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Political dysfunction dents the U.S. credit rating
Aug 3, 2023
Episode 980

Political dysfunction dents the U.S. credit rating

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Plus, a little Journey on a Thursday.

The credit rating agency Fitch bumped the United States’ credit rating down a notch this week despite the country’s strong economic performance. We’ll hear what Treasury Secretary Janet Yellen had to say about it and get into why political dysfunction is at the root of the downgrade. Plus, why a carbon-free future likely depends on nuclear energy. And what musical beat is the U.S. economy grooving to?

Here’s everything we talked about:

We want to know what you’d pick as the economic anthem of the moment! Leave us a voicemail at 508-U-B-SMART or email us at makemesmart@marketplace.org.

Join us tomorrow for Economics on Tap. The YouTube livestream starts at 3:30 p.m. Pacific time, 6:30 p.m. Eastern. We’ll have news, drinks, a game and more.

Make Me Smart August 3, 2023 Transcript

Note: Marketplace podcasts are meant to be heard, with emphasis, tone and audio elements a transcript can’t capture. Transcripts are generated using a combination of automated software and human transcribers, and may contain errors. Please check the corresponding audio before quoting it.

Kai Ryssdal

Everybody I’m Kai Ryssdal. Welcome back to Make Me Smart, where we make today make sense.

Kimberly Adams

And I’m Kimberly Adams, thank you for joining us on this Thursday, it is August 3. And today we are going to play some audio from this week in the news and give you a bit of analysis on the other side.

Kai Ryssdal 

Cannot freaking believe it is August. But that’s not the point of this podcast. All right, first clip, here we go.

Tim Echols

I remember sitting in the White House with President Obama’s climate czar team. And they told me back then, that it was impossible for the US to hit their 80% clean energy goal by 2050, without new and existing nuclear power plants.

Kimberly Adams

So that is a clip from a conversation I had earlier this week with Tim Echols of Georgia’s Public Service Commission. And it was, we were talking about the new nuclear reactor that came online at Georgia’s Plant Vogtle. And this is like the first new, from scratch nuclear reactor to come online in the United States in decades. And it’s going to, you know, once that reactor, and another one that’s coming online soon, is up and running, it’s probably going to provide like half a million people, like half a million people’s homes, half a million homes with electricity in Georgia, Alabama, I think in Florida. And it’s definitely something that in, as he said, bipartisan agreement that nuclear has to be a part of the solution for our green energy future. However, this project came in like at two times the budget it was supposed to be, more than double. Let me go back to my reporting. Like I don’t remember what happened that day. $35 billion. It feels like forever ago, $35 billion for this project. I think it was originally supposed to be like $14 billion. And it’s seven years behind schedule. And it just really highlights the difficulty of bringing new power generation online. And I asked him, you know, what are the lessons learned. And he said, I would not do this again, because Tim Echols has been somebody who’s really been pushing for it over and over again, and kind of kept it going, despite many, many setbacks, including like companies going into bankruptcy, the Fukushima disaster scaring everyone. And he said that if you were to do it, go back and do it all over again, he would not take on a project like this for the state unless there was some sort of federal guarantee that, like there was this, they would only have to pony up X amount of dollars, right, and that there would be a federal backstop for it. And there was some of the people I talked to said that there’s unlikely to be many more big nuclear reactors like this one coming online. But there are a lot of smaller nuclear reactors in different parts of the country that are likely going to be you know, coming online in the coming years and that we need it. But you know, often the NIMBY problem really gets into it.

Kai Ryssdal 

Oh, yeah, for sure. Yeah, I think smaller is that’s the thing I’ve been hearing. And also, you know, he says there’s bipartisan agreement that we need nuclear. I’m sure that’s among the, you know, the policy types. I don’t know that there’s bipartisan agreement in the country, right, because people are still really with with some reason, so really scared of nuclear, you know.

Kimberly Adams

Yeah, for sure. But I mean, I think we’re also at the point that more people are dying of emissions and pollution and consequences of climate change than whatever be harmed by nuclear. But yeah, it’s a fair debate. All right, next clip. Let’s hear it.

Janet Yellen

In the longer term, the United States remains the world’s largest, most dynamic and most innovative economy with the strongest financial system in the world. Fitch’s decision is puzzling in light of the economic strength we see in the United States. I strongly disagree with Fitch’s decision, and I believe it is entirely unwarranted.

Kai Ryssdal 

So that was the Secretary of the Treasury Janet Yellen the other day talking about the stupid decision by Fitch, one of the big three ratings agencies to downgrade the debt of the United States from triple A to double A plus it was something that Fitch had warned about this past spring. And and they finally pulled the trigger as it were, this week. Couple of things. Number one, for as much respect as I have for Secretary Yellen and her career in government and her policy and economic acumen, none of what she said speaks to what Fitch actually cited as the reasons for the downgrade, right? The American economy is strong Fitch actually said that, but they also said number one, we’re not paying attention to the long-term financial harms that are happening because of our fiscal mismanagement. Number one, right? We like to spend money, we don’t like to collect money, we have a great imbalance, but also number two, our political dysfunction, which is to say the Congress of the United States is deeply, deeply dysfunctional, and cannot manage this economy. The one the one flaw in Fitch’s logic, if you’ll permit me a brief editorial comment is that back in the spring when they said, hey, look out, we’re gonna downgrade you unless you fix in part, this debt limit problem. And then they fix the debt limit problem. And then they downgrade it anyway, that makes the downgrade ring a little bit hollow. But this is now the second big rating agency granted over like 12 years to downgrade the United States. And while the costs will be minimal, something like a billion dollars, which I understand that’s real money. But in the grand scheme of things, it’s not real money at the government’s getting right. It is a further warning that our inability, and by our, I mean Congress’s inability and unwillingness to make the hard decisions that will be required to actually manage this economy sustainably are going to hurt us. So that was the news. And that’s what Secretary Yellen said. And that’s what I think about this.

Kimberly Adams 

So about the debt limit deal, though. Yeah. I actually think they’re kind of valid with that, because what was the deal? Right there they place? top line, not budget numbers, right? They said part part of the deal was here are going to be the numbers that we’re going to use when it comes time to do these appropriations bills. And they agreed, or at least the people who are the leaders of Congress agreed. But now here we are in the appropriations process. And House Republicans in particular are like, Nah, man, that doesn’t work for us. I’ll throw in. So yes, there was a deal. But the deal in itself, in some ways embodies what Fitch was saying that there is this dysfunction. So even when they come to a deal, it still isn’t really a deal.

Kai Ryssdal 

Totally fair. And we have to to be even more fair, point the finger where it belongs here on people backing out of that deal, and that is Republicans in the House of Representatives, right. Who said no, no, no. Kevin McCarthy, we don’t care what you said. We’re going to spend a less actually than you want us to spend and then you agreed to spend with White House and and the Senate, the Senate came in and did exactly what the deal said. And Republicans in Congress said no, we’re not doing that. So, yeah. Okay. We do have one more, yes, here we go.

Kathy Hochul

We also have this unprecedent influx of infant individuals arriving in New York, all of them legally seeking asylum. They’re eager to work. They want to work. They came here in search of work, and a new future, and they can become part of our economy and part of our communities.

Kimberly Adams 

That was New York Governor Kathy Hochul, at a press conference in Brooklyn, Hochul and other New York politicians, notably, Democrats, were calling on the federal government to fast track work permits for all these migrants who’ve come to the state in the last year. And I use the word come the phrase come to the state very generously, because in some circumstances, they have been taken there and bust. They’re under dubious circumstances. But there’s definitely some people, you know, coming on their own. But there are so many people, the communities are being overwhelmed. And there are opportunities for people to work. I think, in the Politico article that we’ll have linked on the show notes they were talking about the Farm Bureau was saying, “Yes, we are ready to hire these folks, you know if they can get their work visas.” And so what they want is to sort of broaden this program, that temporary protected status is what it’s called, they want to expand the Temporary Protected Status, which I’m reading from Politico here, “a program that allows certain immigrants to work legally in the US.” And they want that to be expanded to more countries because right now, Temporary Protected Status tends to be limited to places that are in the midst of a crisis. So we had Temporary Protective Status for people coming from Afghanistan when the Taliban took over and a couple of other places you know, where there were wars or something like that and that gave an opportunity for people to not have to wait as long to apply for asylum or to apply for work visas. And, yeah, there are jobs, apparently for them. And I’m imagining these folks want to work. But you know, we have a very broken immigration system. And that was the Biden administration’s response to this call. They said, you know, we’re doing what we can, Congress has to fix immigration. And, you know, I feel like that’s how the conversation always it.

Kai Ryssdal 

You are literally preaching to the choir, we should give a shout out actually to Jasmine Garsd at NPR has been doing some great stories out in New York, about the migrant crisis there and what it actually means so go listen, if you haven’t.

Kimberly Adams

Well that is, are we good? Is that it for us today? You want to do one more? One more?

Kai Ryssdal 

Let’s do one more. We got that.

Kimbelry Adams

Yeah, let’s do one more.

Journey

[Singing] The wheel in the sky keeps on turning. I don’t know where I’ll be tomorrow. The wheel in the sky keeps on turning.

Kai Ryssdal 

All right, well, there you go. That’s a little Journey on a Thursday afternoon. It’s from Stephanie Hughes’s piece on Marketplace earlier this week about asking economists, Stephanie did, about what song fits this economic moment. She was doing a story about the labor market and where this economy is going, and nobody really knows and an economist at Morgan Stanley picked “Wheel in the Sky,” because here’s the quote, “the economy is continuing to push forward.” So there you have it. Here’s what we want to do, just to get a little audience involvement here. What song do you think is the economic anthem of the moment? 508-U-B-SMART is how you get a hold of us. Write to us and makemesmart@marketplace.org. And we’ll we’ll do a little thing on it. Because we can. It’s our podcast.

Kimberly Adams

Yeah, we can. I have to think about that question. That’s a tough one.

Kai Ryssdal

Yeah, no, that’s fine. I got mine. I got mine.

Kimberly Adams

I’ll be interested to hear yours when you’re ready. Oh, do you want to share now or wait?

Kai Ryssdal

All in due time. I do not.

Kimberly Adams

Okay, sure. All right, that is it for us today. We are going to be back tomorrow with Economics on Tap. You can join us on the YouTube live stream at 3:30 Pacific time, 6:30 Eastern. And please don’t forget to sign up for our weekly newsletter. If you do, you’ll be able to get a glimpse of what the team is reading this week. And Kai and I will let you in on what we’re planning to drink for happy hour the next day. If we’ve decided at that point. You can sign up at marketplace.org/newsletter. Sometimes it’s a last minute decision.

Kai Ryssdal 

That’s literally what I said to Ellen when she texted me she’s like, like “what are you drinking?” I’m like I don’t know. gametime decision. Make me smart is produced by Courtney Bergsieker. Today’s episode was engineered by Juan Carlos Torrado. Ella Rolfes, the aforementioned Ellen Rolfes writes our newsletter. Our intern is Niloufar Shahbandi.

Kimberly Adams 

Marissa Cabrera is our senior producer. Bridget Bodnar is the director of podcasts. And Francesca Levy is the executive director of Digital. I usually have to plan in advance. I often have to get ingredients.

Kai Ryssdal 

I know you need ingredients and this and that and I just you know.

Kimberly Adams

Gotta be fancy.

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