Financial correspondent and podcast host Felix Salmon joined co-hosts VV Ganeshananthan and Whitney Terrell to discuss the debt ceiling crisis and his new book, “The Phoenix Economy: Work, Life, and Discuss Money in the New Not Normal.” In the podcast, Salmon highlighted the political and financial implications of the current debt ceiling crisis and compared it to previous debt ceiling struggles. He also discussed the underestimated and unintended economic impacts of the COVID-19 pandemic, such as improving the economic health of low-income Americans and redistributing populations from big cities. Salmon read excerpts from his book and explained how the pandemic continues to change our economic lives.
Salmon talked about the influx of capital into the working class and how it shows that we can influence the economic quality of life of low-income people if we want to. He noted that the relationship between labor and capital has become much more equal for the first time during the pandemic. Poor people were able to quit their jobs and find new, higher-paying jobs, form unions, and demand higher wages. This increased the power of the poor and empowered the working class to demand better and better working conditions and payment.
Salmon also addressed the issues of immigration and interest rates. He explained that immigration has a peculiar positive effect on both labor and capital, and historically, the more immigrants Americans have, the better the economy and the better the workers’ lives. As for interest rates, their purpose is to cool demand in the economy. Salmon noted that layoffs initially appear primarily in the top half of the income distribution, but they eventually show up as a reduction in demand for workers in the bottom half of the income distribution.
The podcast also discussed Republican labor requirements for Medicaid and various states seeking to loosen labor regulations for minors. Salmon emphasized that while encouraging children to work has worked well for certain segments of the electorate, the true exploitation of minors who are forced to work and sometimes not paid at all should always be illegal.
If the US defaults on the debt ceiling, Salmon predicts that the stock market will crash, the bond market will be in turmoil, and the US may further downgrade the S&P debt rating like in 2011.