Econ Battle Zone: Budget Showdown

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0:24Last time on Econ Battlezone, Erica emerged victorious. I can't believe I won. Anything is possible. And was awarded the Econ Battlezone Belt. It's a lot of gold. There is a lot of gold on this. Today, two new Planet Money reporters enter Econ Battlezone Stadium. I'm Kenny from Meadville, Pennsylvania. I'm Mary from Richmond, Virginia. Ready to do whatever it takes to get their hands on the belt. I love shiny things. like a raven. I would wear that belt for a full month everywhere I went. I'm not giving this belt up. This is my belt. Welcome to a special episode of Econ Battlezone. Today, Mary and Kenny come for the champ.

1:13Let's have today's contestants join us in Econ Battlezone Stadium. Erica, Mary, Kenny, the rules are simple. You will each be assigned at random your own econ challenge question and secret ingredient. You will need to answer that question, include your secret ingredient, and delight and inform our judges. Since I don't know what we're doing, there's no real way to prepare. I'm already panicking about how I haven't spent 24 hours panicking. Our country is in the midst of a great debate about the federal budget and the deficit. Should we shrink the size of the federal government? should Congress extend the tax cuts from President Donald Trump's first term?

1:58Today's Econ Challenge questions all have something to do with that budget debate. Computer, please shuffle today's questions and today's mystery ingredients. Mary, you're first. Nice. Your question? What effect will extending the 2017 tax cuts have on economic growth? And why do different economic models give different answers to that question? Okay. And now, computer, what is Mary's mystery ingredient? Rhyme. To succeed, your piece must include as much rhyming as possible. Mary, how are you feeling about your challenge? Listen, when you said deficit, I was like, oh, these jokers are knocked out.

2:47Like, you better. I am ready for deficit. I've been living here. And then it was about tax cuts. But I like rhyme. I don't often get to make my shows rhyme. So that's exciting. All right, let's move on to our next competitor. Computer, what is Kenny's economic challenge question? Kenny, your question is, what signs do economists look for to know whether our country's$36 trillion national debt has reached a level where it has begun to hurt the economy? Okay, I can do this. Mary looks mad. Mary, did you want this one? Yeah, this one's a slam dunk for me. It's all right. You can have it. Now I feel like the stakes are higher.

3:26Now I really can't botch this. Computer, what will Kenny's challenge be? Genre. Kenny, your story must belong to one of the following three genres. Science fiction, romantic comedy, or horror. Only one. Okay. Okay. Okay. All right. That leads us to our defending champion, Erica Barris. Erica, there is only one challenge remaining and only one mystery ingredient. Here we go. Computer, what she got? Erica, your question is about the fight over whether to cut hundreds of billions of dollars in Medicaid funding over the next decade. So how did we get here? What are the three most important events in Medicaid history from its creation in 1965 to the present day?

4:22Okay. And Erica, your piece must contain a musical number. Woo! That is great! Oh, no, see, that's not... The dream, Erica! That is not the dream! Are you kidding me? I hate musicals, and I am tone deaf, and I don't want any part of this. Contestants, remember, you have just 48 hours to become experts in the federal budget debate. Locate and interview your guests and explain everything to us in just three minutes. Whoever impresses our judges the most will take home the title of Econ Battlezone Champion. How's that sound? It sounds terrifying. And Erica, it sounds like you got some musical lessons to take, I'll be honest.

5:15I'm your host, Keith Romer. And this is Econ Battlezone. Can I keep talking about how I feel about this? I don't think it's fair. Why do I have to do a musical number?

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6:25Welcome back to Econ Battlesong. I'm joined now by our two guest judges. First up is Betsy Stevenson, who teaches economics and public policy at the University of Michigan. Betsy, what can you tell us about the challenge facing our contestants today? What's going to separate a good economic answer from a great one? Well, these are all kind of meaty economic questions. I think in particular, Kenny's question, trying to understand that point in which debt becomes too much, I don't think anybody actually fully knows the answer. What about for Mary? What relationship are you looking for in terms of the effect individual tax cuts will have on growth?

7:08Economic growth fundamentally and always comes down to innovation. So now we've got to understand how giving people more money somehow spurs innovation in the economy. That can be true, but sometimes it's not. And then finally for Erica's challenge, what's going to be the mark of success for you there? What are the three most important events in Medicaid history? Is that important to the well-being of the public? Is that important for debt? Is that important for health care? I want to see what she thinks is important and then see if she can make a case for that. Our second judge is one of the senior editors of This American Life and a former host of Planet Money, David Kestenbaum.

7:54David, what about the special challenges facing our contestants? I think the challenge with all of them is like there's a great cringe danger, you know. Also that it would distract from the explaining that you're trying to do. But also, you know, I want to see if they can do it. While our judges awaited the outcome, our contestants were already feeling the pressure. Especially the returning champion, Erica. I'm pretty sure I have the Medicaid part of this down. The musical number part of this is really tripping me up. Erica did not consider herself a musical person. I took piano when I was 10 and four weeks in the teacher told my parents they should just save their money.

8:39And that was the end of that experience. So she started looking for allies. I am sending an email to this country singing economist and his name is Merle Hazard, which, you know, is kind of funny. And he's got all these great songs like how long will interest rates stay low? It's kind of a shot in the dark. I don't know if he's going to respond even, but, you know, he's just got to try things. Meanwhile, Kenny was also out there trying things. So here's what I'm thinking. I throw off Erica and Mary, make sure they're not going to the staff meeting. And we should not go to the noon staff meeting, correct?

9:20And then I'll go to the staff meeting. Correct. No, I'm not going. And use that to brainstorm some ideas. He took his question about warning signs that the national debt had grown too large to the Planet Money Zoom meeting. Anyone I should talk to about when the national debt triggers a problem? The research is all over the map on this, but like you could talk to three economists and you get five opinions on this. But like if the economy is doing great and we're like growing a bunch, it doesn't really matter. Like it can go up to like a huge percentage of GDP or like it could be a weight that is suppressing growth.

9:57And if it keeps growing, then it's siphoning away both government investment and private investment. Kenny also had questions about the genre he had chosen for his challenge, romantic comedy. On that front, the team was less helpful. It almost immediately was like waylaid by a debate over whether Lost in Translation even is a rom-com or not. Wikipedia says it's a rom-com. Lost in Translation? It's not a com. I don't know if it's even very rom. It's just sad. It's not a rom or com. My God. And I was just like, I don't know what to do. Mary began by diving into the substance of her assignment. Why economic models disagree about the effect of extending tax cuts.

10:41What have you learned? I learned that there are differences in how you can model these things. Like, if you and I both built a model, we might differ on how elastic the world is to our changes. So, for example, I might think that labor is not that responsive to changes in taxes and that people aren't going to necessarily work a ton more, that that response isn't going to be huge. And you might be, like, really optimistic about that. But it wasn't long before she turned her attention to her mystery ingredient, rhyme.

11:45While Mary waited to hear back, Erica had already managed to land a collaborator. Um, the guy who's going to be singing with me is a country music singing economist. Merle Hazard had agreed to help and to connect Erica with some of his musical friends. Well, I just booked a Grammy-winning banjo player and an entire Nashville band to work with me on this. So I don't know. I'm in a pretty good place. Kenny, on the other hand, was feeling less in control. So I think my plan, which has literally developed in the last seven minutes while I was making coffee, is to make a trailer for a rom-com. A trailer for a rom-com about the national debt.

12:41I'm so mortified that what I'm going to present is so bad and dumb. Oh, God. As the second day of the challenge began, Kenny tried to learn how to pull off his plan. It's 4.30 in the morning. Rom-com trailer school begins now. What was that? What did she say? That sounded serious. All right, so I've noticed something. Come with us, if your husband wouldn't mind. She doesn't have a husband. I don't have a husband. Come on, let's go. When everything's changing, you're going to have a boom, hit of like awesome pop song from exactly that year. I only came to tell you that this can't go anywhere beyond this evening.

13:23And you should have worn a different dress. So the narrator says lead number one's name, lead number two's name.

13:30Then there's a little moment for the movie

13:37There's the name of the movie And then there's a final little moment for the movie So I think that is how our trailer needs to end Mary's plans also started to take shape Beginning with a call to Ari Simon At the record label Empire The only thing I would say We're up against the fact that you need it tomorrow. And the fact that really what you're asking for is three minutes of someone rapping continuously about a topic they probably don't know a ton about. But Ari did connect Mary with someone who was at least willing to give it a shot. I'm Rex Life Raj. I'm a recording artist out of Berkeley, California.

14:21I rap, I sing, and everything in between. And Mary and Raj got to work, trying to bridge the gap between dropping taxes and dropping bars. Like, what exactly are we talking about? Just how tax cuts affect... The economy. Yes, how tax cuts affect... How tax cuts do or don't generate economic growth. Mary explained that different models made different predictions about the effects of extending tax cuts. on growth and on how little of the lost tax revenue might be made up by that growth. And so who projected that it would be 6 % to 16 %? So that would be the Tax Foundation predicted forecast 16 % and the Tax Policy Center said 6%.

15:08In turn, Raj worked with Mary to find a rhyme to explain the importance of factors not included in those economic models. Indogeneity, right? Indogeneity. Doesn't it feel like there's a lot to work with there? Yeah, definitely. Nice. Indogeneity. I'm going to put that in my phone.

15:31Meanwhile, Erica tried to put a country spin on how Medicaid spending had grown over the decades as Congress extended coverage to different groups of people. The thing is that the big thing in this is the 1972 expansion. She and her new band in Nashville met for a writing session and kicked around ideas about how to transmute Medicaid's increasing percentage of federal spending into country music gold. By 80, budget share was 2.4, but there were still bigger changes in store. Yeah, that's good, John. The material was not a natural fit. So the main thing was that in 91, it was 4 % of the budget, But then by 2000, it was 6.6.

16:18I actually have to say the words Affordable Care Act somewhere in there. Okay, okay. But I mean, did that... The Affordable Care Act. Can we try again? But by the end of the night, they had the beginnings of a song.

16:40Like that? That sound okay, Erica? That sounds great. Okay. Really? Yeah, it sounds so good. It sounds like a real song. Yeah, it is. This will work. And then there was Kenny. He had booked an economist. He was sure could answer his question about when the size of the national debt starts to hurt the economy. Hello, hello. Can you hear me? Yeah, yeah, that works. Harvard professor Ken Rogoff. Now, I have to start out by saying that the whole premise of what you're asking me about, there's no answer to. Kenny hoped to use the interview as raw material for a charming romantic comedy movie trailer.

17:22What was your plan for your interview with Ken Rogoff? So I was like, what do I specifically need from Ken? Some kind of physical comedy is good. It's good to have a pet. And I have a dog that wears diapers. He could walk through the background. Like, that might be funny. And I came down to this list. I needed the meet-cute on tape. I needed a moment of tension with him on tape. And then I needed a moment of softening slash reconciliation. What's your exposure to romantic comedies? My wife watches a lot. Uh-huh. And how well did your plan work out? Poorly. I would say poorly. Okay, I'm sorry about this.

18:02This dog is out of control. I've lost total control of my house. So I feel like we've gone through everything at this point. Absolutely, Professor. Yep. Now I will edit it so that it sounds like Ken Rogoff and I had a delightful interaction. It's possible, though, if you ask him, he will be like, I talked to this guy at Planet Money and he must be the dumbest reporter I've ever met in my entire life. As the deadline closed in, the contestants worried whether their creations would be ready in time. The stakes are high. I'm going to open this file. If it works, it works. If it doesn't, well, I don't know what we'll do.

18:40Literally everything that could possibly have gone wrong technically went wrong. Oh my God, this is so bad. This is so bad. I have half an hour. I have half an hour. I'm not even close to finishing this. I'm so, I'm, ah. All right. Time is up. Hands up. Oh no. Hands up from your editing software. Erica Barris, how are you feeling about your piece? Um, I feel like medium. Medium rare. That's what I'm going to call it. Medium rare right now. Mary, how are you feeling about your piece? Hmm. Well, Keith, if I may pull from one of the greats. There's a certain slant of light, winter afternoons, that oppresses like the heft of cathedral tunes.

19:24Heavenly hurt it gives us. We can find no scar, but internal difference where the meanings are. But Mary, how do you feel about your piece? Oh, sorry. Was that the question? Decent, you know? Kenny, I'm going to go to you next. Y 'all, it was... I haven't heard it. That's not good. I don't know. That's not good, man. And frankly, I don't know what piece of audio I put in at the end. Coming up, the contestants present their stories to our judges. and we all learn who will secure the econ battle zone belt. This message comes from BetterHelp. As a dad, BetterHelp president Fernando Madera relates to needing flexibility when it comes to scheduling therapy.

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21:29Welcome back to Econ Battlezone. We've assembled our three contestants and our guest judges here in Econ Battlezone Stadium. This American Life's David Kestenbaum. Hi. And from the University of Michigan, Betsy Stevenson. Hello. Let's get right into it. Mary, you're up first. What have you brought our judges today? Good morning, judges. My mission was to investigate what effect a tax cut extension would have on GDP growth and then explain why different economic models might give different answers to that question. The economist I talked to said, yes, it could generate some growth, largely by incentivizing lower income workers to work more hours.

22:07But everyone agreed it would not be nearly enough to make up the lost future tax revenue. For help with my challenge, which was rhyming, I called in some trusted professionals, award-winning children's book author Liz Garten-Scanlon and Planet Lenny producer extraordinaire James Sneed. And then I got help writing and performing from a rapper in Berkeley named Rex Life Raj. And the result of that collaboration is what you're about to hear. Yo, what's up? It's Rex Life Raj. And I'm Mary Childs. Hello and welcome to Planet Money, Raj. Thanks for helping do the most. Today, we're going to try to figure out tax cuts.

22:39Will they boost economic growth? The political rhetoric is that it's supposed to help everybody. So does it. We're going to call some experts to try to make sense of it. So first, let's check the data, what the studies show, about if the cuts will help the economy to grow. And the good news is, from nearly every perspective, they drive a little growth, which is the objective. But that comes from lost revenue, federal cash not coming in. The government would have gotten$4 trillion. $4 trillion in lost revenue when they cut taxes. 6 to 16 % gets recouped on the back end. That's according to analysis, according to the studies, because people will get to keep a little bit more of their money.

23:15The way that that's supposed to work is to incentivize, to make workers feel more ambitious and more energized. Tax cuts might generate some economic growth, but a lot of people think that's short term at the most. The question is, will cuts lead to more boots on the clock or just more executive bonuses in buying back stocks? We asked Kent Smetters at Penn. He said both. The problem with that is that we're actually finding, yes, it's not big economic growth. In fact, statistically, it's kind of no different than zero. So even if you're looking for it, tax cuts aren't the hero. Because cuts help the rich more.

23:47The money, they crave it. Higher income people get the money, they're going to probably save it. Not spending the economy, says economist Benga Adjelori. So it doesn't boost growth as much as it could. That's not this story. Let's talk about elasticity, something that we should mention. It's how people or businesses respond to incentives. How flexible we are with our time and our money spending. Like, will tax cuts push us into making different decisions? The elasticities aren't huge, but it's a big base. Eric Zwick at Chicago says that there's a little space for disagreement, for projections to diverge.

24:18Who's to say what will stay and what changes will emerge? Projections also differ based on how you see the world, how reactive we might be, and how changes get unfurled. The fact that things are complex, there's too much to account for. No model gets it all, there's just stuff they must ignore. I have a new word that you can say with me. Okay Raj, what is it? Indigeneity When feedback loops start to twist and tighten the bolts And something outside of the model starts messing with the results They use the lower class as the engine of the economy Making you turn your life force to a commodity Do people work more if the taxes are lower?

24:50We gotta see Will tax cuts make the businesses invest consciously? Or will it make the working man work more? I just don't know if you gonna get what you hope for They say that it'll help the working man earn more That just sound like some rhetoric that we heard before Or tax cuts for economic growth for like a turf war. I just don't know if you're going to get what you hope for. Thanks so much, Raj, with Rhymes Like Diamonds glistening. This is NPR. Thanks for listening. Oh, my gosh. Woo! That was out of this world. That was amazing. Thank you. David Kestenbaum, what'd you think? Overall, really nice job.