 Welcome to the Feetcast, your weekly dose of economic thinking from your friends at the Foundation for Economic Education. I am Richard Lawrence and we are here today with our ravishing panel, Anna Jane Perrell, Dan Sanchez, at Varian March. Hello. How's everything? You're looking more radiant as always, Richard. Thank you. I am working on it. I'm getting a haircut later today. You need it. Yeah. It's evident. It's long. Yeah. Yeah. So how's everybody doing? Excellent. Fantastic. What's going on the website? Feet.org has a wealth of things happening. We have several articles about a recent proposal by Bernie Sanders. I don't know if you guys have heard of the Stop Basos Act. Kind of, like on Facebook and stuff, if you want to explain a little more. Yeah. So Stop Basos, obviously he's referring to Jeff Basos, the CEO and founder of Amazon. But Basos is an acronym. So Basos stands for Bad Employers by Zeroing Out Subsidy. So Stop Bad Employers by Zeroing Out Subsidy. How hard do you think he pushed for that acronym to represent somebody who has a big business? He probably had a whole team of interns looking on it. Just the acronym, the acronym team. That's right. It's a clever one. It actually sounds pretty good. Yeah. Subsidies. Let's get rid of those. Yeah. Libertarians don't like subsidies either. But he has an interesting idea of what a subsidy is. All right. So he thinks that food stamps basically are subsidies from the government to Amazon. Interesting. Interesting. So to Amazon. That's the key. That's the subsidy to that business, not just to the people. From us, the taxpayers. Right. Right. Okay. And so what is Bernie Sanders sort of all of a sudden getting the deficit hawk mentality? What's his angle here? It's much more of a class warfare mentality I think. Darn it. Basically he's saying that a food stamp is a subsidy to Amazon because the taxpayer is subsidizing the living standards of the workers that freeze up Amazon from having to pay them so much. And so he doesn't have to pay them a living wage quote unquote because of these food stamps. And so the act has the effect of taxing Amazon to the exact 100% of whatever food stamps their employees are getting. So yeah. So every dollar that an employee might receive in food stamps, Amazon would then have to cough up to the federal government. Is that right? Exactly. So 100% tax on every dollar that the government pays for these employees to have benefits. Yeah. Right. So then why wouldn't Amazon just stop hiring people who are on food stamps? That's a good question. That's a point raised by Anthony Davies and James Harrigan in a piece that we have on the site, Bernie Sanders Stop Basos Act campaign, ignore several basic economic realities. And they just point out that that is basically that they point out that in other cases Bernie Sanders recognizes that if you want to dissuade people from doing something, tax it. Yep. Right. Like for the carbon tax, for example, which Bernie Sanders is a big fan of. But in this case, doesn't recognize that if you make it more expensive to hire poor people, you will have less jobs for poor people. And so it's unlikely that that's his aim. He more likely would like to see what happened. I mean, is he really looking to get Amazon to increase their salaries? Well, that's right. So my question is also, so is he eventually, so basically he's trying to replace the money we spend on food stamps, for example. So the money we spend on that, is he trying to basically say, no longer is that going to be a government funded thing that's going to be solely 100%, like they said, 100% funded by the business? Is he trying to in that way decrease the number of food stamps that we give out? I don't think so. I mean, what's the end goal there? I think ultimately what's going to happen are these people on food stamps are going to get laid off and they'll still get food stamps. And they won't have a job. So it's just going to increase dependency on government, which, of course, Bernie Sanders as a member of government and as sort of like a paternalistic figure who likes to think of himself as a benefactor of the people would love. Yeah. But I think you can imagine how that thinking goes. Since SNAP, or what we used to call food stamps, SNAP-NFN, since they peter out as your income goes up, I believe he probably is thinking that, yeah, if we can just get their incomes to go up, then we could potentially stop paying out these benefits. But what they're not factoring in is that Amazon has a choice in who they hire. They don't have to hire anybody. They can hire robots. Right. It's the same thing as with the minimum wage that like just because you're mandating that you can only hire them if you pay this, well, if it's not profitable for the company to pay that rate, then they're going to lay them off. They're going to lay them off. I think people in theory at that point have no other place to go because no other employer will be able to at least legally pay them anything lower than the minimum wage. Right. And if there was an employer who was willing to pay them more, why wouldn't they already have left Amazon to go there? I think I at least have heard about troubles that Amazon employees have. I've heard about the pickers, the people who go through the factories and pick out all the stuff that we buy to package and send off. Those people are under really hard targets for the amount of scans they do within an hour. Really tight constraints on breaks and even how they get into the building with security measures. However, all of that makes it really easy for me to get my two day deliveries. We can't have the service that we love, these two day deliveries, these quick turnarounds on purchases without giving up something somewhere. I'm not saying that makes it right. It's just we have high expectations as consumers. We really do. Have you guys, by the way, seen those videos that Bernie Sanders has put out interviewing all the different Amazon employees who are sort of having grievances against Amazon? I haven't seen those. So he's basically got maybe a room of six people who have worked as pickers in these warehouses and they're talking about harsh lighting, the security conditions, the shorter breaks, the hard targets for how many items that you're scanning that you're putting into a basket to be packed up, to be delivered to each of us. Um, and it makes me think because of course at fee, we're always kind of comparing these different imperfect systems that we have in the world. Look at these grievances, which are legitimate and I don't want to dismiss them because I would not want to work in those kind of conditions myself. But look at those grievances in context with grievances out of other sort of economic systems, right? So you look out of Venezuela, for example, where there's famine right now, where there's rampant unemployment, where there's a government that is stifling free expression, free speech. There's nothing approaching a free society any longer in Venezuela. And you compare that to a situation that Bernie Sanders features in order to get support for government action to improve ostensibly the livelihoods and the lives of these employees. And you sort of wonder, you know, where, why, why are we complaining generally about capitalism as an exploitative system when other systems such as socialism, people die and regimes rape people and they cut off their hands. I mean, this is not obviously to, well, there's forced labor, which is the opposite of labor for money. Exactly. So not to diminish these people's individual problems, because of course we want people to be happy and productive and fulfilled, but just sort of comparing the grievances in capitalism in this particular case with the grievances that people in other sort of economic systems would have. Yeah, I think that's fair. I think like you compare it to sweatshops in foreign countries. And you think about, OK, what's the alternative? Because the, you know, the enemy isn't the fact that these companies are not willing to pay them more. Because again, they can only pay them the amount that the worker can contribute to their revenue. If they pay them more than that, they will go out of business. And that means that they are actually devaluing the resources that they're working on. And so it's really scarcity. That's the enemy. It's poverty itself. And so the fact that these employers are arranging labor in a way that can create value with sacrifice, it's a lot better than the alternatives. It's a lot better than just going hungry and not being able to produce any value at all. And especially in third world countries, it's a lot better than a lot of the alternatives like prostitution that they have and, you know, selling children and awful things like that. And so, you know, if it's justified and it is, it's actually a godsend. These sweatshops are actually a godsend to a lot of these people. All the more it's justified in America when, you know, you just the litany of things that they're complaining about that you listed, you know, hard targets to meet like that doesn't seem that bad to me. Well, and McGot Wade, I mean, she said once I went to one of her lectures on actually sweatshops and that idea and she said ultimately, which I think can be applied across, across contexts is, I mean, much like economists, we're never looking, I mean, we can't look for the perfect solution, but we can look for the better solution. And if you cannot make it better, at least know your solutions not going to make it worse. Yeah, which is a great question about the Stop Bezos Act, because I wonder when positioned with the argument that maybe this is a bad idea for having poor and maybe unskilled people being employed, I wonder how Sanders would respond to that because the laws of economics cannot be changed by legislation, right? I mean, that's something that we talk about a lot at fee. And in addition to that, something you said a moment ago, Dan, reminded me that one of the very first lessons we teach at many of our seminars is something that I think many of our students actually don't hear before they reach us, which is that scarcity is a fact. That's one of the things in our world that we do have to deal with. And it's not perfect. And in fact, I tell people sometimes when arguing with them about various sort of theoretical economic frameworks that capitalism may not be perfect. In fact, it's the least imperfect solution, at least that we've discovered thus far. And so we should be willing, like you said, Dan, to accept the costs and understand those costs and to weigh them in our decision making process. Well, it's kind of like it's the worst economic system out there, except for all the others. Yeah, yeah, I mean, yeah, it's certainly not perfect. And I really like what you said, Marianne, about the, you know, in order to maintain our living standards, because like so many people are so many people who complain about Amazon are beneficiaries of Amazon's output. It just makes life so convenient. I mean, I'm sure that you guys all benefit from Amazon every day. I'm expecting a brand new phone case tomorrow before I end up going on a trip. Yeah, I literally just placed an order today. Yeah. Yeah. So I think it just goes back to what Ann Jainsen it's always about trade offs. We can give up a little bit here, but it's going to cost us somewhere else. And at the end of the day, if you're costing low income people, their jobs, you should be ashamed of yourself. Absolutely. Absolutely. Well, let's talk a little bit more about sort of the notion that government benefits actually subsidize the operations of some of these big companies. So of course, we talked a little bit about Amazon, right? But there's also the contention that Walmart pays too little for their employees to not be also subsidized by government programs. So what's the deal with that? I mean, is for example, I tend to think that Walmart, when you look at their support for the minimum wage, that they're doing it for reasons that aren't entirely humane, they're doing it because they see an opportunity, in fact, to crowd out other competitors who cannot bear the minimum wage in the way that a large corporation such as Walmart does. Wait, what do you mean? Can you elaborate on that? So you're saying that Walmart basically supports publicly supports minimum wage as a concept because they know that they can afford, they can take the hit. They can compare to a small business. That's exactly right. And when we're talking about a small business in comparison to Walmart, of course, we're talking about almost anybody else, right? But they, Walmart historically have been on the front lines of advocating for higher and higher minimum wage wherever they operate. Yeah. And it goes with taxes and regulations in general that in general that the biggest players in an industry can afford to bear those burdens better than their smaller competitors can. And so what would you say to somebody who says, okay, well, that is why capitalism is bad because monopolies form naturally organically because because of things like they can take the hit, that concept that a larger company can handle, you know, business obstacles better than a small business. And like, well, that's how monopolies form. But it's not business obstacles. It's it's a government obstacle. Regulatory. Yeah. I didn't think about that. I wonder, so this whole Bezos Act, obviously it's targeting Amazon. But in my research, I discovered that roughly 52% of fast food workers are recipients of Medicaid or SNAP or a different kind of benefits. And the same goes for child care workers, home care workers, 25% of part time college faculty are receiving some kind of assistance like this. If each one of those fast food restaurants, each one of those universities is unexpected to look to the same standard, assuming that they too have at least 500 employees, what is going to happen to all to all of those places? I can't imagine all of those different kinds of organizations being able to take the hit. No, they start putting in the cashiers, the automated sort of order key asks that you see everywhere, coming up in McDonald's. And it doesn't mean that they're not affected and that the business model is not affected, because if those key asks were more efficient than workers before the legislative change, they would have adopted already. And so it's a second best alternative. And so that means that the whole process is less efficient. And that means that the hamburgers and food that they create that they produce are going to be more expensive ultimately. We like to say, sort of given some of the economics that we teach, the decisions are made on the margin. And this is one of those very marginal decisions that companies are forced in the sense to make once you have additional regulatory burdens, such as the minimum wage that increases, right? And raising McDonald's and Walmart really just brings to realization the fact that the companies that they're most angry about are the companies that serve poor people the most. I mean, that make life better for the largest amount of people in our country. Like, yeah, I mean, they are essentially, I mean, things like McDonald's, things like Walmart, things like Amazon are hallmarks of a developed country that we have celebrated here, the wealth that we've created over the last hundred years. I mean, these are hallmarks of those things. And I think to, yeah, to villainize them is somewhat reductive, I think. You want to talk about accessibility? These companies provide goods and services in an extremely accessible and cost effective way. I remember Stephen Colbert on his old show, he used to have this bit where every time he'd talk about Walmart doing something, quote unquote, evil, then his punchline would be like, Oh, but I got these cheap tube socks. And it's like, you jerk, you know, yeah, cheap tube socks is not that big of a deal for you. But for a lot of families, it is. I was like, that is to me, that's on the margin is like, if I had to pay $5 extra for a pair of socks because it was, you know, American made, is that something I'm willing to do? And then that's a sacrifice that we're all going to have to make continually, repetitively every day. If we want Amazon to pay more for their employees, I think this goes really to the role of economics and the way in which we should think about the world, right? So economics is fairly value free. When you're doing it right, it's a fairly value free way of thinking. You can say, All right, increasing the minimum wage will raise the cost to employers to employ people. But it doesn't really say whether that's right or wrong, right? You have to assess that through your own framework, whether it's religious or ethical or however you assess things. And so you're right. You have to look at the costs separately from how you look at the economics, but the economics themselves isn't all that ambiguous. When you raise the price of something, it makes it or when you tax something, you raise the price of something and you make it less available or less possible for somewhere else. Exactly. Absolutely. Yeah, I think it's interesting. So because we see these large organizations under the gun, I think people tend to compare the guy at the top, whether it's Bezos or the Walton family. And they compare and they compare them in their wealth to the average worker. And they say, Well, this guy, I don't know. I don't really know what he's doing. He's probably just sitting around whereas you have the Walmart employee who's on their feet all day, they're working hard. Why shouldn't they earn more money? Why enjoy the benefits of this prosperity? How come Bezos is worth 150 billion bucks? But this guy can't even get $15 an hour. And I think there's some confusion about what what net worth actually means. And Bezos doesn't just have $150 billion in his bank account just sitting there or diving into it like a like a pile of coins. Yeah, like Scrooge McDuck. Yeah. That that is all wrapped up in the property that Amazon owns. That's for the Waltons. That's wrapped up in their cash registers and the carts in the market. Yeah, like even though the consumption that the Walton family and Bezos enjoys, it is higher than the average worker, of course, that they probably have nicer cars. But but that is miniscule, a miniscule part of their net worth, like most of their net worth is actually tied up in the cap productive capital that is creating these goods for the masses. And their living standards, when you think about it, are not actually that different from ours that everybody has basically the same iPhone, right? You know, everyone has four wheels. If you've got a car, it doesn't matter whether you've got a Bentley or a Toyota, you've got four wheels that can take you places. Indoor plumbing. I mean, that's, you know, refrigerator. Yeah. And I think that yeah. So I mean, step one, I guess, you know, trying to avoid resenting incredibly, I guess successful businesses, or very large businesses is understanding what net worth means. But I think it's also understanding much like the conversation we had last week with with what value you're contributing. When you talk about a professional sports player, athlete, whatever they're called, sportsman, and or, you know, a school teacher, we're talking about supply versus, you know, supply versus demand or what have you. So there's a large supply of people that can be pickers at Amazon or can do, you know, that task. And then we've got Bezos who, you know, use some sort of, he used his brain to create some product that was new and innovative, right? So he was he was paid for that adequately. And so thinking about what value you're contributing and what resources we're you're getting, you're getting also a level of risk you're taking. Yeah, you're gonna say, Dan? Yes, exactly. Have you guys seen that picture? It goes around every now and then on Facebook, it'll show up of Jeff Bezos in like 1997 in his office with the spray painted Amazon sign, right? Hair and the hair, right? That was while I was back when Amazon was just known for selling books. Yeah. Yeah. Who buys books on Amazon anymore? I mean, I know you do, Dan, you must, but they're digitized, right? You do too. Yeah, I don't use Kindles. I think that's a it skipped my generation. Like, I don't really know that many people my age that that use Kindles, but I think it's because a lot. I don't know. I'm generalizing and don't want to speak for my generation. They're gonna get mad at me, but I feel like Kindles are more you guys. And the thing about the socialists always think of it as if it was just a problem of distribution and not a problem of production. And so when Jeff Bezos was taking that picture, there was no guarantee that Amazon was even going to be a thing. Like and when when people workers complain, Oh, well, I'm doing all the work. Well, you're doing all the work because he had the idea and risked the capital to make it possible for you to do all the work. So it's like if you take him out of the equation, you've got, you know, thousands of workers that are no longer working on the same project that are off doing just different things. And this value isn't actually created. And now I can't get my book in two days. Like it is absolutely. Yeah, we are all getting, you know, a marginal amount of value every day from this large endeavor. Exactly. And that's you times millions of people. So so Jeff Bezos put his capital on the line in order to make exchanges that benefit. It's a small benefit, but a small benefit for so many people. It's like millions and millions of exchanges every time someone clicks purchase on on an Amazon link, it's like they're doing a little exchange with Jeff Bezos. That's a win-win exchange where he's benefiting all these people. And that's a lot of value. Yeah, I also have to wonder, let's say we took every cent that he's got, just strip his bank accounts. What would happen to Bezos? Is he just going to be your average Joe on the street? No, he's going to go ahead and make another billion after that. At what point does the redistribution stop? Well, and to that point, Marianne, what happens when you liquidate his entire net worth? Right. And so you take away all the cashiers you take away all the computers, all the forklifts, all the shelves, all the planes, whatever else is tied up in Amazon wealth that he owns. Is that a better situation? Even if you were to divide it evenly between 350 million people in the United States, then what? We don't have Amazon anymore. And then the next person who has an Amazon type idea is going to say, well, no, I mean, if it's going to be divided evenly between everyone. What incentive do I have to make this to do this thing? Yeah, to innovate, to change and to put myself on the line. Right. I also take just specifically with this, with this, with this policy, I am really concerned about how you're supposed to keep track of the number of people. I mean, I know how we keep track of people who are on government assistance, but in order to then manage a secondary component where you have to tax every business that has a government, somebody with government assistance on your payroll this year. I mean, just the resources that are going to go to that endeavor seem implausible. And truly, who's not getting some material benefit from government, right? I mean, Social Security recipients, technically, they've paid into it, right? But even even then, I mean, this is other people's money that is now cycling into the Social Security Fund that ends up being redistributed. A lot of us when we're retired, we all have to sign up for Medicare, right? So there are just so many different levels of government assistance. Now, does this set of precedents that says, you know, we're just going to add that additional layer on everybody, every company, every productive employer to pay a hundred percent tax on every dollar that their employees get in government assistance. It's it's a very strange precedent. And that's not government assistance. Then it's then it's a benefit paid by the company that the middleman is the government, right? That was just insane to me. And it's like if it's a benefit that that company wants to give because they want to hire good employees and they want to be competitive in the market of employees, then that's a decision that they would make. And so speaking of these administrative costs, just to give everybody an idea of what that could look like in 2017, there were forty two point one million people receiving SNAP benefits. Forty two million people that that's a huge number. I don't want to count that. Yeah. Yeah. And a lot of the times what what this does is it creates like a poverty trap where you because like you raised earlier, if you make if you raise your income, you become less eligible for food stamps. And so if you get to a certain point in your by getting a raise, you might actually lose money in the bargain because you are qualifying for fewer welfare benefits. And so that stalls people in their career. They just kind of like stay here. Don't either stay here or get to here. You can't kind of hang out anywhere here because you're still interesting. Right. So that's what would you call that like a welfare gap? Sort of, you know, the point at which you're making too much to qualify for these previous benefits. So your net sort of income generally ends up decreasing even though it's technically increasing. Yeah. Yeah, it's like a trap. Yeah. And and really it just makes it encourages dependency. And the thing is that people are not built to to be dependent. People people actually get satisfaction from working. And I think this attitude that work is necessarily bad, even hard work is necessarily bad, I think is is actually backwards. You know, one of the things that the Bezos Act or I guess it is the it is the Bezos Act. I was thinking of a stop Bezos Act. It would be a little too on the nose. But it it reminds me of sort of one of those sorts of laws that's actually prohibited in the Constitution. That's an older type of law that they used to have in the UK called a writ of attainer or a bill of attainer that would actually sounds fancy punish individuals in legislation. Right. So it sort of takes the punishment aspect out of the judiciary, which is traditionally the way in which we conceive of punishment for justice violations. And it actually makes a certain type or a certain person punished in legislation. And so this particular law, regardless of the name, although the name is pretty on the on the nose, stop Bezos, it's very much Amazon related reminds me so much of something. And it's not the first time we're doing it. We have all kinds of laws that kick in at a certain revenue amount. Of course, that's targeted towards certain large companies. So what's an example of a writ of attainer? Like a writ of attainer would be putting into law, for example, in explicitly, Jeff Bezos has a tax rate of ninety one percent. Oh, so it's very individual. It's specifically like Richard Lawrence is going to be taxed on his haircut later today. Exactly. Exactly. And I will be, but not any more than you would be. Right. So the notion of taxation, at least in a, you know, good framework, if you can call it that, would be that everyone's treated the same. Right. So a writ of attainer would be not everyone is treated the same. And that's what this reminds me of. But most of our laws are essentially a lot of our laws are essentially like that and maybe not down to the individual level, although they use the individual as a figurehead to represent a class. But these laws actually tend to be class warfare, where it really is zeroing in on one particular cash cow that to raid for the benefit of another progressive income tax. Well, see, here's the frustrating thing. And I know I keep coming back to the resources that will go into this, if this becomes an actuality. But I just can't stress enough that if the goal is to, if the goal is, and maybe I'm wrong in assuming that this is what the goal is to decrease government spending and to encourage, you know, private taking on private private spending on, you know, employee benefits and employee assistance, if that's the goal to decrease spending, we are going to spend more, way more money trying to keep track of this policy and trying to enforce it, I think, spending way more money on, on enacting it than we would ever save. And so that's, you know, that's issue number one. And it's also just in general, it is decreasing innovation and it's decreasing production, the value of production and the value of innovation. Additional tax on productivity. We're decreasing wealth creation in this country. I mean, that's fundamentally what it is. And I think it would increase the amount of money that taxpayer money that we're putting into the SNAP program. Because again, I think it's going to lead to layoffs of people who are on SNAP in the first place. And then because they're poorer, they will qualify for, for more benefits, more SNAP benefits currently, or at least in the year 2017, we spent 414 million on SNAP benefits. That's not walking around change. That's a lot of money. It's certainly not the biggest part of the budget, but it's significant. And, you know, and Jane, to your comment, I don't believe the end game here is to decrease the amount of money that we spend on this, right? The end game here is, in my opinion, Bernie Sanders is not interested in really seeing this bill passed, although it's a good publicity ploy. He's interested in raising the minimum wage, which comes with all the attendant problems and costs that we were talking about earlier. He really wants to get that $15 federalized minimum wage going. This is one of the ways in which he's pushing forward. How do you see that? How do you see this get being fed into that? Well, first of all, track record. He's been advocating that for three or four years now. But he's always highlighted that wealth gap between the rich and the poor, Bezos and everyone who works for him, right? And so this is yet another way to highlight the way in which Amazon and the people at the top, including Jeff Bezos, are siphoning value, at least in his opinion, from people who are working below. Minimum wage in his opinion would end up equalizing, or at least making things a little bit more fair. What do you guys think about the fact that so many people look up to Bernie Sanders as a hero, as opposed to Jeff Bezos? Bernie's out there every day saying what he believes and advocating for it in a no holds bar kind of way and seeming like a very authentic person. Jeff Bezos is not a public figure. He's not a politician. He's just running a business that ends up helping all of us. I think people tend to look at intentions, at least stated intentions, much more friendly way than they look at people who are billionaires and so far out of the league of most folks. Yeah. Well, I think people rightly, in some cases, tend to associate money with power and say they look at something like Bezos and they're like, oh, this guy is worth a billion dollar or a billion dollars. Then he's got all the cards and everybody else is, you know, just trying to get by and then you have somebody like Bernie Sanders. Well, he's speaking. He's speaking for those people with no cards and he's, you know, putting these people's feet to the fire in one way or another. I think that's why people respond. Well, and especially because he has messy hair and so he doesn't really look authentic that bird's land on his podium. Right. And so you might think that well, he doesn't have power. He's not a person of power when, yeah, even though he maybe he doesn't, his personal income or his personal consumption might not be that high, but the amount of power that as a senator as part of the Senate that he has over all the people in the United States is tremendous. Well, it's a great question. I think we should probably end up talking about that at some later point. At this point, I'm going to take my power so that I can end our conversation here and go get a haircut myself. And we'll see you next week on the FeeCast.