10-7-24 *INTERVIEW* Economist Ben Glasner 'The Great Transfer-mation'

Episode Transcript

Speaker 1 (00:00):
I'm very pleased to welcome to the show.

Speaker 2 (00:01):
Ben Glasner, who is an economist at the Economic Innovation Group.
Their website is EIG dot org. That's pretty easy, EIG
dot org. And he and his team at EIG recently
put out a really interesting economic study that is I

(00:24):
think it's one of the most important things going on
in American economics that you might have a slight inkling
of but have no idea just actually how big the
issue is. The title of the piece is called the
Great Transformation. So instead of transformation transfer like transferring money

(00:46):
from one person to another, the Great Transformation how American
communities became reliant on income from government.

Speaker 1 (00:54):
Ben Glassner, Welcome to Koa's good to have you here.

Speaker 3 (00:58):
Thank you very much. I'm really glad to be here.

Speaker 2 (01:00):
What don't we start with kind of the high level
as you do in the kind of the graphic version
of your report on the website, where you start with
how much reliance for income there was on government transfers
fifty years ago and how that's evolved up to now.

Speaker 3 (01:19):
Yeah, I would love to start there.

Speaker 4 (01:20):
So when we're talking about the spread of transfer reliance
with spread on the reliance on government income. Back in
nineteen seventy, roughly one percent of counties in the US
received twenty five percent or more of their personal income
from government transfers. By twenty twenty two, that it increased
to fifty three percent of US counties. More than half

(01:40):
of counties in the country rely on government transfers for
a quarter of their personal income.

Speaker 2 (01:45):
It's an astounding number, it's a depressing number. So when
we think about transfers, I think a lot. We'll think
of welfare, We'll think of food stamps. What else is
in there? For example, our farm programs in there? What
else are in these numbers?

Speaker 4 (02:02):
So when we think about government transfers, what we're talking
about is anything the government is spending money on or
giving to a person without the expectation or receipt of
a service work good. So in this case, we can
think about things like SNAP or the yearned income tax Credit.
But we also want to think about Social Security, Medicare,
medicaids programs where the government is spending money to help

(02:22):
support a person without receiving something back.

Speaker 1 (02:25):
Do farm programs fall into that category or not?

Speaker 4 (02:29):
No, we don't include farm programs specifically into that. We're
not thinking about it in terms of farm substies, but
instead thinking about it more as I've signed up for
to participate, or I automatically I am eligible for something
that we might think of as the safety net or
a program that's administering some funds to an individual.

Speaker 2 (02:47):
Okay, and not to belabor a point, but would it
be reasonable to include farm programs? Did you think about
that and rule it out or did you not think
about that?

Speaker 3 (02:57):
So we thought about a couple of different ways to
cut this.

Speaker 4 (02:59):
We opted to do was lean directly on the Bureau
of Economic Analysis definitions. So we pull from the Federal
Bureau of Economic Analysis definitions for transfers and follow that
through through the whole course of the analysis. This becomes
a little bit more clear when we think about the
bins that they use. So you might imagine one bin
being wages and salaries, another being supplements to wages and salaries,

(03:22):
like employer payments on behalf of employees into pensions or
insurance funds, business income, rents, dividends, interests, all that kind
of falls in one bucket. And then on the other
side we have government transfers, and that's where we want
to think about, what are those things that are paid
that aren't falling into that zone, and we call the
DEA's definition on.

Speaker 2 (03:41):
That, okay, And again, just to highlight this to listeners,
what bens and set a second ago. As of fairly recently,
and it's probably only gotten more since then, over half
of the counties in America are reliant on government transfers
of one form other has been just described for at

(04:02):
least twenty five percent of the aggregate individual income in
those counties.

Speaker 1 (04:07):
Over half of the counties in America. That's it.

Speaker 2 (04:12):
It's insane, it's unsustainable, which is something we need to
we need to talk about in a second. But before
we get sort of to the future, I want to
talk about how we got here, because there are at
least two ways I can imagine the problem getting this large,
getting this bad, and I'm gonna I'm going to keep
talking about it as a problem. I don't You might
be talking about it in more neutral terms than that,

(04:34):
but for me, it's for me, it's a huge problem.

Speaker 1 (04:37):
And you could imagine two things.

Speaker 2 (04:39):
At least that would explode the problem the way it's exploded.
Number one is potentially the government adding all kinds of
new programs in new ways to redistribute money.

Speaker 1 (04:51):
And number two is some changes in the.

Speaker 2 (04:54):
Demographics of the population that cause existing programs to become
much it's more expensive without government needing to actually change
any laws at all. So I'm guessing it's a little
of both, but I think you say it's much more
of one than the other.

Speaker 3 (05:11):
Yeah, that's absolutely right.

Speaker 4 (05:12):
We want to break it out into how many programs,
what those programs cover, who's eligible into them, and what
the cost of administering any given program is. And so,
like you said, on one side, we might be curious
if it's a situation where we've just expanded the number
of programs or their generosity over time, and on the
other are we just seeing.

Speaker 3 (05:30):
More people falling into these buckets.

Speaker 4 (05:33):
So this brought us to kind of really tease those
two things apart in the analysis, and what we found
was that aging is the strongest force impacting the expanded
reliance on transfers, in particular aging into eligibility for programs
like Social Security and medicare. Those are the two big
driving forces that we want to think about for the
aging effect, And what we ended up finding was that

(05:53):
it isn't as much about in expanding generosity of say
income targeted social safety net programs. We think of about
SNAP or even just the EITC, but instead thinking it through,
we just are seeing a massive demographic shift over the
last fifty years as the population of the US has
gotten older and shifted into a more retirement age focus,

(06:15):
and we have programs really well tailored to trying to
cover that zone. But as it becomes a larger and
larger share of our population and demographic shifts across the
country have made older and older regions, it's turned into
a massive issue when we think about the reliance among
local communities on transfer income.

Speaker 2 (06:33):
We're talking with Ben Glassner from Economic Innovation Group.

Speaker 1 (06:36):
EIG dot org is the website.

Speaker 2 (06:38):
You've got another chart that shows I'll just read what
it says.

Speaker 1 (06:42):
Transfers now count.

Speaker 2 (06:43):
For almost eighteen percent of total personal income in the
United States, up from eight percent in nineteen seventy. And
you know, when you think about this, when you think
about eighteen percent of total individual income coming from transfers,
that money has to come from somewhere, and it either
comes from people earned, people's earnings today or people's earnings tomorrow,

(07:04):
right right, So it's going to because we're borrowing so
much money and just you know, issuing bonds to pay
this stuff, So my kids are going to have to
pay for it, and you know, i'd like to This's
more of a qualitative question, I suppose, But can can
you describe in any sort of qualitative kind of way
just how big a deal this is that we're at

(07:24):
almost eighteen percent of total personal income coming from transfers.

Speaker 1 (07:28):
What does that really mean?

Speaker 4 (07:31):
So what we want to think about for it is
that if we're spending more and more, or we're earning
more and more of our income through transfers, less of
it is coming from things like wages and salaries. And
if we're seeing a scenario where that trend is growing
over time, we're becoming more and more reliant on not
very flexible sources of income. If I'm getting a Social
Security cat check, for example, I only can make so

(07:53):
much in a given month, and my spending and the
economy around me is also restricted by that same band.
If we want to think about a growth oriented agenda,
the more alliance we have on transfers, the less able
we're going to be to pursue rapid growth, rapid accelerations
and productivity and really seeing a better tomorrow, where transfer
alliance seems to indicate a growing restriction into types of

(08:17):
economies communities are really able to see.

Speaker 2 (08:20):
So as I think about potential solutions for this, you know,
I think one thing in a way that makes it
more different, it would be it would be easier, maybe
not politically easier, but conceptually easier if a lot of
the driver of the problem was that we had created
all these new programs and that lots of people were
on these programs, and especially if there were people who
were maybe younger and.

Speaker 1 (08:39):
Of working age on these programs. But if the issue
is being.

Speaker 2 (08:43):
Caused by the fact, but primarily by the fact that
we have an aging population and people are living longer
and collecting Social Security and being on Medicare and all
this stuff for longer, that's a much more difficult thing
to deal with in terms of policy and in terms
of politics. People vote so and I don't know if
you guys are going this far yet, but what are

(09:06):
things we can do to try to fix this problem
other than the most obvious one to me, which would
be raising retirement age for some of these programs. To me,
that's the first one. But there must be a dozen others.
So what are you thinking about?

Speaker 4 (09:20):
Yeah, well, take this problem really seriously, and we think
about it first at the level of local community economics
and when we're thinking about types of solutions that are
obviously raising revenues through either increasing taxes, but that might
choke off some of the growth that we're looking to
take advantage of to help afford these things.

Speaker 3 (09:37):
There's cutting spending on.

Speaker 4 (09:38):
Programs, which, like you said, if this was a different
type of problems where'st maybe we'd be just thinking about
reducing generosity.

Speaker 3 (09:44):
But there's a third level, which is faster.

Speaker 4 (09:47):
Economic growth, finding ways where we can boost that income
through wages and salaries to then reduce the transfer share.
If we can find ways to increase income within local
communities that is not transferred dependent, we'll end up on
undercutting this problem and growing our way out of it.
And that can be done in a couple of different ways.
If we invest more time and energy into research, innovation,

(10:08):
looking for an expansive and better designed immigration policy, tax
and regulatory policies that foster economic dynamism, participation of the workforce,
all those different tools within a local context can help
under or undo some of the damage or some of
the transfer alliance that we've seen in local communities.

Speaker 2 (10:24):
But much of what you just describe, which I understand
and I think I agree with you on most of
that doesn't do anything about reducing the amount of spending.

Speaker 1 (10:37):
That's I mean, it would, it would reduce the.

Speaker 2 (10:39):
Percentage of income I suppose that goes to transfers, but
it doesn't reduce the amount. You're just you know, you're
increasing the denominator by growing the economy, which we should
do anyway, But shouldn't we be trying to do something
to actually reduce the spending as well?

Speaker 1 (10:56):
I mean, do you agree with me that we should
raise retirement ages.

Speaker 4 (11:00):
I think that it's less important to worry about reducing
the numerator when we can also impact the denometors. So,
for example, if we're talking about a local retirement community,
we don't really want to imagine a world where it's
harder to imagine that local economy from really having a
lot of flexibility. People are only going to be able
to work and contribute significantly for so many years. And

(11:20):
while retirement age changes are changing the programmatic effects of
some of the social safety and that it is certainly
one way of going about it. We found as the
primary cause of the expansion in transfer aliance over time
is the limited amount of income growth within regions. So
if we can find ways to spread where income growth
is across the country, make it more robust, and increase

(11:43):
the rate of growth in particularly struggling communities, we end
up resolving the transfer shared dependence growth that we've seen
across the country. So while it's great to impact the
numerator and think about how we can better design transfer
programs in general, the real driving factor is how do
we reduce the share of our income coming from transfers
And to me, I think attacking the deno maneuver is

(12:04):
more important for the denominator.

Speaker 1 (12:06):
Interesting, I think, I like think, I like doing both.

Speaker 2 (12:09):
I think it's nuts that are our retirement ages are
so low when when life expectancy, even though it hasn't
done very well in the past couple of years, is
as high as it as it is now and uh
and I think we should encourage people to maybe stay
in the workforce for a little bit longer and slowly
raise the retirement age, you know, raise it, raise it

(12:32):
by a month every year for twenty years or something.

Speaker 1 (12:35):
Like that.

Speaker 2 (12:35):
You know, that's I think that's something I would do
that's probably politically doable. You know, I just don't know.
I understand what you're saying about growing the economy, but
that's all stuff that every politician always says they want
to do, and then they always just implement government programs
to do it, which never work. And I just I
don't know, you know, of the things that you were saying,

(12:58):
I don't know which of those I sort of buy
as being realistic.

Speaker 4 (13:04):
So I think it's great to push against it in
the sense that it's particularly thinking about which programs are
actually effective at growing the economy. And one of the
ones that I think is most interesting in this space
is when we're talking about the spread that fifty three
percent of US counties. One of the primary factors of
that is that we've seen a more rapid increase in
aging at the local level than the national level, particularly

(13:26):
among counties where you've seen young workers leave to go
find economic opportunity and see the cities reducing the prime
age workforce available to support that local community. So finding
ways to bring in migration, either within domestic or integration,
can help support those local communities' economies vary effectively. We're
currently in an age where we see really high levels

(13:47):
of prime age labor force participation, So it doesn't seem
like it's really a matter of how do we get
more people involved in work necessarily as much as it
is a matter of we just need more people who
can work. Increase the number of people who might be
able to do it in those local communities, and that
alone will help really eat away at that transfer reliance.
On the other side, I think the political viability is
a really important factor. Jim Glandis talks about this idea

(14:10):
of democratically sanctioned economic stagnation. That's that idea that if
we have a lot of say, retirees in a local community,
they're going to pursue policies that are better for them today,
even at the cost of maybe they're kids.

Speaker 3 (14:23):
They're right kids for tomorrow. So finding ways where we
can break.

Speaker 4 (14:26):
That cycle out by targeting policies towards growth in the future,
I think is really the more important part then really
affecting the numerator today. So I'd admit, yeah, we got
to find ways of dealing with this, and maybe the
politically viable solution is going to be targeting the numerator,
but I really want to hope that we keep focused
on that denominator, keep focused on economic growth.

Speaker 1 (14:45):
Fascinating.

Speaker 2 (14:46):
Ben Glassner is an economist at the Economic Innovation Group
EIG dot org. Their new study all of this, by
the way, is linked on my blog today at Rosskomminsky
dot com. The new study is called the Great Transfer
Mation and it's a great transformation project.

Speaker 1 (15:02):
Twenty twenty four is the beginning of this whole project, and.

Speaker 2 (15:05):
It's an incredibly it's one of the most important economic
issues you can imagine.

Speaker 1 (15:10):
And this is a very valuable report and a great
starting point.

Speaker 2 (15:13):
And I appreciate your time and all your hard work,
and thanks so much for being here.

Speaker 3 (15:17):
Ben, Thanks so much for having me. I'd love to
talk again another time. All Right, we're risking today.

Speaker 1 (15:22):
All right, we definitely will. Thanks Bet.