato's Scott Linscombe details how to make gig work better for the new American worker. And Cato's Emily Eagans details some results from our survey of American attitudes on housing. First up, this month's Cato Roundtable.
In case you haven't heard, we have a new Congress with a slight change in the balance of power between the two major political parties and to discuss a fiscal agenda for the 118th Congress. We're talking to Romina Baccia, Director of Budget and Entitlement Policy at the Cato Institute, and to discuss a worker and labor empowerment agenda for the 118th Congress. We're talking to Scott Lincecum, who directs general economics at the Cato Institute, as well as the Herbert A. Stiebel Center for Trade Policy Studies. Romina, I would like to start with you. You know, the rage of the week, the rage of the day that we...
experience on social media is often so detached from significant, substantial problems faced by the federal government, in particular debt and spending. And you, in your paper, The Fiscal Agenda for the 118th Congress, you sort of lay it out pretty clearly in stark terms, and it is terrifying. So give us a sense just quickly of the picture of the fiscal health of the federal government. Thank you, Caleb. And you're absolutely right. If you're looking at the current media debate, it sounds like the only thing we have to worry about is whether Congress will engage in brinkmanship at the debt limit and whether that will cause a default. There's very little coverage and conversation about the real debt crises that we're already in the middle of and that's only getting worse. And that is that since all of this emergency spending that happened during the pandemic, a total of about six trillion additional dollars in spending, or one way to look at it is that we spend an entire year's worth of federal money or taxpayer money just on pandemic relief. And no wonder that we are now at a level of debt.
to the size of our economy that is close to the entire economy at about 95% of GDP. And it's growing. It's projected to grow to 140% of GDP over the next 10 years if we don't change course. So my big ask for this Congress, this 118th Congress, is to shift gears away from all this emergency spending and from this out-of-control deficit spending toward adopting a path that will stabilize our debt. Even just at the current level of GDP, I would love to reduce the debt as a percentage of GDP because it's too high and that has implications for growth, which reduces incomes and living standards for American families.
But on the current trajectory, it's just out of control. So what does that look like in terms of spending, in terms of actually addressing debt in the United States? You said 100 percent of GDP to 140 percent of GDP, the total debt faced by taxpayers in the United States in one decade. Yes. That's a 40 percent increase in national debt in one decade. That seems crazy. But it also seemed it seemed crazy not that many years ago to say, well, our debt is going to surpass 100 percent of GDP. And this is some sort of magical.
number in terms of bad outcomes. I can remember people making that argument. But what does that look like? What is a serious agenda to deal with that look like? Yeah, that's where the real challenge comes in, because what it will require is reforms to major health care programs and Social Security. And I don't think that can be done without bipartisan.
support. And that's what we don't have right now. You have the Biden administration saying that they will protect Social Security and Medicare, which is kind of a misnomer because both of these programs are running out of money. They're both governed by trust funds in the absence of actual reforms. The automatic default is that there will be spending cuts that Congress can only avoid if they actually make reforms. There are a few Republicans that are interested in reforming entitlement programs. But even there, you see generally a reluctance and a neglect of facing the real fiscal crisis, which are these popular entitlement programs. You know, it's much easier to say we're going to cut waste and abuse.
That's just not going to get us there. And the entire debate now of the debt limit is whether to cut discretionary spending, which is one third of the budget. And I just ran the numbers. The current spending cut in discussion would be about $130 billion. We need about 50 times that in order to stabilize the debt over the next 10 years. We need like seven or more trillion dollars in spending cuts. So what we're talking about right now barely scratches the surface. And we're talking about, you know, we saw a massive increase in spending in 2008, 2009. We saw a massive increase in spending in 2020.
Joe Biden is crowing about cutting the deficit, which is comical, I suppose, in relation to the massive increases in spending that we've seen in recent years. But $7 trillion in cuts given two episodes of massive increases in spending in the last two decades. shouldn't be that difficult. You know, actually, you're absolutely right, because if we look at projected total spending over the next 10 years, it's about 10 times that. $72 trillion is what the federal government is projected to spend over the next 10 years. So if we shave $7 trillion off of that, you're looking at less than a 10% cut. I think that should very much be doable. But if we look at the most recent deficit agreement that Congress made, which was in 2011, the Budget Control Act, it was supposed to cut spending by $2.1 trillion. By the end of it, we ended up increasing spending in that budget category, discretionary spending, by $2.7 trillion. Of course, we had a pandemic. So that's the other part, right?
increased spending during emergencies. And I would say by way more foreign excess of what's actually helpful. And then we end up with a higher spending baseline going forward. And that's where we need to cut back from now. So one of the things I said, very simply, just return to pre-pandemic spending. Like, let's go back to the spending level in FY19. And we can even adjust for inflation, but we are way above that. So then you're not even talking about a spending cut. You're just saying, let's eliminate the emergency spending and then cap spending growth from there. Now, one of the scenarios that you lay out in your paper is simply a spending freeze.
A nominal spending freeze. I like that as a political matter because it is one word and everybody intuitively knows what that means. Yeah. And it gets us. to about the same place in a decade as massive spending cuts right now. Oh, yes. A spending freeze would be phenomenal. The big issue we're facing is that we have a spending growth that far exceeds the growth in the economy. And in part, that's because we have entitlement programs that are too generous. They should be targeted towards providing relief for those individuals who need support from the federal government. Instead, we have decade-long health and retirement income support, including for very wealthy individuals, that might make sense for political reasons if you're trying to buy votes, but absolutely makes no sense from a policy perspective, and we can't afford it.
How serious is the effort to do any of what you describe? I've heard the federal government described as a health care program for the elderly with an army. Yeah, I think that's quite that's a very good description we might want to add. And it also provides a lot of income for people that don't need it. But how serious is the effort? Not serious at all, I would say. I don't even think that we have a shared understanding between Republicans and Democrats, whether debt and deficit spending in the trillions every single year is something that we should worry about. And that surprises me because.
I know that modern monetary theory, this idea that the federal government can't just print its way out of any crises and just spend money like there's no tomorrow, gained a lot of traction in the past decade. But I thought that the experience during the pandemic where inflation reached a 40-year high, in part because of excessive government spending and handouts that drove up demand in the economy, that we would have learned that lesson that you can't spend your way to prosperity. But it seems that that message has not reached Congress yet. All right. We'll get to more of the ugly politics of this later. To you, Scott, we have...
We've gone through this awful pandemic. You and other scholars at the Cato Institute have assembled a very handy book, a scouts Bible, if you will, for people who are serious about doing something at the federal, state, and sometimes local level to empower workers, to give them more flexibility, to let them keep more of their own money. to let them buy goods more cheaply? What does that agenda look like for this new Congress? Yeah, I think it's really two parts. First is there really needs to be more understanding in Washington. For those that are trying to push a pro-worker agenda, which is very trendy right now, there needs to be a greater recognition of the existing laws in place that do all sorts of bad things to the vast majority of the American workforce, decreasing labor mobility, decreasing living standards, making it harder to move from place to place or job to job. And as you said, really,
taking away independence and autonomy, creating kind of a one-size-fits-all approach to the American worker that, quite frankly, doesn't match up with almost all of us in terms of our jobs, our objectives, our hopes and dreams, and all that jazz, right? That starts, again, with recognizing where are the existing laws that are causing the problems. And some of it is looking at existing trade policies that raise the price of food and clothing for American workers. Others is looking at existing labor regulations that actually gum up the works and lower workers' lifetime earnings and their job mobility. We also need to examine a transportation policy, how we make it more difficult to drive to our jobs or to get on the train or the bus and take public transportation. All of these things we're doing right now through existing law.
that really harm workers. So part of the agenda is, look, recognize where these laws are and frankly, get rid of them or at least dramatically reform them. You know, Romina mentioned benefits and entitlements. There's a lot to do in healthcare as well. You know, the way that we essentially force people to get insurance through their employers really decreases their leverage with their employers, decreases their ability to change jobs or move on to something else. It, of course, also is just a massive tax. You know, in the chapter, we're talking about trillions of dollars that could be returned to workers to allow them to buy the healthcare they want, to have more portable benefits that really are tailored to their own needs.
Again, part of it is just finding the weeds and trimming. But then there's also, I think, a more proactive pro-worker agenda and focusing on a lot of the areas that are ignored in official Washington, whether that is a big area is remote work. Right now, of course, remote work has exploded in the pandemic era. Our tax laws, however, are stuck in not even pre-pandemic times. They're stuck in like the 1990s. We think of jobs as being right next door to employers or at least a short drive. And our tax law actively discourages remote work. Other provisions of tax law make it really hard to be an independent worker. There's been a dramatic increase in freelance work over the last few years.
And yet tax law essentially requires independent workers to go through a lot of extra hoops. And so we need to have a more proactive agenda in a lot of these areas that will allow workers to live the lives they want to lead, to be more mobile, to be more independent. Studies show that workers care a lot more about flexibility than they do about mandated benefits or just wages. And we need policy to reflect that with some, I think, really pragmatic reforms. You know, I talked with Tim Carney recently of AEI and the Washington Examiner, and he's making this big pitch on behalf of...
families, that people should have more kids. And, you know, one of the things that he says is, look, workplaces need to be more friendly to people who have families. And to the extent that that is not the case, you know, and he's like, my wife is quick to remind people, you know, it's how we all got here, is having been children and having been born, that all of this flexibility could feed that, you know, potentially larger families or at least customized family arrangements. And that itself is probably something that when we talk about the fiscal crisis is, as important as any of the issues here. Yeah, babies are great, whether it's just as entertainment at home or for our current potentially demographic crisis down the road. And like you said, going back to remote work, for example, there was a great study out a few weeks ago that showed that we actually had a little baby boom during the height of the pandemic, in part because working age moms were able to stay home and you actually had an easier time.
having kids, making kids, and the rest. And so policy that recognizes these types of differences in individuals. You know, Washington would say, oh, okay, well, we have to mandate childcare. That's how we're going to mandate paid family leave. Now, leaving aside the unintended consequences that can stem from that, you know, employers being a little more reluctant to hire women of a certain age, for example. But beyond that, we need to recognize we have a lot of policies in place right now that make childcare more expensive. You know, staff to child ratios, mainly at the state level, that increase the price of childcare by thousands of dollars.
We actively zone out home-based businesses for home-based childcare. mandate certain benefits packages that, again, might not be right for a lot of workers and a lot of working families, maybe that are a one-earner family that have a stay-at-home mom or a stay-at-home dad. And by the way, we are actively, at least the Biden administration, actively targeting independent workers, so gig economy workers, freelancers, and the rest, and trying to eliminate a lot of independent work, even though, again, that provides parents with the flexibility they need to take care of the kids, take them to soccer, carry them to school or whatever, and that gives, I think, workers the power to determine the best lives for themselves and their families. So by way of taking this back to...
the realm of politics. Sorry. Sorry, listeners. I apologize for taking this back to the realm of politics. But our colleague, Gabriella Beaumont-Smith, has done all this work on the baby formula crisis. And for parents, in particular, lower income parents who don't have like lots of other options. And I won't explain the biology of choosing to formula feed a child versus breastfeeding and how permanent that decision can be.
The fact that the Biden administration in particular and seemingly most members of Congress, their first impulse was or any of their none of their impulses were. let's get rid of a bunch of dumb regulation to get this stuff moving. Let's look at the core benefit that we are seeking to allow these people to take advantage of. None of that was ever seemingly on the table. And so I, at least initially for all this other stuff that was not as immediately pressing to most people, if we can't get lower income people better access to baby formula to feed their tiny children, I don't have a whole lot of hope.
that a lot of these other policy areas are going to be fixed in short order. Yeah, well, the problem in Washington is that when we think of pro-worker policy, or when politicians think of pro-worker policy, they're really thinking about... helping very specific workers. So going back to baby formula, they don't think of workers as formula purchasers and consumers. They think of them as working in the dairy farms or at the formula plants. And they want to protect those jobs, even though it comes at the expense of millions of American families along the way, and not to mention creates all sorts of havoc for babies and the economy itself. Which is what we see in your other area, trade. We see this over and over and over again.
Yeah, yeah. And really not, I mean, of course, trade is a huge example, but it's not just trade. I mean, if you look through the chapters of this book, whether it's on housing policy or transportation policy, in case after case after case, you find beneath the surface, there's some ostensibly, supposedly pro-worker policy that's actually harming the vast majority of the American workforce, essentially taxing their consumption, making it harder for them to move around, whatever it is. And that, again, I think, though, you're talking about... defeating the political problem. And part of it, I think, really is about recasting the issue as not simply about consumers versus workers, but about workers versus workers. You know, you go back to trade and you see something like a steel tariff. Well, there's...
40 times more manufacturing jobs in sectors and industries that consume steel than industries produce it. So when you tax steel, guess what? You get fewer steel consuming workers, not to mention higher prices for the rest of it. And I think it requires a little more nuance and a little more of reframing this. And again, it's not merely an Adam Smith dreamscape, but instead much more about really pitting workers against each other to the detriment, of course, of the broader U.S. economy. Romina, to the extent that this fiscal crisis that we are...
It feels like it's in slow motion. And historically, at least, if you read Ken Rogoff and Carmen Reinhart, and I know you have, they make it out to be, all these things happen very slowly and then they happen very quickly. And it does not seem that we are in any way, broadly speaking, concerned about hitting that very quickly moment. I think you're absolutely right. There's very little concern for that. And I think there's much to be said about wanting to avoid a future fiscal crisis. But I would actually argue that we are already in a fiscal crisis. Growth is extremely sluggish. And it's in large part because government spending is so high and it's growing and the debt is so high. When debt reaches that level, 85, 90 percent of GDP and grows steeply from there.
Across industrialized nations at those levels, we find growth slowing significantly, roughly 1.3 percentage points. So instead of, say, growing at 2.6%, you might only grow at 1.3%. Cutting growth in half has significant implications for incomes, life expectancy, living standards, you name it, all of the things that make the economy great for the people living in it. debt is already too high and damaging our economy. And even if we didn't face that abrupt fiscal crisis, which we very well may in the future, I think at this point, for politicians that actually care about improving living standards for their constituents, the time to cut spending and stabilize the debt is now and not make the fiscal situation worse. My data is old. And Romina, I'm going to depend on you to update my data here on the fly. If the cost of borrowing for the federal government goes up by, let's say, a point, one percentage point,
How many billions of dollars additionally does the U.S. government have to drum up overnight? I know interest rates have been rising, as we all are well aware. And one additional percentage point in interest on the debt roughly translates to $400 billion in additional spending. Put that into the context of the current debate whether to cut discretionary spending at the debt limit. They're talking about $130 billion. And just that one percentage point increase in interest would be almost four times that. So that's one way we could get from slow motion disaster to fast motion disaster.
Absolutely. Interest rates are critical. The U.S. does a lot of short term borrowing. So we're very much subject to fluctuations in interest rates as a result of that. And we rely heavily on foreign investors. We're not like Japan, which borrows mostly in its own currency from its own people. That's a very different scenario than the United States, which is reliant on countries like China and Japan, which are some of our biggest bondholders, to continue this deficit spending. Scott, you know, this is related in the sense that we're leaving lots of GDP on the table.
by protecting various parochial interests in the United States. I can recall, and I think maybe you and I have discussed this. If not, I've talked about it on the Cato Daily podcast with either Vanessa Calder or Nolan Gray in the context of housing. And that is, I think I spoke about it with Ed Glazer. Ed Glazer estimates, you know, our housing policies in the United States leave about, and it's probably higher now, $2 trillion in GDP on the table that we just don't get.
Yeah, and that's all about letting workers move to where they want to work to be more productive, right? And this goes back to, you know, I haven't tallied it up in the book. I really should make a good blog post. But you can go through almost chapter by chapter and find a GDP bump from the proposals being offered because they let workers be the workers they want to be. And whether that means moving to a different job, whether that means working remotely, whether it means moving to a place because housing costs haven't gone nuts in a place like Manhattan or San Francisco, whether it's eliminating occupational licensing.
boosts supply and increases benefits for consumers, you can go down the list. And in case after case after case, it boosts growth, which growth is great for a lot of reasons, for fiscal reasons, but it's also great just for a rising tide, you know, lifting all boats. When the economy is growing faster, poverty is going down more quickly. Quality of life is improving more rapidly without adding to the debt, without all of that inflation and all those other... unnecessary byproducts. And so while the book is not a growth agenda of sorts, but there's a whole lot of economic growth tucked in there. All right, we're going to leave it there. Romina Baccia, Director of Budget and Entitlement Policy at the Cato Institute. Scott Linskin directs general economics at the Cato Institute and the Herbert A. Steele Center for Trade Policy Studies and is the lead author slash editor of the new Cato Institute book, Empowering the New American Worker. Of course, Romina, author of A Fiscal Agenda for the 118th Congress. Thank you guys very much. And I will commend both of those products to our listeners. And of course, you can follow our continuous work.
In all of these areas, our website is cato.org. Where did the CDC fail and where did it succeed in responding to the COVID pandemic? The recent Cato event, Performance Review, evaluating the CDC in the wake of the COVID pandemic. That review came from Mark Markeri of Johns Hopkins University, followed by Ari Schulman, editor of The New Atlantis. My journey with COVID was that at the time I was the editor-in-chief of the number two trade publication that Physicians Read, a journal called MedPage Today. So I felt a sense.
of an obligation to really understand what was happening since there was a lot of confusion before the pandemic in January, February, and early March. And to me, it was very bizarre that the news was covering this by having pundits give their opinion, people with no public health or scientific background. To me, I just felt like that's very dangerous. So I took it on myself. I'm a surgeon by training. I've spent 90% of my time and do in public health research in understanding.
sort of evaluating the robustness of scientific methodology and recommendations that we make based on it. That's sort of the area of medicine where I focus my work and challenging deeply held assumptions in the field that we inherit. So I felt like somebody must really have some good expertise on this. I know it's not the people I'm hearing from. So I led a bit of a personal investigation to talk to the experts I really respect, which are not necessarily the experts that are good on TV. There's no correlation between being well-spoken on television and really knowing your subject matter well. So I sought out the people that I believe are the top virologists in the country, infectious disease specialists, and public policy people.
You don't want somebody with just one dimension making all, calling all the shots, right? Let's be honest. We physicians don't know anything about unemployment or education. modelers don't know anything about bedside care in the normal course of the trajectory. People who don't understand the history of pandemic responses don't understand how the government has basically botched every pandemic in its history. Even in our lifetime, SARS, MERS, Ebola, Zika, H1N3. So this is not really, governments just don't respond well to pandemics, especially in the United States where they're so bureaucratic.
So it was clear to me that something major was happening, that I really believe we already had community transmission, that we were being lied to when we were kind of told, don't worry about it. So I took it on myself. I went on the airways and I said, look, I've researched this. What is happening in Wuhan? What is happening in Northern Italy will happen in the United States. And that clip on CNBC ended up going viral, maybe in part because I'm from Johns Hopkins, where I'm editor in chief of that page today. So that's when I found myself deeply involved here. And then I would say to answer your question specifically, sure, mistakes were made, but we make mistakes in medicine all the time. I make mistakes in the management of my patients.
People are very forgiving when you're honest. And when the answer should be, I don't know, and you give the wrong answer, that's where people get very frustrated. And that's where we are right now. So Dr. Fauci is head of infectious diseases at the NIH. His primary job is to fund research to answer questions in infectious diseases. That is his job description. He's not a public health official, never was. He is trained as a rheumatologist, has a background in immunology. So he has a job at the NIH to fund research rapidly.
When we had airborne community transmission all over this country, and he took the surface transmission model of influenza, that it was touching surfaces, pour gallons of alcohol solutions on your mail and groceries, wash your hands like crazy. That is a scientific unknown. Rather than rule by opinion, do that research in one of the NIH's biosafety level four labs that we spend a ton of money for and answer that question in 24 hours. Don't rule by opinion, rule by science. Almost every major question in the pandemic was a scientific unknown that Dr. Fauci did not fund the definitive research to answer in a timely fashion, but instead let linger as an open question as opinions fill that vacuum in the absence of data. And that's how we got the most politicized pandemic in world history. Almost all those questions could be answered with randomized trials, including yesterday's bivalent approval.
authorization of the bivalent vaccine by the FDA in six-month-year-old babies? Where is the randomized control trial? They're spending $1.2 billion on long-haul, long COVID research, as I'll describe next week in a Wall Street Journal piece. They can't fund one randomized control trial of the bivalent vaccine. That is the ultimate failure of our public response, was the failure to do the definitive research and fund it.
and answer the big controversies. Instead, they let them linger as open controversies. I agree with everything that you just said. And the thing that you're saying about the problem is not that they were wrong. Public health people are always wrong during pandemics. It's just the nature of the beast. It's being wrong, having told people that you're absolutely certain and not saying we're not entirely fair yet. And then on top of that, suggesting in lots of different ways, not only is this the correct answer, but...
only bad people would disagree with this. Only people who are anti-science, only people who are, for example, on the masking question, xenophobic. That puts you in an incredibly bad position when, if you have to then go and change your position on that, as they did. And on top of that, if you've just read a little bit into the history of pandemics, you'll see that precise pattern specifically on the masking question has happened many times before. In fact, it happened in the last SARS outbreak. So COVID is, you know, the scientific name is SARS-CoV-2. Well, SARS-CoV-1 was the SARS outbreak of 2002, 2003. It was in...
several Asian countries, and it happened in Canada as well. And if you go read the Ontario SARS Commission, you'll read basically a play-by-play of exactly what was going to happen at a larger scale globally 20 years later on the masking question. And they just, they didn't learn it at all. And they had every opportunity to know in advance that it was going to happen. Martin Markari is a surgeon and public policy researcher at Johns Hopkins University. Ari Schulman is editor of The New Atlantis.
The new Cato book Empowering the New American Worker digs deep into policy reforms that would give American workers greater freedom to plot their own professional lives. Scott Lincecum is the book's editor. We talked a few months ago, starting with a brief chat on California's controversial AB5, a piece of legislation that aimed to limit the amount of independent work the contractor could do. Tens of millions of Americans engage in independent work each year, a number that has increased dramatically during the pandemic. We're now looking at 50 million or so Americans have engaged in some sort of independent work last year.
But beyond that, it is hardly this low paid gig work situation that American workers are forced into that, you know, sure, gig work exists. And quite frankly, gig work's kind of great for a lot of reasons. But less than 10 percent, according to the IRS, of independent contracting jobs are in gig work, you know, Uber drivers and the rest. So that's 90 percent or more are actually in different forms of independent work. Yeah. So, of course, Uber drivers, Uber, Lyft drivers being sort of the classic example, but your yard guy, if you have a yard guy, other people who tutors that you might hire for your children. Yeah. Any any number of avenues of exchange where you essentially have an arm's length relationship with someone to perform a service for you or for your or for your business. Yeah. And and, you know, you mentioned a yard guy and a tutor. And those are, of course, classic examples.
But the big change over the last decade is the rise of white collar independent workers, especially in tech, you know, software developers and a lot of artistic positions, marketing as well. And what we found is that in the book, we showed that these folks are really. dominating in the independent work sector these days. And by the way, they're making great money doing so via freelance platforms like Upwork, for example. And the Wall Street Journal this year did this great report on the rise of six-figure contractors. I mean, these are folks that are making more than $100,000 a year doing this kind of white-collar gig work.
Right. That and that, again, is by far the more prevalent form of independent work as compared to this low wage part time gig work that gets all the attention. So to empower American workers broadly who would like to engage in this work. And I would be remiss if I did not mention Vanessa Brown Calder, our colleague. This is a this is a big part of her portfolio, which is showing that for for many workers, especially mothers.
the flexibility that is offered with that kind of arm's length relationship can be extremely valuable. Yes, and empowering, right? That's, you know, when gig workers and independent workers more broadly are pulled, they repeatedly say that they want to do this type of work. They are happy with this work. They're satisfied with their work arrangements. And like you said, a big reason for that is flexibility in terms of scheduling, in terms of business location, and also control.
They control when they work. They control how they work. They control their clients. They have a far more autonomy and freedom when it comes to their working relationships. And that's a big deal for working parents. It's a huge deal, but for all sorts of workers as well. There was a great study cited in the chapter on independent work in the book that pulled Uber drivers. Let's go back to gig workers again. And they tried to figure out how much it would take in terms of compensation for Uber drivers to move to a more traditional taxi cab company. And it was something like 40%.
of a pay increase, about $150 a week, they would have to be paid to give up the flexibility and control that Uber gave those workers. And then again, this extends way out of gig work. So that's the other big misunderstanding about independent work. People are doing this because they want to do it. The vast majority of independent workers totally understand the trade-offs, right? They totally understand that they're not going to have FLSA, the FLSA protections, and they won't have these mandated benefits, and they are going to have to figure out their own 401ks and health benefits and the rest.
gladly accepting that trade-off because they get more control and they get more flexibility in those working relationships. And oh, by the way, the studies show that they still are getting benefits either through a spouse or through open private or government markets. And they even say that their work is more stable and better paying. So this is not, again, this exploitative arrangement that it's so often made out to be. You mentioned, we talked about AB5 a little bit. The PRO Act is in part a nationalization of that kind of arrangement, which makes it...
If not more punitive to try to maintain that kind of independent arm's length relationship that independent work facilitates. But there are a lot of things that states do or can do to make independent work harder or easier. Right. And the big one here is that is tax treatment. Right. Current tax law is just simply not designed. And that's at the federal and state level. Simply not really designed for an independent work environment. It really ignores, again, those that we now have.
tens of millions of independent workers. Upwork projects that in the next decade, about half of the workforce could be independent workers. Tax law doesn't reflect any of this. It is very difficult compared to a standard employee to file your taxes and to file it correctly. You can be on the hook for major penalties if you don't file your estimated taxes properly. I know this actually personally because I have done some independent work on the side for more than a decade.
All of those types of tax issues discourage independent work. They increase the cost of engaging in independent work. They discourage people from perhaps moving from jurisdiction to jurisdiction because of this type of disparate tax treatment. So what we propose is instead of trying to condemn or eliminate independent work, policymakers at the federal and state level should really be thinking creatively about how to make... independent work easier, and really just to level the playing field with standard employees. We're not asking, and we certainly wouldn't want the government to put the thumb on the scales for independent workers overall. But instead, it's just creating a parity, creating equal treatment for both independent workers and traditional workers. And so that includes things like creating a...
a standard business deduction that independent workers can take so they don't have to worry about estimated taxes, they don't have to worry about their, you know, itemizing their expenses down to the last nickel, that they could also take on voluntary withholding. That's another idea out there. That's, you know, for example, a wedding photographer could have his or her taxes withheld or might not. They can choose to do that. Again, just simplifying tax treatment so that those headaches that exist now with independent work and with state and federal tax code no longer exist, that it's just a simpler process overall. And those reforms, I should note, they're pretty widely...
advocated by not merely free marketers like me, but a lot of tax professionals and law professors and the rest have looked at the independent work situation and just said that this is really terribly biased against independent workers for no good reason. It's a classic case of this antiquated model of work just simply continuing because Congress hadn't gotten around to fixing it. And we should understand that when it comes to independent work, maybe a full-time job imposes upon you burdens that you might not... might not like that lowers your life satisfaction. And being able to choose the people with whom you associate is itself a pretty valuable thing. Incredibly so, particularly in the current...
political and social environment in which we live, right? You know, independent workers have a really great advantage that they don't have to worry so much about their tweets or they don't have to be associated with an employer that might have certain political views or whatever that they don't like. They get to control all of that. And again, that type of control is really... a huge part of the value that independent work provides and that most independent workers are embracing as part of that trade-off we talked about, right? That, again, the vast majority of these relationships are voluntarily entered into by both a business and an independent worker, fully cognizant of all of these types of trade-offs. And the best thing that policy can do is get out of the way, right? Let people engage in these voluntary transactions in the way they want to shape them. And by getting out of the way, really, it's, again, the biggest thing is to make tax treatment easier, make it similar to being a standard worker.
where you really don't have to think much about it. You just, that's basically what it is. You sign a little paperwork and you're done, right? And then the other thing that I think is really critical is a lot of our benefits are currently tied to work. And we talk about this in a separate chapter. You mentioned Vanessa Calder. She's written a chapter on employee benefits and what we call job lock. That's people basically being kind of stuck in a job because of their benefit situation. And there are a lot of those types of solutions that we propose in the benefits chapter that would be great.
also for independent workers, you know, decoupling health insurance from your employer, decoupling your 401k and your savings from your employer. Doing this would be a big advantage for independent workers who now have access to these benefits, but it's just harder. And for no, again, for no good reason, just because policy hasn't caught up with economic reality. Scott Lincecum is editor of the new Cato book, Empowering the New American Worker. The new Cato Institute survey on housing gauges Americans' attitudes about housing, its creation, and what might spur people to be more supportive of greater freedom to create more housing. Emily Eakins directs polling for the Cato Institute. We spoke for this Cato Audio exclusive.
Broadly speaking, how concerned are Americans about the cost of housing? Americans are very concerned about the cost of housing in America today. Eighty seven percent in our latest survey, our latest national survey that we conducted with YouGov found that Americans are concerned about the cost of housing. And this is true for Democrats, independents and Republicans. There is not a partisan gap in these concerns. So you did a sort of a broad survey and the main results are broken down by affiliate party affiliation, Democrat, independent, Republican.
It's interesting to see where there are partisan divides and there are not partisan divides on the cost of housing, on whether or not it's a good time to buy a home, which, of course, with high interest rates where we are right now, pretty much everybody believes it's not a great time to buy a home. But there are partisan divides that do emerge, and mostly they have to do with constructing housing in the neighborhoods where the people responding to the survey live. That's exactly right. So I think we should back up for just a second because I want to explain why we asked the questions that we did. So we asked people about how concerned they were about the cost of housing. And so we found 76 percent of Americans thought that now is a bad time to buy a house. Fifty five percent say that they could not afford to buy the house that they're living in right now. And 69 percent are worried that their kids won't be able to afford a home when the time comes for them to buy a house. And that is what Democrats and Republicans agree on.
But a lot of housing policy scholars would tell you that one way to deal with the high cost of housing is to build more houses, build more single family homes, build more condos, build more apartments and townhomes so that with increased supply, the prices become more manageable and regular young families can afford them. That's where the partisan division emerges. So I can walk you through some of that data. If you look at where the partisan divide shows up, we all they all everyone seems to agree that the cost of housing is a big problem. As you said, more than 80 percent of Americans are.
somewhat, very, super-duper concerned about it. But when it comes to building more housing, the solution that economists and normal human beings agree is the way to deal with the high cost of housing, build more of it, the partisan divide arrives once we start talking about your community. Democrats generally more supportive of building housing in their community. Republicans generally more supportive of not building more housing in their community. That's exactly right. So if you look at Americans overall, it's split nearly down the line. 51 percent favor, 49 percent oppose. But Democrats, they're almost about two thirds who favor building more houses. Republicans, though, far much less than 50 percent. It's 39 percent of Republicans favor and a majority, nearly two thirds oppose building more houses. And we can unpack that. I think there's a couple of reasons why that is, in part.
Republicans are more likely to own homes already, and they're more likely to live out in more dispersed areas where the reason they seem to want to live there, like rural areas where the houses are further apart, the whole reason they want to live there, based on some of the other questions that we asked, is they like the character of being spread apart. And they don't want to build more houses because that kind of crowds up the very reason they want to live where they're living. Democrats, on the other hand, are less likely to own, and that's what they're looking to buy. And also, they're more comfortable with smaller houses that are that are built closer together. So I think those two things together are kind of explaining this partisan divide. But we asked some follow-up questions that considerably changed the results and actually bridged this partisan divide and got Americans to a place where they actually would support building more houses. And I'd love to walk you through that data. Yeah. So you take that basic question, the do you support or oppose building more housing in your community and then the various kinds of housing, but then you ascribe sort of a purpose and intent to building that housing. So how does the partisan divide change?
And how does support or opposition change based upon the characterizations that you present? Yeah. So it's about who benefits from that additional housing being built. So what we do with our survey questions is we'll ask the straight question first. You know, would you favor or oppose building more houses in your community? Then we follow up and say, would you favor or oppose building more houses and condos and apartment buildings in your community if it made it easier for people to afford homes? So you see that extra sentence there.
tell people that it would make homes more affordable. It increases support from barely 51% all the way up to 64%. You get two thirds in support. So that tells us that most people are not making the connection that economists do, which is if something's too expensive, you make more of it, you build more houses, it makes it more reasonable and accessible to people. People don't necessarily make that connection. And so in the poll question, when you tell them that, that gets them up to where they're more supportive. On the partisan question, that increases Democrats from 63% up to 75, bumps them up a little bit. Republicans, it bumps them up.
Just barely over 50%, 53% slim majority of Republicans would support if you tell them that it would make it easier for people to afford homes. But then we asked about what kinds of people in some follow-up questions. So the first one we asked about, and that's where you get the most support. We said, what if this meant, would you favor or oppose building more houses in your community if it made it easier for young people and young families to afford homes in your community? That is where you get the most support.
Of all Americans, support rises up to nearly three-fourths. 72% say they would support building more homes if it made it easier for young families and young people to afford to buy homes. And that gets Republicans up to nearly two-thirds in support. And of course, Democrats gets an even higher to 82%. So a solid majority of Republicans instead of a narrow majority. When it says you go from people to young people and young families, that's, you know, people like children, people like children in neighborhoods. And this is sort of the unfortunate, the next question sort of flips that support.
again, for Republicans at least? Well, so I think there's another way to look at it. So we asked about a few other groups. We asked, what if it made it easier for people of color to afford homes? And what if it made it easier for people with low incomes to afford homes? To be fair, you need to compare those numbers to the baseline because different people were asked these questions. The way you do it is that you take a sample and you randomly assign respondents to hear one of these questions. And I think for that reason, you need to compare it to the baseline question. So Democrats, you increase support.
from 63% to 85. So almost a 20% jump for Democrats if it would benefit people of color and help people of color afford homes. Republicans, it does increase support, but less so. It goes from 39% to 44. So it's a five-point jump. So there's not as big of a jump. And then if it helped people with low incomes to afford homes, it jumps up from 63% to 78% for Democrats. And again, for Republicans, it goes from 39% to 45%. So it's basically the same for those two. So it does increase support, but not nearly as much as it does if it benefits young people.
So what does that tell us? You know, we're rapid just as a big takeaway. Now, certainly this tells us something about how to message on the issue of, hey, build more houses. But what does it tell us about the, you know, for politicians, politicians who want to take advantage of public sentiment on behalf of new home construction? What's the big takeaway for them?
I think the big takeaway is that, like you said, people like young families being able to move into their neighborhoods, but they also want their kids and their grandkids to move into their neighborhood one day. And I think for a lot of the people who are at first opposed to building more houses, those are precisely people in an age demographic where they have kids, their kids are getting older, and they want their kids to come back and look close to grandma and grandpa. And so if they see this as a benefit. to their own families and the people in their communities that are young, you know, kind of paying it forward to the next generation. That really seems to move the dial here. And also just to keep in mind that there are different reasons that people will oppose building more houses. And this gives them a competing consideration that seems to outweigh their preferences, you know, for not building more houses. This is what gets them over the line is to help the next generation and particularly their own kids and grandkids. Emily Eagans is a vice president of the Cato Institute and is Cato's director of polling. If you have a topic you'd like us to tackle, send us a note at CatoAudio at Cato.org.
Most Americans believe the 2008 financial crisis came from unregulated Wall Street firms, so-called shadow banks, making too many risky bets, causing the housing bubble to burst. But is that the whole picture? In his new book, Why Shadow Banking Didn't Cause the Financial Crisis, Cato's Norbert Michel explores the main problems with this controversial story about the 2008 crisis and explains why the resulting regulations were misguided. To learn more and to purchase your copy of Why Shadow Banking Didn't Cause the Financial Crisis, visit cato.org slash books. We have a bittersweet programming note for you. The March 2023 edition of Cato Audio, the one you'll get right after this one.
will be the last one we send in a physical format through the mail. It's a sign of the times, and for those of us who remember the transition from cassette to CD and then CD to podcast, it may be a mark of age. Kato Audio will continue to be produced, of course, and available wherever podcasts are sold. That will do it for this edition of Kato Audio. I'm Caleb Brown. I'll talk to you again next month.