Here’s What It Will Really Take To Fix America’s Economy — ft. Kathryn Anne Edwards

Kathryn Anne Edwards · Bloomberg Opinion

US income and corporate-profit concentration now match 1929 levels, with top 1% income share near 21.5%.

The top 1% share of US income peaked around 22% in 1929 and is now about 21.5%, against a postwar low near 10%. Corporate profits as a share of gross domestic income peaked at about 8.9% in 1929 and had hovered near 7% for most of the twentieth century. The five highest years for that share are now the five most recent. She concedes wealth inequality is not at 1929 levels because of middle-class homeownership, but argues income and profit concentration are as bad and that the economy is producing too much inequality.

“...That was around 22%. So one in five dollars in The US was taken home by the top 1%. We're at 21 and a half now.”at 18:42

Kathryn Anne Edwards · Bloomberg Opinion

Lower the estate tax to about $1 million and fund a children's trust with the proceeds.

Proposes setting the estate tax at a reasonable level, around $1 million, with proceeds going into a children's trust fund that pays a basic income for children, early childhood education and after-school and summer enrichment. Ed notes the current exemption was raised to $30 million per couple under the One Big Beautiful Bill Act, and she argues that amount does not buy what it used to. She frames the moment as a chance to act while many wealthy people are aging.

“...put the estate tax at a reasonable level, say a million dollars. And any of the proceeds collected from the estate tax goes into a children's trust fund, which does things like pay a basic income for children”at 20:49

Ed Elson · Prof G Media

California's one-time billionaire wealth tax was too crude to work, and voters rejected it.

Ed says the California Prop 40 one-time wealth tax did not make much sense to him because it was too crude, a simple billionaire threshold, and he expected it to fail. He argues that a crude design gives no workable redistribution mechanism, and it was rejected, so the policy did not achieve the redistribution it sought.

“one of the proposals that we saw in California, prop 40, was this one time wealth tax, which I thought didn't actually make a lot of sense. And part of my concern was that it was too crude to the point that it actually wouldn't work”at 24:43

Kathryn Anne Edwards · Bloomberg Opinion

Wealth taxes are feasible; the real problem is assessment, and step-up basis lets gains escape tax.

Argues the US already taxes wealth through property taxes, so the claim that wealth taxes can't be done is overstated. The hard part is valuation. Using the step-up basis as an example, an asset bought in 1980 and passed on at death escapes capital gains tax entirely. She suggests either a recurring wealth tax or carryover basis for long-term assets so gains are taxed during holding. Such proposals have existed since the 1970s, so the claim that the design is unknown is unfounded.

“I think there are very simple ways. You know, the hardest part of a wealth tax is how you assess.”at 32:47

Kathryn Anne Edwards · Bloomberg Opinion

Concentrated economic and political power will not be voluntarily surrendered, so redistribution requires a sustained multi-front campaign.

Kathryn links the rise in top-1% wealth to the decline in white-collar prosecutions and argues these trends are related through power: people with power to make the economy work for them do not give it up. Billionaires may talk about tax reform, but they are not fighting for higher minimum wages or higher taxes on themselves. She concludes that redistributing economic and political power must be a multi-front campaign covering workers, consumers, the uninsured and the elderly.

“I don't think that is a coincidence. I think that they are probably related. They're absolutely related over who has power to make the economy work for them. ...People with power, they don't give it up.”at 40:49

Kathryn Anne Edwards · Bloomberg Opinion

The midterms were a referendum on economic hardship and government corruption, not just one issue.

Cites the AP exit poll, which she reads as one part economy and one part corruption, and says people cannot make it in their daily economic lives while the government they see as distant is profiting. She ties this to Texas, where one-party control had gone stale and governance quality had dropped, and to a Gallup finding that 55% say their finances are getting worse.

“I mean, the AP exit poll was pretty clear. This was about one part economy, one part corruption.”at 4:46

Kathryn Anne Edwards · Bloomberg Opinion

White-collar crime prosecutions have collapsed and must be pursued fully, since non-enforcement benefits the powerful.

Kathryn argues that law should be enforced whenever it is broken, and that white-collar prosecution in particular must be a priority. She cites Justice Department charts showing white-collar case filings have fallen off a cliff. In her view, failing to prosecute benefits those who expect to get away with wrongdoing, not the public, and she faults Gerald Ford's pardon of Nixon as the wrong precedent.

“This is like ingrained into my person that we need to absolutely prosecute white collar crime. ...It's fallen off of a cliff, and it benefits no one to let that precedent lie.”at 40:03

Kathryn Anne Edwards · Bloomberg Opinion

US households' financial sentiment is at a record low, worse than in recessions or the pandemic.

Cites Gallup polling showing 55% of Americans say their financial situation is actively getting worse, a Pew report that 70-75% of Americans have cut back on non-essential spending, and a consumer sentiment index with about 40% expecting their economic situation to be worse in a year. Argues that on most of these measures sentiment is the worst on record, not merely worse than in a recession or since the pandemic.

“For most of those measures, it's the worst it's ever been. Not worst outside of a recession, not worse, you know, since the pandemic. I mean, the worst on record that Americans feel about the economy is right now.”at 5:28

Kathryn Anne Edwards · Bloomberg Opinion

Top 1–5% consumption, tied to stock wealth, drives roughly a third of the US economy.

Kathryn argues that stock market wealth fuels the consumption of the top 1%, and specifically the top 1–5% of Americans. She says that this spending is possibly a third of the economy. Because of this dependence, the economy's health is tied to the stock market, which makes market-moving policy politically difficult.

“I hold all of the wealth. I hold the consumption of the top one to 5% of Americans that is fueling possibly a third of our economy.”at 58:47

Kathryn Anne Edwards · Bloomberg Opinion

The unemployment rate hides a large gap in job-search hardship; the government should collect real-time data.

Argues the headline unemployment rate misses people who are frozen out of the job search, with only a handful of indicators showing a problem and many unanswered questions. Proposes a quick survey modeled on the pandemic-era Household Pulse survey to track how many jobs people apply for, whether AI is used in hiring, and how often applicants are overqualified for jobs they land.

“We have this massive gap between what the unemployment rate says that the labor market should look like and what it actually looks like.”at 7:24

Kathryn Anne Edwards · Bloomberg Opinion

Paid sick days, higher minimum wages and sectoral bargaining are needed to lift wages at the bottom.

Argues that to fix inequality the economy must invest in workers, which requires aggressive labor law and more worker power beyond existing collective bargaining. Gives a range of options: easy steps like paid sick days and a higher minimum wage, and harder ones like sectoral bargaining agreements for service-sector jobs.

“We need to get more wages and income to the bottom. And some of that is easy, like, require paid sick days, and some of that is harder.”at 22:51

Kathryn Anne Edwards · Bloomberg Opinion

Tax breaks for owners, not market-rate supply alone, are the first fix for housing affordability.

The step-up basis lets homeowners hold appreciated homes until death without paying capital gains tax, with an estimated 1-4 million homeowners locked in, and about 40% of homes owned by boomers who will mostly die in the next fifteen years. The mortgage interest deduction goes almost entirely to the top fifth or top 10% of filers and inflates loan sizes. She argues the money should go to states and localities to build lower-income housing, because market-rate building won't reach people earning $15 an hour, and that wealthy buyers distort prices in certain markets.

“the first thing you should do is you should take away the massive tax bonus that people get by dying owning their homes.”at 12:52

Kathryn Anne Edwards · Bloomberg Opinion

Home equity as a retirement store of wealth no longer works; government retirement accounts should replace it.

Kathryn argues that the house-as-piggy-bank approach that worked for boomers no longer works. She proposes a government-funded retirement account, modelled on the federal Thrift Savings Plan, which she calls low-cost and low-risk, to build wealth without relying on one address. She says that taking home equity off the table is scary for many people, so the alternative must be made clear.

“You've been using your house as a piggy bank, and that that is what was working for boomers, but it's not working anymore. So an alternative would be that every American has a government funded retirement account that actually Trump proposed, modeled after the Thrift Savings Plan.”at 1:02:18

Kathryn Anne Edwards · Bloomberg Opinion

Removing the Social Security payroll tax cap would push trust fund depletion out to the 2050s.

Social Security has a financing problem, and people hesitate to fix it because they think all seventy-five years must be solved at once, which would require deep cuts. She argues a new administration could instead act right away by removing the payroll tax cap, a popular revenue-raising move that would forestall trust fund depletion until the 2050s. That would buy room to make wider changes to the program over time.

“you could just take power in January, get rid of the payroll tax cap, and at least, like, forestall the trust fund depletion out until the twenty fifties.”at 28:38

Kathryn Anne Edwards · Bloomberg Opinion

Universal paid family leave should be funded by a small payroll tax added to Social Security, which can expand now.

Kathryn argues that universal paid family leave should be put into Social Security, funded by a small added payroll tax. Her case is that Social Security has run since the era of index cards and has never missed a payment, so it is capable of paying out maternity leave now. She urges expanding it immediately rather than waiting.

“If you wanna pay universal paid family leave, you would put it into social security. ...they started this program on index cards before there were computers and they've never missed a payment.”at 35:14

Kathryn Anne Edwards · Bloomberg Opinion

Universal public health insurance would free workers from job lock and boost entrepreneurship.

Argues that money raised from taxing the wealthy should fund universal public health insurance. Currently people are stuck in jobs because their health coverage is tied to employment. Public coverage would let them start businesses and build their own wealth, so it would improve income distribution rather than only correcting one after the fact.

“But we can, you know, get some money and spend it on things like universal public health insurance. That means that people don't have to be stuck in their job”at 31:47

Kathryn Anne Edwards · Bloomberg Opinion

Private US health insurance is the most subsidized industry and should be replaced by universal public coverage.

Kathryn argues that private US health insurance is the most subsidized industry, relying on the largest government tax subsidy, so it would collapse within days if that subsidy were turned off. She says employer-sponsored plans are a poor design: roughly one in four Americans is locked into a job by health coverage, and low self-employment is linked to the difficulty of buying insurance without employer help. She separates health insurance (who pays) from health care (who provides), and says the goal is universal public insurance through a transition away from employer plans. She adds that government already spends about $2.5 trillion on health, so the alternative is not zero spending, and that Medicare and Medicaid have much lower administrative costs than private insurers.

“the private health insurance industry in The US is bar none the most subsidized industry. They cannot function without the largest government tax subsidy that we have. It goes to health insurance companies. If the government turned it off, they'd collapse in days.”at 49:03

Kathryn Anne Edwards · Bloomberg Opinion

Texas's voucher program is draining public school funding, and its results are clear.

Texas has the most expansive voucher program, passed after Republican state house members who opposed it in rural areas were defeated in primaries by out-of-state-funded challengers. She argues vouchers in rural areas effectively defund public schools, and that private schools don't have to take all students or freeze their price increases, so the voucher amount simply becomes a price increase. She says the results are clear: vouchers are bleeding money from public schools that need it.

“We've now had vouchers in Texas, and their results are very clear. I mean, it is just bleeding money from public schools.”at 3:45

Kathryn Anne Edwards · Bloomberg Opinion

Trump's tariffs and Iran war drove up consumer prices, making them attacks on consumers.

Argues the Iran war spiked oil prices, which spread through the rest of consumer prices, and that the tariffs were attacks on consumers. Presents the two as the main causes of the recent inflation problem that voters are reacting to. She argues Democrats will be tempted to frame the fix as reversing these two policies, but that is not enough to fix the affordability problem.

“Trump launched an unnecessary war in Iran. It spiked oil prices, which bled into the rest of consumer prices, and also he put up these tariffs, which of course were attacks on consumers.”at 8:34

Kathryn Anne Edwards · Bloomberg Opinion

She doubts US inflation returns to 2% within six months, and that wouldn't fix affordability anyway.

Says the electorate did not ask for inflation to fall to target. People feel the price level on products and the loss of what they can afford, not the inflation rate. She doubts inflation can return to 2% within six months, and argues that even if it did, it would not solve their problem because prices remain high.

“And if I don't think 2% inflation within the next six months, which I really doubt we could get to anyway, that is not the fix.”at 10:39

Kathryn Anne Edwards · Bloomberg Opinion

The US peacetime deficit is 6%, larger than France's; mismanagement, not welfare generosity, drives fiscal trouble.

Cites a non-recession peacetime deficit of about 6% of GDP and says the US deficit is bigger than France's, so it is already on the path critics attribute to generous welfare. She argues the myth that generous social welfare inevitably causes bankruptcy is wrong, because fiscal trouble comes from mismanagement and the US shows that without a generous system. Democrats therefore must pay for what they want, since Republicans added to the deficit for twenty-five years.

“we have a non recession peacetime deficit of 6%. ... I was like, y'all, our deficit is bigger than theirs.”at 26:05

Kathryn Anne Edwards · Bloomberg Opinion

The pass-through business deduction is used almost only by the top 1% and should be ended for revenue.

The pass-through deduction lets owners claim business income at lower rates, intended to treat small businesses like corporations. She says it is used almost exclusively by the top 1% and has become a way for them to accumulate assets. Recommends a one-off bill that ends the deduction and starts raising revenue, instead of a sweeping tax overhaul, which she says is hard to pass.

“we know the pass through deduction is being used almost exclusively by the top 1%, and it has been a boondoggle for them to accumulate assets.”at 27:25

Kathryn Anne Edwards · Bloomberg Opinion

Data centers get sweetheart tax deals with little accountability and should pay more through utility bills.

Kathryn says the public anger over data centers is valid. Tech firms are getting sweetheart tax deals to build environmentally noxious facilities in local communities with little accountability. She argues that adding rules, accountability and taxes, including making data centers pay more through utility bills, is reasonable and could be done quickly.

“And then they're getting sweetheart tax deals to build, you know, just environmentally noxious data centers in their backyard with seemingly little accountability.”at 53:58

Kathryn Anne Edwards · Bloomberg Opinion

AI firms are monopolistic and their harmful chatbots should be pulled from sale and make companies liable.

Kathryn describes the leading AI companies as monopolies making a dangerous product that should not be on the shelf. She argues that a product that harms people, especially children, should not be sold, and cites chatbots telling people to kill themselves. She compares chatbot makers unfavourably to therapists and to a product recall for choking hazards: a harmful consumer product comes off the shelf, and a company whose product causes deaths should face wrongful-death liability. She says the industry has been given every favour and does not deserve more.

“if you have a product that hurts people, especially children, you shouldn't be allowed to sell it. And chatbots tell people to kill themselves.”at 55:52

Kathryn Anne Edwards · Bloomberg Opinion

The China race is a shield; the real issue is that some AI companies can harm people with impunity.

Kathryn argues that AI companies hold up China as a boogeyman whenever harm is raised, and that China is 'right behind us'. She says voters do not see a race with China. They see that some companies are allowed to harm people while others are not, and that is why the industry gets a free pass.

“What people see is not some race with the Chinese to have the new technology. What they see is that some companies are allowed to harm people and others aren't.”at 57:54

Kathryn Anne Edwards · Bloomberg Opinion

AI is a bubble, and regulation risks popping it; the only question is when it pops.

Kathryn, speaking as an economist, says AI is a bubble. She argues it is no longer speculation whether a bubble exists, only what happens when it pops. She says that any regulation this product desperately needs risks popping the bubble, leaving Democrats with a bad hand after they came to power.

“But I can play the economist here and say that it's a bubble. ...I don't think it's speculation anymore of whether there is one, it's just what will happen when it pops.”at 58:13

Kathryn Anne Edwards · Bloomberg Opinion

The AI-propped stock market faces a massive correction that Democrats must be willing to risk.

Kathryn argues that the stock market is being propped up by AI, and that its wealth is fuelling top-earner consumption. She sees no easy way to reform the economy without a massive stock market correction, and says Democrats have to be willing to accept that risk.

“I don't think there's necessarily an easy way out of here without a massive correction in the stock market, and I think Democrats just have to be willing to risk it.”at 59:00