Lessons from the Crypto Apocalypse

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  1. A plan to end white supremacist violence
  2. What the crypto crash means for ordinary Americans
  3. Rising wages helped dampen inflation
  4. CEO pay has ballooned beyond all reason or rationality
  5. Affordable child care is an economic must
  6. The Biden Administration makes quality internet access affordable for millions

(The Pitch is a weekly economics newsletter written by Zach Silk. Follow here on Medium or sign up for free on Substack.)

Friends,

A few weeks ago, Time published a data-packed appeal from Nick Hanauer explaining why the Biden Administration should restore the overtime threshold to levels equivalent to when the American middle class was at its strongest. A month ago, this newsletter drilled deep into why overtime’s enshrinement of the 40-hour workweek is such an important protection.

And now, journalist Marcus Baram has written a brilliant four-part series for Capital & Main explaining why overtime is central to American working life. I urge you to take your time with the whole series, and to share it widely with your networks.

  • First, Baram explains how the threshold’s protections have been whittled away, and what that means for American workers. While nearly 63 million workers qualified in 1975 for time-and-a-half pay for every hour worked over 40 in a week, that number has been stripped down to just 15 million today.
  • Next, Baram outlines how the Biden Administration could buck decades of anti-worker action from his predecessors and restore overtime protections.
  • Then, using heartbreaking real-life examples, Baram explains how employers have stripped both time and money from workers by skirting overtime rules and diverting money that used to go to the middle class into corporate profits.
  • And finally, Baram examines the overtime rule as it stands in the United States, comparing stories from states like California and Washington that have raised the threshold to conditions in the many states that use the atrophied federal overtime standards.

This series is the kind of in-depth investigation of labor issues that you rarely see anymore. Baram zooms between the macro lens of 50 years of trickle-down economics and the micro lens of what these erosions of overtime protections mean for individual workers. All together, it’s an impressive series that deserves as many readers as possible. If it gets in front of enough eyes, it’s the kind of impressive reporting that can convince the Biden Administration to go as big as possible for American workers by restoring the overtime threshold.

The Latest Economic News and Updates

A plan to end white supremacist violence

Before we can address the week in economic news, we first must acknowledge the horrific act of white supremacist violence at a Buffalo grocery store. Make no mistake: This was an act of terror directed against America’s Black communities. It was a loathesome, racist act of violence committed by a white supremacist. Like you, we at Civic Ventures have spent the past few days keeping the victims of the attack in our thoughts.

But for our leaders, the time for thoughts and prayers has long since passed. We need a specific plan to end white supremacist violence in America. The Center for American Progress has assembled a blueprint of policies that directly target white supremacist terrorists through a combination of executive actions, data collection, more robust prosecution of white supremacist crimes, and a variety of other financial and technological tools.

It’s normal to feel helpless in the wake of horrific acts of violence like the shooting in Buffalo. But you’re only truly helpless if you choose to respond with inaction. I encourage you to check out the CAP report, choose one or two of the policy solutions that speak most to you and your interests, and then advocate for them. Write your leaders, organize action, write op/eds and social media posts promoting the policy of your choice. Just the act of publicly opposing evil acts like this is important; it makes clear to the white supremacists that they are not welcome in America, and that they don’t speak for you. At a time when monstrous behavior seems to be proliferating, none of us have the luxury of staying silent.

What the crypto crash means for ordinary Americans

The last few weeks have seen an unprecedented cryptocurrency meltdown, with some $40 billion in wealth disappearing overnight when the so-called “stablecoin” Luna bottomed out. Luna, though, was just the beginning: a wide variety of cryptocurrencies have melted down in a slump that vaguely resembles a miniature version of the stock market collapse of 2008:

If you, like the vast majority of the population, still don’t quite understand what cryptocurrency does, Emily Stewart at Vox has written an excellent explainer that debunks some common myths spread by crypto hucksters and casts a clear eye on the real benefits of crypto. But a growing number of Americans have at least dipped a toe into the crypto market, with a Pew poll finding that 16 percent of Americans have bought into cryptocurrency. That market is mostly young and male, but the divisions across race and income are perhaps not what you’d expect:

Notice that the divisions between income classes at the bottom of the last chart are relatively equal, with 15 percent of lower-income Americans investing in crypto, nearly matching middle- and upper-class investors? At the New York Times, the always-excellent Tressie McMillan Cottom writes that many Americans saw crypto as a way out of poverty by making wealth seem more accessible to ordinary Americans.

Those lower-income Americans didn’t just get that idea on their own — the idea of crypto as a road to wealth was aggressively sold to them by American mayors. Miami mayor Francis X. Suarez told Axios that “Most people who are poor have their money in a bank account that earns negligible interest.” To those poor Americans, Suarez promised that “if you had a crypto account, you could get a U.S. stablecoin” and earn a much higher rate of interest — possibly as much as six percent.

That was the promise. But the reality is that if you’re a poor American who listened to Suarez’s advice when it was published in Axios in January and invested your savings in a stablecoin like Luna, you would have lost, basically, every last penny.

The takeaway from this collapse is that bitcoin is not going to solve income inequality — if anything, it’s making income inequality even worse. Our leaders would do more to resolve the yawning income gap by unrigging the tax code and investing increased revenue into the Americans who need it most.

Rising wages helped dampen inflation

We may have seen inflation rates slow down last week, but high prices are still the number-one problem most Americans are facing every day. Capital & Main focuses on the impact of high prices on one working-class California community, and how inflation threatens to send families careening over the edge of poverty. Sharon Epperson at CNBC offers a way for you to calculate the impact of inflation on your own personal finances. And The Washington Post reports that for the first time in history gas prices passed $4 per gallon in all 50 states. (As an aside, this week’s Pitchfork Economics podcast highlights a piece of legislation currently in Congress that could directly resolve Big Oil’s corporate profiteering and provide a rebate to middle- and working-class Americans.)

Some have falsely tried to blame inflation on federal investments in ordinary Americans, and others have even warned that increased worker pay caused those higher inflationary prices. To that last claim, in particular, the Economic Policy Institute proves that higher worker pay has been “dampening inflation all along,” to the tune of roughly one percentage point. They warn that if the Federal Reserve continues with its plans to raise interest rates and spur a slowdown of the economy, the resulting loss in wages could actually worsen inflation.

And in the meantime, several large retailers like Walmart and Target are reporting disappointing earnings this quarter, citing inflation as a reason for the slowdown. Other retailers like Home Depot, however, say their sales are up and inflation hasn’t impacted their sales at all. The signs are confusing and nobody can reliably predict where the economy will go next.

CEO pay has ballooned beyond all reason or rationality

There’s an old joke among reporters that if the headline to a story is in the form of a question, the answer to that question is always “no.” That joke turns out to be absolutely true in the case of a recent New Republic story headlined “Is the Typical CEO Really Worth $15 Million?

In the piece, Timothy Noah argues that CEO pay isn’t tied to anything anymore — not worker pay, not inflation, not profitability of the corporation, not shareholder value. And as CEO pay has ballooned beyond all reason and beyond the mechanisms of cause and effect, Noah continues, that has emboldened corporate leadership to make decisions that put the entire economy at risk. It’s a short but elegantly argued piece, and well worth your time.

Affordable child care is an economic must

The post-lockdown whine of “nobody wants to work anymore” has rightfully been ridiculed to infinity and back, but the fact remains that there are plenty of job openings for every American looking for work. A new study from McKinsey & Company and Marshall Plan for Moms finds that increased child-care benefits would help ease the worker shortage.

“Almost half of mothers with young children who left the workforce cited child care as a reason for the move,” The New York Times’s Alisha Haridasani Gupta reports, “and 69 percent of women looking for a job said child care benefits could sway their decision on where to work.”

Only six percent of hourly workers and 16 percent of salaried workers enjoy child care subsidies from their employer, Gupta writes, and only a third enjoyed flexible hours to help arrange child care. If employers are really desperate to fill those positions that have been empty for the last year or so, they should consider child care assistance as a perk, in addition to higher wages.

And a new report from the Washington Center for Equitable Growth makes a case for policymakers to increase access to child care. The costs for daycare and other forms of child care are rising higher than ever, even as the child care industry lags behind the rest of the economy in terms of recovering from the pandemic:

The Center warns that if child care services continue to lag behind the rest of the economy and prices continue to climb, parents will have to drop out of the workforce entirely, or reduce their hours significantly, in order to take care of their children. They argue that either wages need to increase dramatically in order for parents to afford child care, or government needs to step in to provide affordable child care for all.

And no matter which path we choose, the Center finds that the child care industry will continue to suffer from tremendous waves of disruption if child care workers are underpaid. Check out this chart, which shows the slowdown in staff turnover when employers raise child care workers’ wages up to and over $25 per hour:

The Biden Administration makes quality internet access affordable for millions

It’s been a rough week, so let’s close with some good news about a smart policy: For the Washington Post, Jacob Bobage writes that the Biden Administration, as part of the bipartisan infrastructure bill passed last year, has ensured that tens of millions of low-income American households are eligible to receive subsidized high-speed internet access for just $30 per month. That’s 40 percent of the country that will have access to cheap (or, with additional subsidies, free) internet access that’s high-quality enough to support remote work and/or education.

Policies like this one don’t top the headlines, especially in interesting times like these, but they make a significant difference in the lives (and the futures) of ordinary Americans. Some 48 million households that once struggled to afford even cheap and unreliable internet access will be able to access the education, communication, and entertainment that middle- and upper-class Americans have by now taken for granted. You can check to see if you qualify for the program at getinternet.gov, or by calling the hotline at (877) 384–2575, and you can make a tremendous difference in someone else’s day-to-day life by passing that information on to anyone who needs to hear it.

Real-Time Economic Analysis

Civic Ventures provides regular commentary on our content channels, including analysis of the trickle-down policies that have dramatically expanded inequality over the last 40 years, and explanations of policies that will build a stronger and more inclusive economy. Every week I provide a roundup of some of our work here, but you can also subscribe to our podcast, Pitchfork Economics; sign up for the email list of our political action allies at Civic Action; subscribe to our Medium publication, Civic Skunk Works; and follow us on Twitter and Facebook.

  • On Civic Action Live this week, we’ll discuss how inflation has eaten your wage gains and what our leaders should do about it, why affordable and universal child care should be a centerpiece issue for Democrats in the upcoming midterm elections, and what lessons we can learn from the recent collapse in cryptocurrency value. Join us at 10:30 pm Pacific time on Friday.
  • Representative Ro Khanna joined the Pitchfork Economics podcast to discuss his plan to tax the outrageous corporate profits of gas companies and return that revenue directly to middle- and working-class Americans in the form of quarterly checks. There’s a lot of candid, thoughtful conversation about the current state of inflation in this episode, too.
  • At Business Insider, Paul explained the three policies in President Biden’s 2023 budget proposal that would change American economics for the better by restricting corporate power and increasing paychecks for ordinary American workers.

Closing Thoughts

A brand-new Gallup poll shows that 58 percent of all Americans own some form of stock, a slightly smaller percentage than the 62 percent who reported owning stocks before the 2008 market crash. So if a majority of Americans have some investment in the stock market, why are we so fond of reminding people in this newsletter that the stock market doesn’t represent the health of the overall economy?

First, keep in mind that percentage spans a wide variety of ownership–including mutual funds and 401Ks — which means the vast majority of those stock owners likely aren’t actively participating in regular trades, individual stock ownership, or a regular cashing in-and-out of wealth to and from the market.

Second, as Gallup reports, “Stock ownership is strongly correlated with household income, formal education, age and race.” That means some 90 percent of households earning more than $100,000 per year take part in the stock market, while just one-in-four households taking home $40,000 per year own stocks of any kind. A slim majority of people of color do not own stocks, and a wider majority of Americans aged 18 to 29 — about 60 percent — do not participate in the stock market. So stock ownership skews to older, white, and wealthy households.

And most importantly, the polling doesn’t question how much stock each individual holds. Last year, the wealthiest 10 percent of all Americans owned just shy of 90 percent of all stocks — a record high that really puts the Gallup poll into perspective. So the next time you hear a politician crowing about stock market gains, remember that they’re excited to enrich an elite class of shareholders, with crumbs for a dwindling share of the middle class and nothing for everyone else. The stock market really does resemble the economy in only one respect: its wealth isn’t trickling down to 90 percent of Americans.

Be kind. Be brave. Get vaccinated — and don’t forget your booster.

Zach