Measuring a tax cut is all about the framing

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Speaker 1 All right, you got seven minutes. What slice of this economy do you want to talk about, huh?

Speaker 1 From American Public Media, this is MarketPlay.

Speaker 1 In Los Angeles, I'm Kyle Risdahl. It is Friday today.
This one is the 21st of March. Good as always to have you along, everybody.

Speaker 1 With the stipulation that there is honestly too much going on in this economy to cover in a single segment, we're going to try real hard. Courtney Brown is at Axio.
City Bretti is at Politico.

Speaker 1 Hey, you two. Hey, Kai.
Hey, Kai. Courtney Brown, let me begin with you and Jay Powell.

Speaker 1 Obviously, the Federal Reserve this week, as we know, decided not to do anything with interest rates, blah, blah, blah. We know the nuts and bolts of what the chair said.

Speaker 1 Here's the thing that interests me.

Speaker 1 I think the word uncertainty was mentioned seven or eight times in this presser, and Powell said literally nobody trusts their forecast now. He kind of shrugged when asked what was going to happen.

Speaker 1 Is that at all concerning that of the 400 plus economists at the Federal Reserve, not one of them can say to Jay Powell, here's what we think is going to happen?

Speaker 3 I think that says so much about this moment. I mean, they aren't,

Speaker 3 you know, they aren't magicians. They aren't mind readers, these economists, as smart as they are.

Speaker 3 They know what everyone else knows, and all they have to go on is history. But when what the administration is proposing from a tariff standpoint is

Speaker 3 pretty much unprecedented, it's hard to rely on history. My favorite moment from the press conference was

Speaker 3 when Chair Powell kind of challenged, you know, reporters in the room, like, what would you write down in the summary of economic projections?

Speaker 3 We don't know what's going on. We don't know what's going to happen.
It's anybody's guess.

Speaker 1 Sadib, let me ask you this. In that summary of economic projections, the dot plot, it is called in the vernacular, GDP estimates were moved a little lower.

Speaker 1 Inflation estimates were urged or moved a little higher. Powell said

Speaker 1 almost literally, you know, sometimes you just go with the inertia. And the inertia right now is to keep rates steady, which I thought was the safe choice.

Speaker 4 That is the safe choice. They're all probably like writing the shrug emoji down and trying to figure out how do you estimate what's going on?

Speaker 4 This is a scale of policy change that we have not seen at the start of any administration. It is dizzying, and it hasn't really taken effect yet in any huge way.

Speaker 1 Key point right there. Key point hasn't really kicked in yet.

Speaker 4 The president is talking about Liberation Day in a couple of weeks. He's got all these things with tariffs coming up.

Speaker 4 He wants to create this moment. We'll see if that actually yields the thing that he's looking for

Speaker 4 in reordering the global economy. At the very least, higher tariffs would mean a momentary burst of higher inflation, but that's sending the stock market down.

Speaker 4 And that means there will be less money for consumer demand. And that will actually send prices down in some areas.
So, how do you balance that out in making a projection

Speaker 4 a year ahead or even months ahead?

Speaker 1 Who knows? I was interested, Courtney, to read your column either yesterday or the day before.

Speaker 1 I don't really know, in which maybe it was today, actually, in which you pointed out that the Fed now really is in the back seat

Speaker 1 in terms of controlling this economy. For decades, it had been the Fed, which set interest rates and managed monetary policy, and it was in the driver's seat.

Speaker 1 It is now firmly in the back seat with President Trump driving. And in that back seat, the Fed is between a rock and a hard place.

Speaker 3 Exactly. I think that's the big picture takeaway from the summary of economic projections and the press conference.
I mean, as you say, there is kind of this shrug, I don't know, feeling at the Fed.

Speaker 3 And I think that just, that says so much about what it's going to be able to do if all of these tariffs that President Trump has threatened ultimately do go into place.

Speaker 3 Actually, the Bank of Canada, the governor of the Bank of Canada, I think, said it best. Like monetary policy can't do anything in a trade war.

Speaker 3 It's not the tool that can be used or the tool you want to use. So, yeah, I think we've come off this decade plus of monetary policy ruling all.
And that doesn't seem like it's going to be the case.

Speaker 3 Let's go around.

Speaker 1 Sudip, I feel like we have to say that again to make sure people really get it. With the president of the United States

Speaker 1 doing all that he can with chaotic tariff policy to destroy consumer and business confidence and precipitate a recession, the Federal Reserve cannot save us.

Speaker 4 The Fed is not going to be able to counteract everything here.

Speaker 4 The Fed obviously can lower interest rates in a crisis and step up and do all sorts of things in a crisis, but usually the Fed gets to that point once the crisis has already started due to other reasons.

Speaker 4 It's rare that

Speaker 4 the mess begins entirely because of the Fed, though sometimes sometimes it has in the past. And so

Speaker 4 they have to react to the conditions. I don't think we want a Fed that is going to be playing this guessing game far in advance and

Speaker 4 imagining what could come. It's a highly volatile, uncertain world.
Lots of things can happen. And

Speaker 4 the expectation that the Fed is going to be all-knowing should have been erased many years ago.

Speaker 1 Courtney, let me ask you this.

Speaker 1 The vibe coming out of that presser and the Fed decision was that the president really ought to be pretty happy about what Powell had to say and about the decision that the Fed made.

Speaker 1 The president, of course, because he kind of can't help himself, came out on his social and said rates ought to be lower because rates ought to be lower.

Speaker 1 I don't know what the question is. Are you surprised that he's piling on the Fed, even though the Fed kind of soft-pedaled the damage he's causing?

Speaker 3 He really fooled us. I think there were some reporters that thought that this time was different.
He wasn't going to be antagonizing the Fed.

Speaker 3 And when he talks about interest rates, as the Treasury Secretary has said, the president is referring to, you know, yield on the 10-year, yield on the 30-year.

Speaker 3 That's going to directly affect consumers. No, no, it's not the case.
He's back to attacking the Fed.

Speaker 3 When really... As you say, he should be pretty happy with what happened.
I mean,

Speaker 3 we could be like like the Bank of Canada or the central bank in Korea trying to shield the economy from inflation, shield the economy from the downturn.

Speaker 3 The Fed is kind of in wait-and-see mode, and I think that's the best possible outcome for Trump.

Speaker 1 Courtney Brown at Axio, Sudip Ready at Politico, on Friday of Where Are We, Sudip, Week 9? Isn't that what you were saying?

Speaker 4 End of week nine.

Speaker 1 End of week nine. All right.
Have a nice weekend, you two. Thanks, guys.
Thanks, guys. Wall Street at the end of week nine.
Traders kind of shook off some early morning gloom and doom.

Speaker 1 Ended on an upnote. Details, numbers, when we get there.

Speaker 1 With no small amount of trepidation, and I really mean that, we take you now into the very dark heart of the congressional policymaking process.

Speaker 1 Specifically, what lawmakers want to do about the 2017 Trump tax cuts, which are set to expire at the end of this year, unless Congress decides otherwise.

Speaker 1 And therein lies the rub, because Congress is caught up in something of a war of words over how exactly to measure the impact of tax policy.

Speaker 1 As I said, we take you into this debate cautiously because it is kind of dry and convoluted.

Speaker 1 But for our special correspondent, Stacey Vanick Smith, it echoes a personal dilemma that is just coming to a head.

Speaker 5 I really love this TV show, Severance, and I am having an internal struggle about it, not unlike the current struggle in Congress over how to measure tax cuts.

Speaker 5 So in Severance, an evil company has found a way to sever employees' minds. When they're at work, they they don't remember the life they have outside of work.
It is so dystopian.

Speaker 6 Do you know if I'm happy up there?

Speaker 5 What I'm definitely not happy about, the 10 bucks a month I have to pay to watch Severance on Apple TV. But I love the show.
So I signed up just temporarily just to watch Severance.

Speaker 5 And the finale just aired, which means it's decision time.

Speaker 8 So you have a month-to-month subscription, right?

Speaker 5 Chai Chang Huang is the executive director of the Tax Law Center at NYU. She says Congress is also at a decision point with the 2017 tax cuts, which expire this year.

Speaker 8 And you get to the point where you're deciding, oh, do I keep this subscription service or do I cancel it?

Speaker 5 Here is my dilemma and Congress's. I could look at the situation like, my show is ending.
Time to cancel Apple TV and save some money. That is the kind of measurement Congress uses now.

Speaker 5 It's called the current law baseline. But there is another part of my brain, the current policy baseline part of my brain.
It says, you've been paying for Apple TV for months.

Speaker 5 This is not some new expense you have to figure out. Just keep it.
My streaming subscription struggle is basically what is happening in Congress right now.

Speaker 5 Except instead of 10 bucks for Apple TV, it is trillions of dollars for tax cuts.

Speaker 7 The way to think of current policy is, what's the policy today?

Speaker 5 Neil Bradley is executive vice president of the U.S. Chamber of Commerce.
He thinks the way taxes are calculated in the budget should be changed to use current policy baseline.

Speaker 5 He says most people and businesses saw their taxes go down in 2017, and they've stayed down. That is the policy we're living under now.

Speaker 7 Absent a current policy baseline, you're going to have to sunset all of these tax provisions.

Speaker 10 And so you end up with this huge tax cliff

Speaker 7 that no one believes actually that we should send the economy over.

Speaker 5 If the tax cuts expire, most households would see their taxes go up by at least $500.

Speaker 5 For the top 1%,

Speaker 5 it would be more like $60,000.

Speaker 5 Bradley says keeping the tax cuts in place is not a new cost. It's a continuation of current policy.
But right now, Congress does not calculate things that way.

Speaker 5 Right now, it uses current law baseline.

Speaker 9 So, current law baseline is exactly how it sounds. It's how the law is written.

Speaker 5 John Tucker is a partner at tax firm KBKG. He is firmly in the current law baseline camp.

Speaker 9 These tax cuts would increase the deficit, right? Current law is the reality, right? The actual economic impact.

Speaker 5 Current law baseline means if Republicans want to extend the 2017 tax cuts this year, it will show up in the budget as a new government expense.

Speaker 5 An expensive expense, roughly $4.5 trillion over the next 10 years. Tucker says the economic impact of these tax cuts is a major blow to the already worrisome deficit.

Speaker 5 He says the current policy camp basically just wants to sever that expense away.

Speaker 9 Current policy is kind of the funny math, if you will, to make it look like it's not going to cost anything.

Speaker 7 But I'm a tax accountant.

Speaker 11 So I tend to like to deal with real numbers.

Speaker 5 But this fight isn't really about the numbers. It is about the framing of those numbers.

Speaker 5 The GOP's majority in Congress means the tax cuts will most likely be renewed, no matter who wins the War of the Words. So why the fight? NYU's Chai Chang Wong says the framing matters.

Speaker 8 That changes the rhetoric.

Speaker 5 The current law baseline means Democrats can point to the tax cut extension and say, the GOP is preaching cutting government waste, but they are adding trillions to the deficit with these tax cuts.

Speaker 5 If current policy baseline wins out, Republicans can say, we're not adding to the deficit. The Democrats are just trying to raise everybody's taxes.

Speaker 5 Plus, current policy baseline could make passing the tax cuts easier, and they wouldn't necessarily have to come up for a vote again in the future, says Huang.

Speaker 8 But the reality for how the federal budget and how people will experience it is really the key thing to keep focused on.

Speaker 5 And the reality is this. The tax cuts will add trillions to an already crippling U.S.
debt load.

Speaker 5 But if they expire, most businesses and individuals will see their taxes go up at a moment when a lot of people are struggling. The ultimate decision will be made by a nonpartisan appointee.

Speaker 5 Her job is to wade through wonky word policy debates like this one.

Speaker 6 The work is mysterious and important.

Speaker 5 Meanwhile, I have to make the call about whether to sever my ties with Apple TV, though I did hear Severance just got renewed for a third season. In New York, I'm Stacey Bannock-Smith for Marketplace.

Speaker 1 Don't at me here, gang, but I don't really do Severance. But you know what I do do?

Speaker 1 I do listen to this program on a podcast. You can get it at our website, marketplace.org, or of course, the platform of your choice.
Just follow us there.

Speaker 12 Coming up, 80% of our staff are foreign-born. Most of them, 90%, are African.

Speaker 1 Immigrants. Turns out they really do get the job done.
First, though, let's do the numbers.

Speaker 1 Dow Industrials ticked up 32 points today, just under a 10th percentile, 41,985. The NASDAQ rose 92 points, about 12%,

Speaker 1 17,784. The S ⁇ P 500 inched up four points.
Call that flat, 56, and 67. For the five days gone by, the Dow gained 1.2%.

Speaker 1 The NASDAQ added two-tenths of 1%. The S ⁇ P 500 grew about 1%.

Speaker 1 Carnival Corporation reported earnings today, and the results were were not smooth sailing. Cruise company reported a loss of $78 million in the first quarter.
Carnival down 1.2% today.

Speaker 1 Royal Caribbean or Caribbean, I can never decide which, crested one-third of 1%. Norwegian cruise lines expanded about 1.5%

Speaker 1 today. March is Women's History Month, so let's have a look at some position of women in the workplaces.
According to the Census Bureau, women make up

Speaker 1 48% of the civilian labor force. In 2019, 27% of positions in science, technology, engineering, and mathematics were held by women in 1970.
That figure 8%.

Speaker 1 Bonds fell, yield on the tenure T-Note rose 4.25%

Speaker 1 for the 10-year year listening to Marketplace.

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Speaker 1 Dashing through the store, Dave's looking for a gift. One you can't ignore, but not the socks he picks.
I know, I'm putting them back. Hey, Dave, here's a tip: Put scratchers on your list.

Speaker 1 Oh, scratchers, good idea. It's an easy shopping trip.
We're glad we could assist. Thanks, random singing people.
So be like Dave this holiday and give the gift of play.

Speaker 1 Scratchers from the California lottery. A little play can make your day.

Speaker 2 Please play responsibly.

Speaker 1 Must be 18 years or older to purchase play or claim. This is Marketplace.
I'm Kai Rizdahl.

Speaker 1 If you took anything from the conversation that Sudeep Courtney and I had, I hope that it's that nobody, up to and including the chairman of the Board of Governors of the Federal Reserve System of the United States, that's Jay Powell's actual title, nobody from Powell on down knows where this economy is going.

Speaker 1 Economists don't know, the stock market doesn't know, ain't nobody knows. That said, the hard data has been holding up pretty well.
Jobs and consumer spending, all of that.

Speaker 1 The soft data, maybe not so much. Business and consumer sentiment is not great right now.
Remember, most of the data that we get, soft and hard, is lagging.

Speaker 1 It tells us where we've been, not where we're going. But we got the conference board's index of leading economic indicators this week.

Speaker 1 Leading, it's right in the name, tries to predict where the economy is going. And last month, the LEI saw its third straight monthly decline.
Here's Marketplace's Mitchell Hartman.

Speaker 14 The leading economic index crunches together 10 key data points, including manufacturing orders, jobless claims, consumer confidence, stocks.

Speaker 14 A falling LEI from December to February signals the economy is slowing and faces headwinds, says Justina Jablinska-Lomonica at the conference board.

Speaker 14 But she says what matters the most is the six-month trend, and that's been gradually improving.

Speaker 8 It has not been as negative as 2023 or at the beginning of 2024, not triggering recession signals.

Speaker 14 Now, one big caveat here, February's LEI doesn't include what happened in March, rising fears of a global trade war and a big sell-off in stocks.

Speaker 16 So the market has pulled back from its all-time high.

Speaker 14 But Paul Christopher at the Wells Fargo Investment Institute says in the overall economy, we're not seeing a cascade of weakness where one thing leads to another, leads to another.

Speaker 14 Instead, things just seem to gradually be getting a little worse, says Thomas Martin at Globalt Investments.

Speaker 11 Employment has been weakening, sort of, but not too much. Consumer spending is still okay.
The odds of a recession have increased, but they're not alarming.

Speaker 14 Lower-income consumers are increasingly pulling back in the face of high prices, says Eric Friedman at U.S. Bank.

Speaker 14 Still, with incomes rising faster than inflation and business balance sheets strong, we do retain a glass half-full perspective.

Speaker 10 We concurrently recognize that that glass could spill quite quickly.

Speaker 14 With the next wave of unsettling news on tariffs, inflation, government spending cuts, and all the rest. I'm Mitchell Hartman for Marketplace.

Speaker 1 The Bureau of Labor Statistics says that every year for the next 10 years, the United States is going to have more than 700,000 openings for home health care workers. 700,000 every year.

Speaker 1 But those jobs, they don't pay a lot. And there is related a lot of turnover and they don't show up on a lot of most desired jobs lists.

Speaker 1 Here's where I remind you, though, that immigration is a labor market story. Marketplace's Elizabeth Troval takes it from there.

Speaker 15 John Bocci is prepping dinner for the family he's helping today in Dallas. He grabs spices to add to a plastic bag of raw chicken and shakes the bag to get it grill ready.

Speaker 12 And this one we put on the grill.

Speaker 15 Wachi is a caregiver. Right now, he's helping Dale and Gene Fuller, who are part of the silent generation.

Speaker 1 I cook for them. I make sure Papa takes him to exercise his stuff.
And I do with the wives too.

Speaker 15 Wachi immigrated from Ghana around eight years ago and earns $15 an hour, which helps pay rent on a house where he lives with his wife and another family from Ghana.

Speaker 15 He and two other caregivers help 91-year-old Dale Fuller manage life.

Speaker 15 His wife has a brain condition, which causes short-term memory loss.

Speaker 1 If you were to meet my wife today,

Speaker 1 she would have no recollection of having met you the next day.

Speaker 15 I sit with Fuller in his study, lined with books, VHS movies, and DVDs. He gets to spend more time with his children, grandchildren, and great-grandchildren because he gets help with his wife.

Speaker 1 The caregiver becomes sort of a second brain for her since hers doesn't work so well.

Speaker 15 The at-home help from Cambridge caregivers costs around $16,000 a month. Fuller says they're lucky.
It's covered by long-term care insurance, which most don't have.

Speaker 15 All three of the Fuller's helpers are immigrants from Africa. Adam Lampert is Cambridge Caregiver CEO and employs roughly 300 people.

Speaker 12 80% of our staff are foreign-born. Most of them, 90%, are African.

Speaker 1 Americans don't want to do this job.

Speaker 15 Roughly a third of home health and personal care aides in the U.S. are foreign-born, according to the American Immigration Council.
Around 100,000 are from African countries.

Speaker 5 Our labor force is generally more skilled than is required by that type of job.

Speaker 15 Pia Arrhenius is an economist with the Dallas Fed.

Speaker 5 Our kids are growing up with more education than ever before. They're not aspiring to those types of jobs.

Speaker 15 But someone still has to do this work, and it ain't going to be AI. And as the U.S.
population ages, MIT's Jonathan Gruber says we're looking at a looming labor problem.

Speaker 17 America is going to be Florida. We have no plan for credibly meeting that massive change in the long-term care needs of our population.

Speaker 15 It may be unrealistic in this political environment, but he says one obvious solution is increasing legal immigration.

Speaker 17 There's a natural trade to be made,

Speaker 17 which is to let people who would like to come live in America and be happy to work for the low wages we pay our care providers to come provide the care we need.

Speaker 15 And without immigration reform, it'll be boomers, their kids, and taxpayers taxpayers who will pay for the labor shortage. Adam Lampert says, take what happened during the pandemic.

Speaker 12 Prices went up almost 30%.

Speaker 12 When I say prices, I mean the wages that we had to pay went up, and we turned around and charged that to our client.

Speaker 15 The COVID labor shortage meant immigrant wages went up because there weren't enough other workers to compete for those caregiver roles.

Speaker 15 Lampert worries about a similar effect under a policy of mass deportations. He says his employees are working legally, but that's not true everywhere.

Speaker 12 There are these undocumented workers in the invisible part of the market. They're working privately for people.

Speaker 15 Andy says even the threat of mass deportations could cause workers to stay home, removing a chunk of this workforce.

Speaker 12 That is the definition of the labor shortage.

Speaker 15 Which would make caregiving services more costly at a time when the ranks of people who need care are growing. I'm Elizabeth Troval for Marketplace.

Speaker 1 This final note on the way out today in which the Fed, it's just like us.

Speaker 1 The Federal Reserve, in addition to setting interest rates, is subject to them too, which I mention because the central bank published its audited 2024 financial statements today, in which we learned that it lost $77.6 billion last year.

Speaker 1 Long story short, it had to pay out more in interest on the deposits that banks keep at the Fed than it earned in interest on all the treasury bonds and other assets that it holds. Ironic, no?

Speaker 1 Since the Fed is in charge of interest rates.

Speaker 1 Anyway, it turns out the Fed's not actually like us because once interest rates are lower for longer, it's going to run a surplus and all that red ink is going to disappear.

Speaker 1 It's more complicated than that, but

Speaker 1 trust me on this one, would you?

Speaker 1 Our theme music is composed by BJ Lederman. Marketplace's executive producer is Nancy Fargali.
Donna Tam is the executive editor. Neil Scarborough is the vice president and general manager.

Speaker 1 And I'm Kai Rizdal. Have yourselves a great weekend, everybody.
We will see you right back here on Monday. All right.

Speaker 1 This is APM.