Production and distribution of City Club forums and ideastream public media are made possible by PNC and the United Black Fund of Greater Cleveland, Inc.. Good afternoon and welcome to the City Club of Cleveland, where we are devoted to conversations of consequence that help democracy thrive.

It's Friday, June 21st.

And I'm Cynthia Connolly, director of programing here and moderator for today's conversation.

Our speaker today knows the narratives used to shape the economy, and he believes those narratives need to change.

Jeff Fuhrer is an economist and has been active in economic research for more than three decades, including the Federal Reserve Bank of Boston, where he served as director of research, executive vice president and senior policy adviser.

Now, Jeff is a nonresident fellow at the Brookings Institution and a foundation fellow for the Eastern Bank Foundation.

In his book, The Myth that made us how fast beliefs about racism and meritocracy broke our economy and how to fix it, Furyk explores the link between widely held but false narratives about poverty and race and poor outcomes for many in the US economy.

From a supposedly post racist nation and the self-made man.

Fear argues that systemic racism continues to produce vastly disparate outcomes and that our brand of capitalism favors doing little to reduce disparities.

If you have a question for our speaker, you can text it to 3305415794.

That's 3305415794.

And City Club staff will do their best to work it into the second half of the program.

Members and Friends of the City Club please join me in welcoming Jeff here.

Thank you, Jeff.

Your book.

I went through it and read it thoroughly.

It is absolutely a very, very thorough book.

How does a Boston Fed guy decide to write a book about meritocracy breaking the economy?

So first, I thank you for for being and thank you for the introduction.

Thanks to all of you for coming.

Thanks to the Fed in Cleveland and Emily and others who have helped make this happen.

I really appreciate the time to be in front of this audience.

What a great institution, I have to tell you.

This is not my expertize, but I feel a pretty good vibe in this room.

I don't know how you quantify that, but it's just very positive and engaged, which is which is great.

So how did that happen?

So someone was asking me just the other day, so what was your awakening moment when when did you figure out that there was something not quite right where their economic system and the answer is there was no moment.

It was a journey.

And I think it's important to emphasize that journey aspect, because I think that's what we're all on.

No matter how well-informed you are, no matter how much you know about our racial history, about the way our economy works, there is more to learn.

And I think it's important for all of us to accept where any one of us is on that journey, wherever that happens to be.

Let's work together and continue on the journey.

I will say there were important formative moments for sure.

Some of them happened in childhood.

I won't go into that.

But in my work at the Federal Reserve Bank of Boston, I had a couple of privileges, one of which was to mentor lots of folks who were not white males.

And my job in that case was to listen and through listening to their life stories, their struggles, negotiating the workplace as people of color, as women and women of color.

I just learned a lot that I was not aware of.

I also was involved in a couple of key projects that the Fed worked on that were all about economic development, and in the process of that, I had the chance to talk to not only leaders in those communities, but residents and some of whom I actually got to know and some of whom I still keep in touch with.

And importantly, I think, for changing minds through relationship with people.

This is how we change.

This is how we grow.

This is how we're enriched.

Sort of funny for an economist to be talking about.

It's not like we're I don't know if you've met economist before.

We're not exactly relationship experts.

We're not exactly loaded with social skills.

Right.

I mean, we're just not quantitative data.

We are data for breakfast.

That's what I do.

But I do think those relationships helped a lot.

So through work at the Fed, through my personal experiences, and then of course, through reading lots and lots of stuff, and I still have more to read.

And also talking with experts who have been working on racial justice and economic development for their whole lives and learning from them.

It started to dawn on me that there's there's more to what's going on in the economy than what I typically described as a macro economist.

And I am grateful for all of those opportunities.

I am not done on my journey.

I don't think any of us are.

But, boy, it's just it's a privilege to be here to talk with you about these issues that I believe are a first order importance for the nation for the next hundred years.

I actually hope it's shorter than that.

I hope we make progress well before that.

But these are first order issues for us to succeed as a nation.

And you didn't always have kind of this this perspective, correct?

In your book, you had mentioned having a bit of a change of heart going into a couple of meetings and and presentations with some some bias or preconceived assumptions.

Yeah.

Yeah.

So I was stupid.

And I mean, it's true.

I was just ignorant, a little stupid about a bunch of these things.

So one that I mentioned in the book that was formative and I want to highlight it because it brings up the name of someone who was a leader in scholarship in the area, and that's William Darity.

William Sandy Darity Jr and his sometime coauthor Derek Hamilton, both of whom came to visit the Boston Fed back in the early 20 tens.

I guess it was.

And we were talking about the wealth gaps, which I hope you all know about now.

They are staggering.

They're enormous.

They're an embarrassment because of the source of those gaps.

We're talking about where they came from.

And so I thought I was a pretty smart economist, you know, because we are economists.

We think we're smart.

I thought I knew and I said, well, this is about, you know, income disparities, which are well known at the time.

And over time, of course, not.

Unequal incomes will mean less accumulation of savings and assets.

And so that's where the net worth comes from.

So it was Derek who spoke up first.

But Sandi is, of course, at least equally expert said you know, said it in the nicest possible way because I'm stupid.

And he needed to.

He said, you know, I don't think that's really true, Jeff.

He said I said, okay.

And so we talked about and this was the beginning of a long set of studies for me from from those two authors and from others.

We talked about the institutional racist racism, sources of wealth disparities.

And so this is, you know, 15 years ago for me, I at first didn't believe them.

I kept up I now corresponded both with Derek and with Sandy.

And Sandy actually wrote an endorsement of my book, which was really generous of him.

And what I said is you guys changed my mind because what I did was talk with people, read more sources, understand our history, and it is clear that you can't explain wealth disparities just by the differences which do exist in income.

It has to do with the system systematic denial of opportunity by the government of the US with the complicity of the private sector, denial of opportunity to build wealth.

While at the same time, as I quote from Martin Luther King, Reverend Martin Luther King clip we played just the other day, while at the same time we provided all kinds of opportunities to build wealth for white folks, not all of whom have lots of wealth today, but many who do can trace their wealth to that intervention by the government to consciously provide wealth building opportunities.

So it took me years to really understand this, which Derek and Sandy already knew, but that was a really that was a pivotal moment for me.

And I would add that in the wake of the release of the 2015 Color of Wealth study, we put together a work group who were charged with better understanding the history and the documentation of systemic racism as it as it applied to the accumulation or lack thereof of wealth.

And, boy, that's that was big for me.

That was a big learning moment.

I'm grateful to both Derek and Sandy for changing my mind and then for the people who participated in that work group who helped me and so many others understand what the true roots are of that disparity.

Absolutely.

And you wrote a whole book on it now.

So you're able to share the message with with more of your learnings and what you've uncovered.

And I have to tell you, and you can shut me down whenever you need to for a time, but I this is true probably five or six years ago now, I'm often called on to talk about the macro economy because that was my earlier expertize.

So I would but then I always included a second section, which is so that's what's going on at the top level.

Here's what's going on underneath.

Talked about this over and over.

And then I talk to my family, I talk to my friends.

My wife finally said, Would you shut up already and write a book about this?

Because we've heard it.

We've heard it, we get it.

She's a huge supporter.

But that's part of the history that we have.

We have the myth that made us.

Speaking of the myth, you compared the myth in the book to the Air Force in Star Wars.

It surrounds us.

It's part of.

Us.

Penetrates us.

Yeah.

Obviously we can't measure this in mid-air chlorians.

But what exactly is the myth that you're talking about?

So it's a it's a suite of or a combination of narratives that are false, meaning they're not a good description of reality for the most part, but they're strong motivators for many people, most importantly, for people have either political or economic power in the country over the ages.

And the four main ones are the pull yourself up by your bootstraps myth, which is to say all you need to do to succeed is work hard.

And I am actually a big believer in hard work and I do think it matters, but it is clearly not sufficient in our country that that part of the myth has been used by many folks to build a deep mistrust of the poor.

Because, after all, if all you need to do to succeed is work hard.

And I look at the poor, it must be they're not working hard enough.

Right.

That is a terrible I mean, disrespectful is the mildest way of putting a narrative about the poor.

But it's played quite a role in the kind of safety net we've constructed.

It is relatively meager.

It is suspicious of the poor.

It worries incessantly that many of the poor and many people of color compounds the narrative are scamming the system somehow, which is just factually incorrect.

So that's one.

Number two, we're a post racist nation.

Anything that happened in our history, if you're willing to admit it, some are not.

We certainly are in this room.

Anything that happened is no longer relevant for determining economic outcomes today.

That is a myth.

It's unfortunate those those systemic institutions, racist institutions, for one thing, still exist in many cases.

But even where they don't, they have dominant effects, important effects today on economic outcomes.

The third myth is that corporations are only responsible for maximizing their own profits.

They have no responsibility for their employees, for the environment, for the communities in which they operate.

That myth has been taken as a religion by our private sector to extremes so that we don't have in large corporations incredibly profitable corporations who have skinny down the wage bill, if you will, the cost of labor by doing all sorts of things which make the plight of lower wage workers really, really difficult in the economy today.

The fourth part of the myth is just that it's about the role of government and what it means to have free markets.

And in the book and in my slides, when I use slides, I always put free markets in quotes because that's a myth.

There are no free markets.

They are all supported by subsidized by constructed with particular winners and losers in mind.

So the question is never whether the government interferes with markets.

The question is how the government interferes in markets because they always do.

And they have to in many cases.

Most cases, how do they interfere and who are the winners and the losers?

So that's the there are sub narratives and so on.

We don't have time.

Trickle down theory.

One of my favorites.

What, what a crazy idea.

But anyway, that's that's the quick summary of the message.

Trickle down to it.

Yes.

I mean for those who may not know that is that is pre Reagan right.

That that idea is pretty rare.

Yeah.

Because we're way, way, way, way back.

And there are some very witty pundits who have described what trickle down really means.

So it's a farce, it's silly and it has never worked and it never will.

So yeah.

So throughout the book though to you, you would mentioned that you are generally in favor of capitalism and its beliefs.

This is not like a huge socialist agenda, which I think some people, they would see the cover and immediately think that that's what it is.

Can you talk a little bit why you know, this?

You know, capitalist society may be the best system for the United States, but not in its current form.

Right.

Well, you just kind of summarize it in your last four words and in its current form, I got the right number two.

I counted somehow on the fly.

So your last four words are critical because what they say is that it's not that capitalism is a universal way of running the world, and there is one way in which it is instantiated and there is one way that it's structured and isn't it beautiful and it works by itself, and you don't have to do anything to structure it or so that's crazy.

Capitalism comes in many, many flavors or varieties.

We have chosen a particular form of capitalism in the United States that works really well for large, publicly traded corporations for high net worth individuals, for white people more than people of color.

It works really well for them, and it was structured to be that way.

I referenced a moment ago the the litany of public policies.

I didn't name all of them, but the notion that there was a litany of public policies which built up wealth for subsets of the population, denied opportunity to others.

That is what we created.

If you when you read the book, I should say when you read the book, not if when you read the book, you'll see there's much more detail on the history of policy choices that we have consistently made it to continue supporting an economy that built this very particular flavor of capitalism, which is successful for a subset and is a real issue, a real problem, a real exclusionary force, a real mean spirited, a stingy, a go figure it out yourself.

A good luck with your life.

A welcome to the lottery of economic success that is the United States.

That's what we've constructed over and over again.

And as the book shows, fueled by these very simplistic narratives, not that people don't need ways to simplify their understanding of a complex world.

We do that all the time.

These particular narratives have been extremely destructive, corrosive and exclusive.

Right.

You mentioned I feel.

Strongly that you tell.

I feel strongly about this.

Yes.

You mentioned that the myth, too, persists in spite of having these facts on the ground.

And it's a combination of, you, quote, wishful thinking, avoidance of facts and willfully misuse dogma.

Your book is a comprehensive collection of rebuttal of facts, and you broke it down to the three areas of brokenness you have unequal distribution of income as one even more unequal distribution of wealth, distressing characteristics of work in lower wage jobs.

You also touch on housing, health care, education, the prison system, business ownership, the role of banks in the financial market.

You literally cover it all.

It's not that well in the book, but there's a lot of fun.

It is comprehensive.

There's a lot of a lot of.

You cover a lot.

I mean, with you know, obviously we only have so much time here let's like dove in a little bit and to wealth distribution you started touching on it there how has the myth fueled this and how has that system gone awry around particularly wealth distribution?

So just before I get into that, I just want to say the reason I cover all those areas to some extent in the book and the reason there are so many footnotes and the reason there's data is because there's no way there's no way we could agree on every single fact in the book and every single historical citation.

But what I think is really difficult to do is to avoid the understanding, the big picture that I'm painting, that whether you disagree with one fact or one citation is essentially immaterial.

The picture I'm painting is one of deprivation and systematic exclusion, so that's why all those things are covered in there.

So with respect to the wealth distribution, so, you know, as I said, there are a lot of people who do not understand the history that gave rise to this wealth inequity.

And just to remind you, if you're not keeping track of the very latest data, so the board of Governors produces the survey of consumer finances every three years.

One came out just a short while ago covering 2022.

So currently for black and for Hispanic families, the ratio of the median family net worth to that of corresponding white families is roughly 1 to 6 or 1 to 7.

All right.

That's a lot.

It's a huge discrepancy.

So it is enormous.

I mentioned earlier, because this also matters.

The overall concentration of wealth, regardless of race and ethnicity is unbelievable as well.

And I try to put some like, you know, Sesame Street pictures in the book about that with little people and dollars and all this stuff, which I think is probably a good way to do it.

Otherwise I would have put in these really awful technical charts.

But it's the overall concentration is crazy.

And the folks who have that wealth use the meritocracy bootstraps narrative to say we deserve that, right?

I have $1,000,000,000 today.

Why?

Because I deserve it.

I earned it.

I worked hard.

You cannot take it away from me.

And there are some economists I've spoken to.

I don't know if we'll get into CEO salaries, but as an example, CEO salaries, I mean, because they're insane, they're insane.

But there's 273 times as much for Cleveland in Ohio.

In Ohio, yeah.

And in the nation, it's over 300.

And there are some salaries that are thousands of multiples of median income.

And there are economists who, to their discredit, will do what we often do, which is figure out a way to rationalize that.

Well, it makes sense.

They would say that salaries are that high because of the incredible value that CEOs bring to the organization.

And I think, you know what?

At that point, we have departed from the realm of common sense.

The sniff test failed miserably.

This is a crazy justification of something that we all know makes no sense, and that's just for salaries for net worth.

The notion that anybody either deserves or could possibly make use of hundreds of millions, billions, whatever dollars is, is insanity.

That is a strange tournament.

Slash competition that really wealthy people are playing among each other about.

Who's got the most and are they special?

Nobody.

I guarantee you, there is nobody who merits deserves or needs anything approaching that.

So for that reason, when we get to the discussions of what do we do about this wealth inequity, most of the things I talk about in the book are human, about human capital formation, their investments in human capital.

Those are positive.

Some things they make the overall economy work better and they make it larger and everybody benefits.

The one exception to that is when I talk about wealth redistribution, I don't mean to jump the gun on things that we can.

You can cut me off.

One of the most powerful parts of your book is how you incorporate not just is this, you know, factual data.

Right.

You bring in some really powerful stories, too, from people that you've gotten to know over time.

Did you want to give a couple examples of the story, particularly around like welfare reform or, you know, the recession and things like that?

Sure.

So you may remember those of you who are old enough that in 2000, seven, eight and nine, we had a little problem in the economy.

We had a financial crisis and what's now called the Great Recession, because it was huge.

And I so I viewed that from inside the Federal Reserve as a policy adviser who was charged with trying to stabilize the economy in the face of those that craziness, I guarantee you it would have been mountains worse if we had not done some things to offset it.

But what struck me, even at the time I remember being at a gathering of the officers of the Federal Reserve Bank of Boston, and we were, I think in 2010, 12, nine and ten, we were reviewing what we had done to offset the recession.

And I made the audacious claim at the time that, you know, on saving the financial institutions and the financial markets, you know, B-plus.

And it's not an A because they did things that were effective.

But, you know, was do we have to save them that?

Well, aren't there some people who should have lost more money and maybe people lost jobs?

But in any event, there are good reasons for stabilizing the financial system.

We did B-plus on that.

Ordinary folks, homeowners, D-minus.

Why do I say that?

Because we had the wherewithal clearly exposed.

But even at the time, we had the wherewithal to stop foreclosures, pretty much in their tracks.

And it would have cost money for sure.

So there was actually a proposal that came out.

I join the author with some great colleagues at the Boston Fed that said, Here's how you do this.

It would cost about $75 billion.

Now that's more money than I make in a week, which so you know what that means.

It's true.

And doesn't tell you anything, but that's a lot of money.

But now think about this with hindsight.

How much did we spend during the pandemic?

How much do we spend on the financial institutions?

$75 billion, relatively short money.

What would that have done?

Well, if you made a grant, it would have paid the mortgage payments for all these folks who are likely to suffer a foreclosure, most of whom most all of whom it was not their fault.

They owned a house.

They had a certain amount of equity prices fell, the equity disappeared, and they were unemployed maybe because we were in a recession or they had their hours cut because we're in a recession and they could no longer afford to pay.

Okay, that's not really their fault.

They're caught by a crisis.

So we could have made those mortgage payments.

What would that have done?

Kept them in their house first.

Great.

Second, keep mortgage payments going.

Why is that important?

Because it means the financial markets aren't falling apart in the same way.

So for 75 billion and what if it turned out to be a hundred billion?

I'm still okay with this argument.

We could have saved the homeowners at least dramatically reduce the losses in the financial system that were leading to the meltdown and short circuited at least some of probably not all, but some of that recession.

But what that revealed was the bias towards the powerful and the wealthy, because after all, they're the smartest and the most important actors in our economy and the bias against not even the poor, although there is that, but against ordinary households.

Who would you know, they could misuse this money.

What are the incentives?

Is there moral hazard?

Would you be incentive to do something stupid down the line?

Yeah.

What do you think about the financial institutions or saved?

Was there any problem there that there's now a too big to fail discussion that has still not been resolved?

So that's I would say that's one.

Some of the lessons that we that, you know, we learned from the recession were not replicated during the pandemic, the lockdown, you know, stimulus payments and the PGP loans and things like that.

That went directly to.

That's right.

You know, folks on the ground doing the works.

There were some lessons learned from that.

So I want to put an asterisk on that.

But yes.

And it's a pretty big asterisk.

Go ahead.

What's the asterisk?

Well, the asterisk is that so when the culprit that was causing economic tumult was easily identified as a little spikey virus, which is not anybody's fault.

I mean, I don't know, there maybe some lab somewhere where something happened?

I don't know.

I want to get into that discussion.

That's not anybody in this country's fault as far as we know.

And that's what's causing the tumult that easily identified, you know, evil actor is easy to respond to because you don't have to get into the difficulties of, well, did the pork bring this problem on themselves?

Was there corruption and greed and misuse of funds and all this?

So in those circumstances, we responded immediately and forcefully, but notably the child tax credit, the enhanced child tax credit of 2021, which is proven to have taken lots of kids out of poverty, expired within a year.

Why?

Because well, now, if you make that ongoing, we're just helping poor people and we don't want to do that.

So I would say we learned some lessons on the financial side, maybe more, but I don't I'm not sure they're enduring and will apply to all.

Future credit that that that boosting or rather the reduction of poverty during the child tax credit and the stimulus payments was lost.

It's lost its loss after 2021.

The Center for Community Solutions here in Cleveland, you know, Emily Campbell actually spoke.

She's here in our audience today.

Absolutely only she she spoke at the city club just in February.

And she talked about the five things we all need to understand about poverty.

And one of the statistics she cited in Florida is that the total number of people living in poverty has stayed relatively steady in the last 70 years.

It's fallen a bit.

But due to population loss, poverty rate, the poverty rate has nearly doubled and has become more concentrated.

We're seeing this replicated across many areas in America.

And you actually just released a new blog today with the Brookings Institution about poverty rates and kind of where families are right now with basic necessities and just surviving right now.

Did you want to dove into that?

I love that we.

Read things that I wrote, which is great.

I think it's like Cynthia and my mother are my biggest well, maybe I really like that.

The Cleveland Fed also.

Yeah, I have to give them props, but so yeah.

So I released this blog because I want to point out that the poverty rate is the tip of the iceberg.

So depending on how you measure it, poverty today is between 11 and a half and maybe 12 point something percent.

There are different ways of measuring this, but, you know, I hope, you know, the poverty line that defines, you know, whether you're in poverty or not.

So for a family of four in the United States as of 2023, it's $30,900 for two adults.

Two kids, it's roughly the same for one adult and three kids, roughly $30,900.

Okay.

Can you live as a family of four on $30,900 in the Cleveland metro area?

Not close.

Okay.

Where can you live in the United States?

Because there's no variation by region on the poverty line.

It's just it is what it is.

Where in the United States can a family of four live on $30,900?

Nowhere is the correct answer, and I'm not saying that.

So this is what the blog is about.

So this is not a guess.

This is I put together two sets of data.

What are the total resources available to a given family living in a particular county?

And those resources include whatever they earn, whatever they might have from savings, earnings, plus whatever they get from the government in terms of assistance, whether it's in-kind or in cash, that's their total resources.

They live in a particular county.

How much does it cost to pay for rent, food, the transportation that gets them to work?

No other transportation.

Just getting to work.

Modest health care, because without that you're in bad shape and some other necessities and so on.

There is no county in the United States that's even close to 30,900 for a family of four.

The lowest numbers are in the mid 50,000.

And in San Francisco, surprisingly, it's like triple that, almost triple them.

Okay.

So armed with that data, what I want to say is how many what I want to find out is how many families in the US today have family resources that altogether are not sufficient to pay for basic necessities.

So it ain't 11%, it's not 11%, it's probably over a third.

And if you happen to be a family headed by a black or brown individual, it's probably a half or possibly more.

And if you're a single parent family, it's above that and you can compound those two.

Okay.

If this were a space mission, we'd say, Houston, we have a problem.

This Rocketship economy that we have designed to fly is not flying for these people, even vaguely.

And we can debate till the cows come home the details of how this is constructed.

That's actually a conservative estimate.

I have higher numbers than that.

And by particular regions, it's even higher still, but it's nowhere near 11 or 12%.

It is at least two and a half to three times that large.

That to me, I published it.

I presented this at Harvard University's Public Policy Seminar, and they said that number is way too high.

And I said, You're right, but I don't think for the reason that you're saying no, I'll show you all the calculations we can debate.

You're not going to get it much lower it is way too high.

The notion that a third or more of our families don't have enough total resources after government support to pay for basic necessities is a crime.

And if we don't do something about that, actually, someone asked this question this morning, there could be violence, but there will certainly and I hope not, but there certainly could be upheaval and upset, and rightfully so.

And you focus a good portion of your book on solutions.

You do an amazing survey of what the myth is, an amazing survey of how we got here.

And then you provide some solutions to how to fix it.

Part of your title, what you go through early childhood education, community college restructuring, the workplace wages, health benefits, childcare, paid family leave, housing so, so much more.

Obviously we can't get into everything, but what are some of your solutions that you want to bring up today and maybe just like one or two?

Sure.

Sure.

So one that's important is changing the narrative because while people many people in this room do not adhere to the narratives I just elucidated in a moment ago, lots of people in the country do, and some of them have serious political and economic power.

Some of them, I'm quite sure, don't actually believe the narratives.

But they're happy to use them in service of spreading more myths that keep the system the way it is and keep them in political power.

So changing the narrative, not a small thing to do.

You know, we can all play a part in that by pushing back on it.

That may not be sufficient.

Fortunately, we have changed narratives nationally over our history.

I'm thinking of the LGBTQ narrative that was in play when I was a kid, which was just embarrassing.

Now it is not perfect, but it is much better.

And that happened through relationships that we all learned we had with folks who belong to that community.

And the relationship trumps the I use the word Trump, but the relationship I promise not to bring politics over.

The relationship trumps the narrative in that case and can in other cases too.

It's not as easy to do that for socioeconomic and racial and ethnic divides, but it is possible.

So that's a longer topic.

I won't.

That's as much as I'll say about that.

Yeah, well, one of the solution I want to emphasize because it's such a no brainer and not my innovation, if there's a Nobel Prize winning economist who's been pushing this for years, this is universal high quality, early childhood education.

It's not sufficient to fix all these problems, but it provides a start for kids that is essential.

And there's both medical and economic and sociological evidence that makes this a slam dunk.

Not only does it give kids a good start, the paybacks to the investment are on the order of six or 7 to 1 in terms of better wages and health care outcomes, less likely to of involved in the prison system and so on.

We should do that now.

I love it when I hear about work in Cleveland or anywhere else that's moving that initiative forward in a community or whatever.

What I don't like is I don't want the US still to be the great lottery of life, where if you're born in the the neighborhood in Cleveland where they've provided early childhood education, that's high quality for all of the residents.

You're the lucky one.

But the folks who live in Mississippi or parts of the Midwest or the North or the South, Texas, God help us.

No, but I mean, you know, if you if you happen to be born in some of those states, sorry, you're out of luck.

And that is not a solution I'm happy with.

I'm not a huge let's build the federal government guy.

As I said this morning.

But I am a guy who says without solutions that are relatively uniform so that every kid and every adult who lives in the country has a chance to succeed.

Without those sorts of solutions, we haven't really solved the problem.

So that is the way to approach those.

And we're going to get to audience Q&A here in a second.

And we're going to ask one quick question.

Sure.

But I know a lot of folks would ask in rebuttal to this is how do we pay for it?

Yes, yes, yes, yes.

Which is a great question.

So I'm an economist.

I believe in budget constraints and all that accounting.

Okay.

So here are two facts about the economy that will help us think about how to pay for this.

Two facts, one for large, public, large, publicly traded corporations.

In 2022 and 2023, they earned 2.6 and $2.7 trillion of profits after paying taxes and so on.

Okay, well, so profits can be used for good things.

They can be used to reinvest in capacity and new technologies and so on.

But interestingly and I say that euphemistically, interestingly, of that 2.6, $2.7 trillion over $1,000,000,000,000 each of those two years was used to repurchase their own shares, their stocks, which boosts the price of those.

And another time will argue about whether that is there any way of rationalizing that?

I don't really think so, but it suggests that there is capacity in the economy, as evidenced by those enormous profits which went to do nothing other than repurchase stock.

Stock stocks and shares.

That is a capacity which if we can get a hold of it and that's not a small problem, we can get a hold of it could be redeployed much more productively.

The second fact is that in 2022 and the same will probably be true in 2023, the IRS reports that of taxes legally do just about $700 billion were not paid tax revenues due to the federal government not paid.

Okay.

So together those two add up to about $2 trillion.

You can do a lot with $2 trillion anyway.

That's an ongoing thing, right?

$2 trillion.

And they will pay for everything that I suggest in the book.

Wow.

Pretty handily.

Now, again, it's not easy to get a hold of those.

You'd have to tax or maybe appeal to the goodness of people's hearts to donate it.

But you probably to tax it.

And of course, the tax avoidance would be significant and mighty, but that's to say the capacity is there in the economy to pay now without incurring lots of extra debt or changing the tax structure apart from taxing corporate profits.

Thank you so much.

And we are about to begin the audience Q&A for our live stream and radio audience or those just joining.

I'm Cynthia Connally, director of programing here at the City Club and moderator.

For today's conversation, we are joined by Jeff, your nonresident fellow at the Brookings Institution and Foundation Fellow at the Eastern Bank Foundation.

He is also author of the book The Myth that Made US How False Beliefs about Racism and Meritocracy Broke Our Economy and How to Fix It.

We welcome questions from everyone City Club members, guests, students and those.

Joining us via our live stream at City Club Talk or radio broadcast at 89 seven WKSU Ideastream Public Media.

If you'd like to text a question for our speaker, please text it to 3305415794.

That's 3305415794.

And City Club staff will try to work it into the program.

May we have our first question?

Yes, the first question is one of those text questions, so I'll read it here.

You reference the myth of shareholder value, also referred to as the Friedman Doctrine.

Why was Friedman's idea so influential?

Why wasn't there a debate about it in 1970?

So you don't know who Milton Friedman was.

He's not with us anymore.

And so Nobel Prize winning economist, you know, a pretty smart guy, he did some good things, including building the foundations for the Earned Income Tax Credit, which is one of our more effective national and state policies.

However, in 1970, he wrote a letter to the New York Times, which was decrying the tendency for firms at the time to divert their attention from just ruthlessly maximizing profits because they were starting to worry about things like the environment, communities they operate in, maybe even the fate of their employees.

Are they doing well or not?

Are we paying them, you know, paying benefits and wages?

And he said the one and only goal for corporations is to maximize shareholder value, which is roughly the same as maximizing profits and that anything else that they devote their attention to his words, tantamount to socialism.

So and for Milton Friedman, that was really that's like, you know, calling you a child abuser.

It was.

That is bad.

First order bad.

Okay.

He was paid attention to because he's a very influential economist.

I think he was also paid attention to because it feeds it fed into narratives at the time that said, yeah, that's we don't want our companies to be sidetracked from this really important mission we're on of maximizing profits because after all, our shareholders are the one who provide us at least some of the capital we use to operate.

So that probably is a good thing.

And it's a really simple organizing principle, isn't it?

And and it is.

And I'm not against corporations making profits properly accounted for.

That's okay with me.

I think at the time it fed into us as a political movement.

It's partly neo liberal.

It's partly conservative combination of the two.

They often perversely work together on this that thought that free markets and free enterprise were the way to do everything and they were the smartest people in the room.

They knew how to solve all of our problems.

And in fact, Ronald Reagan says in a speech in 1981 or two, I can't remember.

This isn't a speech.

It's clear by now that the best solutions for all of our social problems come from the private sector.

And I thought, really, when did that happen exactly?

I mean, and in the 44 years since then, I still mister.

And I'm not saying that private sector is bad, but that's not what they do and it's not really what they're structured to do.

So I think that's part of the reason it took off.

Then there were folks like Jack Welch who took that maxim and ran with it like crazy.

Jack Welch maybe not a really nice guy, maybe successful in some ways in his practices, which built on that Friedman doctrine and others were emulated by many in the private sector, which is what delivers the results I cite in the book with low wages, poor benefits and all this sort of stuff, but incredibly high profits.

They did that.

So that is, I think, some of the dynamic that operated narratives, business mantras, it's put us in not so good shape.

Yeah, next question.

We have another text now.

Question Cleveland is about to conduct an experiment in universal basic employment.

What do you think of UBC as a solution to the problems you identify?

That's interesting.

I don't know about the you.

We've so UBC largely is the root of this whole program is providing 100 participants a salary more than a living wage salary and tracking how they're going to do over time.

And it was championed by our city council among many local partners here in Cleveland, and it's the first of its kind in the nation, actually.

So it's different than universal basic income.

And so it's going to be implemented directly to the people, often through employers as well.

And it's a different take on UBI.

And I don't write much about basic income and UBI is actually a little you know, I don't think a universal basic income started in Europe as a way of providing people the time to pursue their favorite passions.

You know, I'm going to go learn to play the violin or whatever, which is sweet, but not really getting at poverty, basic income.

Interesting.

So I don't know much about this program.

What I would say is that given the gaps identified in the blog of income versus sustainable income, we have to do something.

And the Earned Income Tax Credit on average provides 36 and 30 $700 for each family.

The maximum might be 6000, 7000 bucks.

That is, as I said, that's not moving people close.

And even if we expand that, that it's not going to get close enough.

So programs like this, at least for now, and that's a trial.

So we'll see how it goes and what we learn from it.

That's part of the beauty of doing these trials.

These are necessary just to bring people up to two sustainable living levels.

You know, of course, my hope in the longer run is we don't need that.

But because because people are actually getting educated and the way that they should have access to stable employment, are paid reasonable wages, get good benefits and all that.

And then we don't maybe need that.

But at the moment we really.

I think the one myth that UBI, using universal basic employment's pushing back on is the notion that people are getting free handouts or they're lazy or they're not working.

And I think this is the an attack almost on that myth.

Well, it's universal basic employment.

Right.

Everyone wants to work and has a job.

They do have a job.

So maybe that's the difference.

And even when people get basic income grants, there's good research on this now and people want to know what do they do when they get the money?

It's like, well, they spend it on food and diapers, you know, like like the rest of us.

That's what they're doing.

That's just what they need.

But that's counter to the myth that says what they waste, that they're lazy, they're, you know.

So anyway, so that's a great trial.

I'm glad the person who texted and brought them.

In, we have Emily Campbell here.

Absolutely agree 100% that changing the narrative and early care and education are two of the things that will have the longest payback over time.

But emphasizing the long piece of that.

Yes, you know, in Cleveland's neighborhoods, upwards of half of our children are living in poverty.

They can't wait.

What are some things that and solutions that we can be bringing to policymakers are suggesting communities implement to speed up some of the progress or to help right now?

And you've hinted at some of them, I think, in terms of the child tax credit.

But I'm just interested in your thoughts about the pace of change.

If I'm going to come back to one that I think is maybe most important in terms of urgency and timeline, and that's about wealth.

Net worth or whatever you want to call it.

But yes, in the short run, there changes we can make today.

So for large profitable corporations, we can impose a minimum wage that's actually sustainable for all of their employees.

And I know that's not popular in every circle.

But again, when I look at the this is why I say we can pay for it.

That's in part of my calculus, right?

If you want to raise wages for folks who are making wages, that mean that they go home at night and have to use food stamps to provide for their family, raise it so they're not reliant on public support for subsistence.

We can do that.

And the large corporations with profits, they can afford it.

Now, who can't afford it?

A lot of small to medium sized businesses do not have enormous profits.

They're not doing well.

It's not easy.

Some of you may have run small businesses at one point or worked for them.

It ain't easy.

There's no question.

And so what I suggest in that case is to provide actually David Neumark at the Uclh system, suggest a tax credit for small firms so that they can then afford to pay that new minimum wage because without sustainable wages, we're not going anywhere.

So that's one example of an immediate change.

So we have limited time.

Let me then just go to the wealth issue because as I said, most of my proposals are for building human capital.

As you said, that takes time.

Great early childhood.

So 18 years from now, kids are going to be in decent shape.

What about the ones who are already born and alive and adults?

Well, so for wealth, it's even more acute because we know that this wealth gap arose through decades, centuries of policy denial of opportunity to build wealth.

Wealth, by and large, is intergenerationally transferred.

It takes time.

And so if I say let's do the good programs that will build education and human capital for all of our citizens, so that 100 years from now and that's not a fake estimate, 100 years from now, the wealth gap will be closed.

Then it's like your question about urgency is now, right front and center.

Is that an urgent response?

You know, urgent care.

I go into the hospital, I'm bleeding profusely.

In 100 years, we'll have a solution for that.

For, you know, this is actually urgent.

I'm going to die.

Okay.

So for that reason, I'm also in favor of wealth redistribution policies, wealth equalization policies.

If you will the others in the book are really about not zero.

Some they're positive, some they're building size economy.

They're great.

This is one that's about redistribution.

And to the comments earlier, we know there are folks in the economy who could live without some millions of dollars of the wealth that they have amassed, not because they're brilliant and deserving, because they're lucky.

So I propose a few different ways of redistributing wealth.

They include things like down payment assistance programs which distribute wealth to folks in the form of housing, equity.

More on that another time.

But baby bonds, which put deposits in children's account again, it takes a while for that to because their accounts are restricted, it builds up.

But the one that would happen more immediately is the R word.

Reparations, right?

Yes, we're talking about reparations.

Of course, this typically said in the book that somebody had.

Yes.

You're saying you might want not want to say that word.

Yes.

And you did not take their advice?

No.

So before I wrote the book, I as I said, I was trying to talk about these issues.

And somebody really came up to me in all earnestness and said, you know, you probably if you want to reach all of your audience members, you probably shouldn't talk about reparations anymore.

And I said thank you for the advice.

How can you not talk about it?

I mean, it is glaring.

It's a glaring problem.

It's right in our faces.

We know what the wealth gaps look like.

We know where they came from.

We know that it's the consequence of policies and complicity with the private sector.

We know that.

Okay, so can we please start the conversation now about what our responsibility is to rectify that?

What can we do?

How should we do it?

What does it look like?

And I mentioned Sandy Darity before, has a volume that that lays out a plan for this.

He thought about this as much as anyone.

It's not that we don't have any idea how to do it, but the conversation is barely starting in some cities.

I don't know if Cleveland has a working group or task force that Boston does, but it's the task force which is like, you know, I've been on task force before.

Yeah.

What are we going to do?

Right.

Evanston, Illinois, actually did something on the housing front with a true reparations program.

It's only award made a few awards so far, but at least they're doing something that is redistributive.

It is.

And I do think we have the wherewithal in the economy financially to do the redistribution and think about how we can make reparations work.

Could the federal government today pay the bill that's due, which I estimated in the neighborhood of $15 trillion for descendants of African-American slaves, another 15 for Hispanics with roughly the same size wealth gap.

They didn't suffer exactly the same discrimination, but they suffer from discrimination.

And it's evident in the wealth gaps.

So that's many trillions of dollars.

Could they pay it all today?

No.

Probably another 70 trillion.

You think you calculated the land alone for?

Well, there's square.

And thank you for bringing up the plight of indigenous people because land theft.

Yes.

Is is an insane amount of value.

The land that was confiscated from them when they were driven off, relocated killed, etc., that's an insane loss as well.

So it ends up being a huge amount.

Can the federal government do it?

Yes, but probably over time.

I want to talk another time about a proposal that would do reparations in the following way.

You make a promise from the US government which may not be reneged in the same way that U.S. Treasury debt may not be renewed to pay stream of payments over the next, let's say, 20 years that go to the families I just mentioned.

So do you get all of it at once?

No.

But you have a Treasury bond, in essence, that has value today that's related to that whole stream of payments.

And if there was a market for that, you can trade that.

You can use it as real wealth, even though the government can't pay all of that upfront, that when I think I came up with all I can think good thoughts, sometimes that's a way of handling the burden there.

But absolutely those redistribution policies have to be considered.

I had Michael.

Yes.

As we were talking before, can you please say why you believe that the notion that immigrants, people who come to this country are ripping us off economically is a myth.

So and I, I keep saying this, I do cover this in the book.

I covered that in the book, too.

I'm not an expert on the immigration system, but it is a fact that we hold to really pernicious narratives about immigrants which are incredibly ignorant of our own history, as well as the current facts on the ground there.

There's good research done to shown what it is that immigrants contribute to the economy in terms of tax revenues, because most of them are taxpaying folks, whether they have legal status or they're paying taxes out of their earned income, they work in jobs that many non-immigrants don't really want to do, but are essential for the economy.

All in all, whether that's the case or not, the history of the U.S. is course a history of immigrants contributing to the economy.

So why does this why does this fable persist?

It's the same as the others there.

Many immigrants are poor.

Many are black and brown.

There's almost surely a racial component to this, a racism component to this.

And there's also a segregation and otherness component, which is part of what I talk about in the book, that we are really good at talking about the other who is not us, who does not deserve, who didn't work.

It's hard.

Who doesn't belong here, who is not the same skin color as me, who is suspect, who I don't trust for all the reasons I enumerate?

We do that all the time.

I could make a longer litany, but I think that's long enough and and as I said, through relationship, if we're brave enough to do that, if we just get to know people who are not the same as us, that is always a gift.

It is always educational and always breaks down narratives.

But that's not sufficient to solve all of our immigration issues.

I think we need some of our leaders to courageously step forward and point to the history and the facts and the contributions and the fact that our economy will fall apart.

If we stop allowing immigrants to come into the country as of today, it will fall apart.

So just a very practical notion that's not really feasible from a human perspective as well.

That is the right thing for us to do.

Of course, we cannot handle the flow coming over the borders probably right now given our current structure.

And it is inhumane not to build a structure that handles people who are coming here as refugees.

Right now, we're doing things that are not good for individuals and families, that is not humane.

So we need to build a better structure.

Will there be the will for that?

I don't know, but I would advocate for it.

So it's a big question, another book.

But that's a that is a partial answer and a great question.

Next question.

What do you think a good solution would be for economic reform that acknowledges that both the failures of slavery and the failures of reparations in the past, but also looking forward to the future with the Treasury bonds and going a little bit deeper into that as well.

Thank you.

Well, and that's so interestingly, you talk about, you know, as I mentioned, the differences in financial assets which reflect the the damage done by institutional racism over our history.

But you also said things about social capital, and we had a discussion about parts of this morning.

And I've had discussions over the last several months as I've been touring around the country, talking to anybody who will listen.

And so I think I think I've talked some about the the financial capital side of it, and we can talk more offline.

The social capital part is really interesting because it's pretty well established now that the building of social capital is essential for peoples, both economic and social survival, and where there are communities that are short on resources, and where there are corporations that use the existing social capital networks to provide access to success, power, financial, all of that.

Just putting the financial wherewithal in the hands of folks who deserve to have it through reparations or whatever may not be sufficient, because that may be that the social capital structures exist.

I mean, particularly in corporate America, even even in the public sector organization I used to work for, we were gradually coming to realize, well, what social capital structures had we built that were excluding folks.

I mentioned mentoring folks before.

This is part of what we learned about this, just hearing about the way those informal networks operate and the denial of opportunity, the assumptions about people, their motivations, their in, their hard working, you know, capability and all that, all this sort of floating around, untethered, but influencing decisions that were made public sector, private sector.

So that's one example of social capital.

The other example is the distress and mental anguish and in some cases, mental illness that is coincident with significant economic suffering, especially also in the presence of racism, which I hear about.

I did not live that, but I hear about it from more and more people.

And then there were people, of course, fortunately, researching it.

Now that's another reckoning we have to come to grips with that.

I do not have I don't write about solutions for that because I don't think I'm qualified.

But I thank you for bringing it up because it is a big part of the problem, both in the public and private sector.

What's going on at work, plus in the in the communities where the constant barrage of difficulties and struggle and racial assaults is was one of my friends, a black guy who's a colleague of mine from the Fed.

You see, it's just exhausting.

It is just exhausting of the words he used.

And I again, I haven't lived it, but I hear it.

And so no great solution for me for that, but I hope others do.

And so thanks for raising the issue.

Friends and members of the City Club.

Jeff, you're yeah, thank you.

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Next week at the City Club, on Tuesday, June 25th, we will hear from Key leadership in Cleveland's Arab-American community who hold Palestinian heritage on how their community is faring and what is needed to move toward equity and peace.

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