American Experiment Podcast
Why are so many Minnesota high school graduates unable to read or do math at grade level? Does Tim Walz actually think he's going to be the next president of the United States? And why does he keep swearing so much?
These are the kinds of hard-hitting questions we get into every week on the American Experiment Podcast, where we unpack the week's biggest stories, interview Minnesota's movers and shakers, and "stop the tape" on clips of our state's most ridiculous elected officials.
New episodes drop every Tuesday afternoon and are available on every major podcasting platform.
American Experiment Podcast
Episode 139 - Klobuchar's SOFT-on-FRAUD Record, EXPOSED
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Sen. Klobuchar's record: SEE no fraud, HEAR no fraud, SAY no fraud...
Check out the American Experiment Podcast!
This week we’re investigating Senator Klobuchar’s questionable track record on fraud, wondering why Minnesota taxpayers just paid for a convicted murderer’s sex change operation, and revealing our state’s unbelievably high ranking on welfare spending. On the back half, we sit down with economist John Phelan to hear about his 41-step affordability agenda for Minnesota.
QOTW: Do you think Minnesotans should have to pay for a convicted criminal's sex change surgery?!
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Welcome back to the American Experiment Podcast. This week we're investigating Senator Klobuchar's questionable track record on fraud, wondering why Minnesotan taxpayers just paid for a convicted murderer's sex change operation, and revealing our state's unbelievably high ranking on welfare spending. On the back half, we sit down with economist John Phelan to hear about his 41-step affordability agenda for Minnesota.
SPEAKER_00Let's dive in.
SPEAKER_02If this is your first time joining us, welcome. Things are pretty crazy here in Minnesota, and we try to bring you a more sane perspective and take on things. As always, I am Grace Keating this week, joined by Isaac Felgersdyke.
SPEAKER_00Hello, everyone. Happy to be on the side of the camera. The lights truly are brighter than I thought they would be.
SPEAKER_02It is it is blinding. It is blinding over here on this side. Yes, Catherine is out this week. We hope she enjoys a few days away from the office. And our producer Isaac has graciously agreed to step in. So yeah, glad to have you with us.
SPEAKER_00Happy to be here. And like always, we have an audience question. So be sure to like and subscribe while you are down there commenting. Um, but this week's audience question, which will make sense in a minute, is should Minnesota taxpayers pay for sex change operations for convicted criminals? It's a real stumper.
SPEAKER_02It's a head scratcher.
SPEAKER_00It really is.
SPEAKER_02Not gonna lie. I'm hoping to see a lot of common sense and logic in the comment section.
SPEAKER_00You would hope so.
SPEAKER_02You never know. So do it hope.
SPEAKER_00So take your time and think about it. Uh, and then head down to the comment section and let us know.
SPEAKER_02Well, um, you know, as a reminder, today is, of course, primary day. If you have not voted yet, you know, go out, do your civic duty as a Minnesotan, as an American, participate in this incredible voting process that we are so lucky to have here in America. Isaac, have you voted yet?
SPEAKER_00I by the time this episode airs, I will have voted. Um, I am an election day voter. As much as people say you should vote early, I I love going on election day. And it's so fun. Like I actually love voting. It's it's really fun, actually.
SPEAKER_02I totally agree. There is something special about going in on actual election day and having that, you know, that there's a sense of community that arises from that. And you know, now we've got this, you know, what like 47-day early voting window. It's like the longest in the country.
SPEAKER_03Yep.
SPEAKER_02No one in our state likes it or agrees with it. You know, you tell me why we still have that. But it does kind of take away some of the excitement, the magic of going in on election day, Mike.
SPEAKER_00Yeah, you go in, you get your ballot, you get your, you fill it out, you get your sticker. It's super fun.
SPEAKER_02Oh my gosh. Also, let us know in the comments. Do you take the I voted sticker? What do you do with your i voted sticker? Uh, there's some very intense uh feelings in this office around whether you keep the sticker, whether you throw it away, whether you wear it the rest of the day. Is it a point of pride or is it bragging? Yeah, exactly. Please let us know. I'm dying to know. Well, let's go into our first topic of the day. Of course, election season is heating up. And as it heats up, you're seeing a lot of generally left-leaning politicians, I'd say, in Minnesota who are trying to rebrand themselves as tough on fraud. I mean, it's no surprise that Minnesota's massive fraud scandal is top of mind for voters this year. And uh, so you've seen, you know, for example, our attorney general Keith Ellison definitely try to reposition himself as this tough on fraud guy.
SPEAKER_00Good luck, big guy.
SPEAKER_02It's not going so well, I would say, not aging super great. He was just in an interview with um, I think it was KSTP, and they had given some numbers to him on, you know, the the amount of money reclaimed from fraudsters. And he argued with them on the on the figures that they had, and for like two minutes, and then finally admitted that he had no idea what the actual numbers were, which was pretty hilarious. Um you have to laugh, or else they'll cry, you know.
SPEAKER_00Exactly. The dude was just like, well, that doesn't make me sound super good. So I'm gonna I'm just gonna say that's not true. And he's like, I I don't actually know, but like it doesn't sound good, so unbelievable.
SPEAKER_02Not ideal. No. Um so definitely not a rebrand that's overly successful. I would say don't think Minnesota voters are buying into the idea that he's this, you know, tough on fraud crime fighting guy. Um, but he's obviously not the only one doing it. Senator Amy Klobuchar is, I think, trying to position herself in that way as well. Uh, at last week's Farm Fest debate, the gubernatorial candidates had been asked, you know, what they would do if elected uh in response to Minnesota's fraud scandal. And Klobuchar answered by saying, quote, the people of Minnesota were ripped off. This was wrong, and it should have been caught earlier. So, not like the strongest statement in my opinion. You know, I agree with it, certainly. Um like a little milk toast. Yeah, exactly. Yeah.
SPEAKER_00She couldn't even say who we're being ripped off by. She couldn't even go as far as to say, like, oh, this is why it's wrong, or this is like how it happened. She can't even, she can't even go there. She just has to be like, yeah, fraud's bad. Okay, great. Thank you for your deep analysis.
SPEAKER_02That's a great point. She's not saying, you know, it's bad because of X, Y, or Z, or we should have done X, Y, or Z differently, because it is her party that's been in office this whole time. So how is she going to turn around and you know start criticizing? Well, and you've seen and you've seen very, I mean, Peg Peggy Flanagan have a similar, a similar issue in in her uh in her run. Um, you know, how do you suddenly turn around and criticize, you know, the governor who you've been supporting? Are you who you've been besties with uh for years?
SPEAKER_00Yeah, who you've buddied up with and said they're doing so well, they're such a public servant, they're doing such a good job. Um, who even Amy Clomishar, when Walls first re-announced his re-election campaign, got immediately got behind on Twitter saying, We need to elect Governor Walls again, he's such a good public servant, to just turn around and be like, Okay, well, why are you running in this place then, Amy? Like, tell us why. Like, why do you think it is that you're here and he isn't?
SPEAKER_02Yeah, that's a great point. What's worse, maybe, than that very milk toast answer that she gave at Farmfest is her record speaking, or actually not speaking, on Minnesota's fraud scandal. We've we had a couple people here at American Experiment go back and look at her press releases. Between January 20th, 2022, so that was when the FBI first rated Feeding Our Futures offices, between then and then December 31st, 2025, right before she launched her campaign for governor, Amy Klobuchar issued over a thousand press releases, one thousand eighty-five, and not a single one of them addressed the Minnesota fraud scandal. The closest she came to acknowledging it was commenting on I think Joe Thompson's uh resignation.
SPEAKER_00In which she blamed Trump. Oh, presumably or blamed the fact that Trump was putting pressure on the office, you know, to investigate the ice shootings a certain way and just came around to blaming Trump. Not fraud, not Governor Wallace, not any of that situation.
SPEAKER_02Not calling for reform or help or or even apologizing, as you know, she's supposed to be our representation in DC, the people of Minnesota. And she should to a certain extent, you know, kind of be a steward of these federal funds that were, you know, funneled into Minnesota and then lost to fraud. Any sense of accountability, any sense of, you know, we're gonna do better, I'm gonna make sure this stuff is going to the right place, an apology to Minnesota taxpayers or American taxpayers for that matter. Nothing. And the timeline on this is so funny. We break it down piece by piece again at americanexperiment.org. But for example, when the FBI first rated Feeding Your Futures offices, she that week was calling for protected status for immigrants from El Salvador, Guatemala, Honduras, and Nicaragua. Uh, when the Department of Justice indicted Amy Bach and 46 others, which was the largest fraud indictment in Minnesota history at the time, she was releasing a statement on resuming full immigrant visa services in Havana. And when Amy Bach was found guilty, she was calling on Trump to reverse the illegal firing of FTC commissioners. So clearly she's always been really tough on fraud. She's been, you know, fighting out there in the trenches. Yeah.
SPEAKER_00Yeah, exactly. Yeah. It's like she saw what was going on and then was like teasing Minnesotans or like playing with Minnesotans of be like, yeah, I see the biggest issue that everyone else is talking about, but I'm gonna go ahead and issue my press statement on uh immigrants from El Salvador instead.
SPEAKER_02It is, yeah.
SPEAKER_00Come on. It would have even been better just to not put out a presser that day. Just go silent, just go radio silent for a day. But instead, you had to just like point it, like uh uh just so frustrating how she sees it, clearly sees what's going on, and can't even have the nerve to comment on it.
SPEAKER_02In answer to that same question at Farmfest that she was responding to, she also claimed that she was the one who recommended U.S. attorney Andy Luger, who was the prosecutor who helped expose the fraud in Minnesota early on. Uh, I you know, I guess again, to position herself as someone who's, you know, been on top of the fraud scandal the whole time, which is pretty funny because President Biden had nominated or had announced Luger's nomination on November 12th, 2021. So like two full months before the FBI raids even happened. Uh so if she even did have something to do with that pick, uh it had absolutely nothing to do with the fraud scandal. Oh gosh. Which again, it's like I just don't say anything then. If if you if what the examples you're coming up with are so weak and so reaching, just don't say anything, you know?
SPEAKER_00Totally. I know this whole thing reminds me so much of the 2024 election when Kamala replaced Joe Biden because they kicked Joe Biden off the ballot.
SPEAKER_02Is it is an interesting parallel there, yeah.
SPEAKER_00Yeah, because Kamala had to run this weird line, walk this really fine line of, you know, it's not Joe Biden's fault because, you know, he did such a great job because I was on his team. And it's also kind of Joe Biden's fault because I'm a little different and like I need to be able to like show some daylight between me and him. It's the exact same situation with Amy and even Peggy and Governor Walsh. Is that they have to walk this super fine line of being like, yeah, we need reform for fraud. We need to do the things that you know the previous guy wasn't doing, but also the previous guy was doing such a good job. Like, I endorsed him, I'm buddy buddies with him. I was on the in I was in the same office as him in Peggy's case. And so it's just like they're trying to walk this line of like of like, no, the fraud's bad, obviously, but like I can't say whose fault it was, or I can't say who was in charge or who the buck stopped with in Governor Walls' own words. You know, I can't blame Governor Walls because then that would look bad on me for being on Governor Walls' quote-unquote team. Instead of just saying what everyone's thinking and being like, the only reason that you two are on the ballot is because, or Amy specifically is on the ballot, is because Governor Walls got ousted because this was his fault. She can't even go far as to say that. It's it's unbelievable.
SPEAKER_02It's interesting too. I think it also cements her truly as you know, I don't remember who coined this term, but you know, the senator of small things. You look at her track record, what she's done in Congress. And um, especially looking at these press releases. I mean, as this fraud scandal is unfolding in Minnesota, as everyone is so upset over their money, you know, being ripped away from them. She's talking about immigration statuses and the FTC commissioners and and you know, pool drains and all this stuff. And not, I mean, no, not even in the ballpark of the issues that Minnesotans actually care about. I do think it is very telling that as she's trying to rebrand and reposition yourself as tough on fraud, this is the best she can come up with.
SPEAKER_00Totally. Well, in kind of the same vein as rebranding, uh, we have a very interesting story here. You'll see in a second. Um, as you all know, Minnesota faces a massive budget deficit. Uh, it's projected to be $1 billion by 2029, thanks in large part, if not all, to the 2023 session, the off-the-cliff session that we've wrote extensively about at americanexperiment.org. Um, this week, John Phelan has a piece on American Experiment um that talks about some of the things that our taxpayer dollars are going to. Um, so he says the big question in November's election, obviously, is whether this deficit is going to be closed by spending cuts or tax hikes or some kind of combination of the two. Um, obviously, I'm on team uh spending cuts, not sure about anyone else. Yeah, I think taxes are high enough for kind of think that we're being taxed enough. But along those lines, when we look at um what we should be cutting spending from, it's important to look at what we're spending our tax dollars on in the first place. And so enter one, Bradley Servio. He is a man spending life in prison for beating someone to death with a hammer. And then setting the man's house on fire.
SPEAKER_02Ah.
SPEAKER_00Just to put it.
SPEAKER_02Just in terms of ways to die, death by hammer. That I that is so high at the top of my list of ones I've done.
SPEAKER_00Yeah, that has to be a brutal way to go.
SPEAKER_02I mean, there's there's great ones, but that is rough.
SPEAKER_00I mean, it's like, yeah, it's disgusting. So obviously, this guy is not a very good guy. Uh, just not a man not mentally well either. Right, not a man of high standing character, you know. Um, so yeah, like I said, spending life in prison. Well, he is spending life in a different prison. As of 2023, he is spending his life in the Shakapee women's prison. That's right. Mr. Bradley Servio has decided that he is a woman. See the see the rebranding tie that I did to be. Thank you. That was he bring branded himself. Admirable. What can I say? Yes, uh, thanks to Governor Walls' Department of Corrections uh transgender policy as of 2020 that was put in place in 2023. Mr. Sevillo is was transferred to Shakpe Women's Prison in that same year because he now identifies as a woman.
SPEAKER_02Identifies. Key words identifies, you know, no surgeries done, which even at that point I really think it's questionable to people moving you to another facility.
SPEAKER_00Yep.
SPEAKER_02But nothing materially on this man had changed other than the fact that he now wanted to check a box that said woman.
SPEAKER_00That said he is a woman.
SPEAKER_02Yeah.
SPEAKER_00No. And so they transferred him almost immediately. Um, well, according to it gets even better, actually. According to a 2024 piece by R Redux, I think I'm saying that right. He was showering with other female in inmates, causing them to feel, quote, violated, obviously. Uh. Who wouldn't feel violated in that situation. I mean, you're literally locked in the same shower room as this man. Like reading this article, so reading this article, I didn't include this in our in our little notes, but the the shower room, there's only one shower that these inmates can use. So this man, who was at the time, we'll get to it, an intact man.
SPEAKER_02Like materially, materially still a man.
SPEAKER_00Correct. Evidently, very, very obviously a man is showering with a bunch of female inmates locked in their shower. Like, there's no way for them to just like leave if they feel uncomfortable. Like they couldn't be like, oh, taking a shower, and then this man walks in and they're like, Oh, I feel uncomfortable, I'm gonna leave. No, it's locked. They they had to be in there.
SPEAKER_02That's sick. That is sick. Gross. That's sick.
SPEAKER_00So in this piece, one of the inmates is quoted saying, quote, This man is not transgender. No surgery has been done whatsoever. He is fully a man and still has a man's body part attached to him. He acts like a man, sounds like a man, and behaves like a man. It's in a women's prison.
SPEAKER_02So illogical. It is such a violation. And again, again, where are the feminists? Where whatever happened to listen to all women, believe all women, you know, if if your lived experience is, you know, you don't want to be sharing a shower with a guy in your prison. Um, you know, we should be protecting those women, right? Isn't that fair? No, they're they're nowhere to be found. The trans issue, it just completely flows the opposite direction.
SPEAKER_00Yeah, and we talk all the time about 80-20 issues. This has to be near the top. Yeah. I mean, it it has to be a 90-10, 95-5 issue. Who's out here saying, like, yeah, we should be, we should let a convicted murderer say, I'm a woman, and then go shower with a bunch of women in a women's only prison? Like, who is like, yeah, actually, that's that's I voted for that. Who's who's vote who thinks that's okay? I don't even, I can't even place my finger on a demographic that would be like, yep.
SPEAKER_02It's the new like transgender correctional policy, right? This is another part of the wave of legislation that was passed in 23-24. Uh, you know, same era when the new Minnesota state flag was passed, and you've got this whole wave of legislation that was pushed through that most Minnesotans, you know, don't agree with, feel like they never had a voice in. You know, their state's flag is different, and you've got these insane policies that they don't want, they don't like. And uh, I think it really contributes to the sense of voicelessness that so many Minnesotans have right now.
SPEAKER_00100%. Well, we have some new news on this front.
SPEAKER_02We haven't even gotten to the craziest part yet, in my opinion.
SPEAKER_00We haven't even gotten to the craziest part. Well, this inmate can rest easy. One of her one piece of her statement is now changed. We can report that Mr. Bradley Servio has now had quote bottom surgery.
SPEAKER_02Mass will have.
SPEAKER_00Awesome. And the even worse news is that you, me, and our lovely viewers all paid for it. Yes, that is right. This uh convicted murderer had bottom surgery that was paid for by Minnesota taxpayers on the Minnesota Taxpayer Dime.
SPEAKER_02State funded sex change operation. Who was already in a women's person.
SPEAKER_00Correct. Which, if you just recall from the not to go back to the 2024 election again, but it was so insane that even Kamala was saying, no, this isn't happening.
SPEAKER_02Yes, everything, everything that the left says is oh, you know, that's a bridge too far. That's not actually happening anywhere. Exaggerating. It always happens in Minnesota specifically, every single time.
SPEAKER_00Correct. And it even goes back to that WNBA uh segment that you guys talked about last week. A bunch of pushback to the whole, like, oh, what's a big deal? There aren't any biological men in the WMBA anyway. So what's the big deal? What you guys are just making this up.
SPEAKER_03Yeah.
SPEAKER_00Well, here's example 1A is in the 2024 election, Kamala thought this was so crazy that even she goes, No, it's not happening. It will never happen. That's so that's just a conservative talking point. Well, here in Minnesota, we paid for the $50,000 surgery. Yes, $50,000. You'll hear John Feeling uh later on in this episode, interviewed by Grace, say that he looked into it. It's anywhere between $50,000 and $80,000 for this surgery. So even if you go on the low end, say $50,000. And then John Feelon did some math here. Um, the average Minnesotan pays about $5,000 in state income tax annually. So let's assume the surgery costs $50,000, right? That would mean that 10 Minnesotans worked their entire year and every dollar of tax coming out of their paycheck went to this convicted murderer's sex change operation.
SPEAKER_02Typically, on an issue like this, this is the point where I would say you have to laugh, because if you don't laugh, you'll cry. And I'm not saying that this week because this is genuinely so sick and upsetting and frustrating. When you think about 80-20 issues, you're exactly right. This has to be at the top of the list. No Minnesotan should be reading this story, thinking that this is okay when you have fellow inmates saying, I'm not comfortable with this, I feel violated by this, I feel threatened by this, and no one is coming to help them. And you and I are then paying for it.
SPEAKER_00Correct. Yeah, it's even I would propose that even the fact or even the argument of like, oh, there should be insurance should cover these kind of sex change operations, or like, you know, uh minture or whatever, like public insurance should cover these kind of operations. Even that's an 80-20 issue of people being like, no, actually, we shouldn't, as taxpayers, like that's fine if you need to be on, you know, whatever government-funded insurance, but like we shouldn't be covering your sex change operation. Yeah, and then you go one step further, and it's a convicted murderer in prison, yeah, and we're covering his sex change operation. Yeah. Like, how is that's it's a nice, it's a 95 issue. It's a 95 issue for sure.
SPEAKER_02At what point is it a bridge too far?
SPEAKER_00Exactly. Exactly.
SPEAKER_02Uh well, just in case that wasn't enough bad news about how your hard-earned tax dollars are being used, we did want to cover how much Minnesota spends on welfare programs compared to other states. We just got some new data uh that Martha and Jolamoli was reporting on at americanexperiment.org. As you might have guessed, Minnesota is, of course, one of the most generous states in the entire country when it comes to a welfare system. You know, who would have guessed it? After adjusting for the number of people living in poverty, Minnesota spent more on welfare programs than 47 other states, with $47,000 spent per person. Even when casting a wider net in terms of how you look at this data, Minnesota spent $20,000 per person living below twice the federal poverty level, ranking fourth highest among the 50 states. Minnesota outpaced the national average of $12,000 by 40%. So again and again and again, we're always at the top, we're spending more, you know, we're more generous, all this stuff. Now, here's my question. I know you don't know the answer to this. If only two other states in the country spent more than Minnesota on their welfare systems, which two would you think it would be? Because I was gonna say California, and I'll just tell you right now that's not right.
SPEAKER_00I I did see this in our I saw this question in our notes, and I did see the answer later on, but I'll give you my initial thoughts. Is I guessed East Coast, and my first guess was Maine.
SPEAKER_02Right.
SPEAKER_00Because it's always, is always the very predominantly white female liberal states that are doing these crazy kind of things, more affluent areas. Exactly. So the ones that have the money to burn, and the ones that have like the oh, we have the extra couple bucks, like why not? So that was my guess is East Coast states, which I see was kind of close.
SPEAKER_02Yeah, you were basically spot on Massachusetts and Vermont.
SPEAKER_00It's always Vermont, isn't it? It is, isn't it?
SPEAKER_02The Bernie Sanders effect.
SPEAKER_00Yep.
SPEAKER_02Now, looking at government spending generally, zooming out a bit, not just on welfare, in 2024, which is the most recent year we had this data available, Minnesota spent $82 billion on general government activities. So that's welfare programs like Medicaid, cash assistance, and childcare, roads, education programs. Programs, police and fire protection, and other health care programs. That's about $14,000 per resident, and that's the 16th highest spending level nationwide.
SPEAKER_00Already insane amount.
SPEAKER_02Crazy. Crazy amount of money. Frankly, yeah. Both nationally and in Minnesota, public welfare was the top spending component. So that's not totally unusual. For every $100 spent, Minnesota allocated $31 to public welfare programs compared to just $20 for elementary and secondary education. Nationally, however, and this is where it gets a little weirder, public welfare surpassed elementary and secondary education by just two percentage points. So it's not that unusual for public welfare spending to get the bulk of a state's dollars. But the gap in Minnesota between public welfare spending and every other category is way wider than any other state.
SPEAKER_00Even coming from our educator in chief, Governor Walls. And it's not like we're not putting any money towards our education system. Lord knows that we're spending, we're throwing already way too many dollars at our schools and just hoping the problem fixes fixes itself.
SPEAKER_02Yeah.
SPEAKER_00But just the fact that it outpaces it by that much is kind of surprising me coming from, you know, Governor Walls, the teacher himself.
SPEAKER_02Yeah, it is interesting. We spent more on public welfare than we spent on our entire education system, including colleges and universities, which are typically left out of that kind of education spending calculation. That was not the case, again, nationally, suggesting that Minnesota could be prioritizing these means-tested welfare programs at the detriment of core public services like roads and education and infrastructure. So tying this all in with the budget issues that our state is facing that are rapidly approaching, public welfare spending has by far, and you have heard us say this again and again on the show, it has by far been our state's fastest growing expenditure category, more than quadrupling since 1990. Elementary and secondary education has grown by 168% over that same period.
SPEAKER_00That's no small number.
SPEAKER_02Crazy growth. Yeah. And like you said, it's not like we're not raising our spending on education, even though we probably shouldn't be. But that was still slightly over half as much as our public welfare spending grew. And some people, including our governor, certainly, would look at those stats and say, that's a great thing. You know, we're spending more than ever to help people, look at all the support we can give them. And I just disagree. I just disagree. Our goal as a state should not be to have more and more people every single year needing state assistance to get from day to day. Our goal should be to have people in Minnesota doing so well economically that they can support themselves without needing these public service welfare programs.
SPEAKER_00Absolutely correct. Um, it's exactly like our very own Bill Walsh, shout out, says all the time that Governor Walsh treats this like he's a salesman.
SPEAKER_03Yeah.
SPEAKER_00Like he, the only difference is we don't think Walsh is getting any commission out of this or any kickbacks. We don't think.
SPEAKER_03Well let's go.
SPEAKER_00Don't go, don't go. Parody, parody. Just joking. Um, but yeah, it's like it's almost as if the end game in Governor Walsh's mind here is that it would be an amazing thing if every person in Minnesota was on this uh welfare, was on was dependent on the state.
SPEAKER_02Yeah.
SPEAKER_00And it's it's just like it's like I said, Walsh, Walsh says is that like Walls celebrates this as if it's a good thing. The more people we have dependent on our state government, the better. The more people that rely on that government check every month is a good thing. Whereas if the other line of thought, and I think this is not to get into politics, but this is what's on the ballot in November is the other line of thought is no, we should be doing so well, like you said, Grace, that we don't need to be dependent on our state government. It's it's two very different lines of thought. And, you know, I I tend to think that one is more common sense than the other.
SPEAKER_02Yeah.
SPEAKER_00And I think a lot of us here listening to this podcast think the same way, but it's it's baffling how you can get to the conclusion that no, actually, the more people that are dependent so desperate and in such a hard situation that they need the state government, the more people in that situation is a good thing.
SPEAKER_02Right. Well, not only is it ideologically unwise, in my opinion, to be trending that way, but our budget can't handle it. This is a completely unsustainable path that we are on, even with how much our spending has already grown. It's still growing on this area of welfare programs. And that's where you get back to this idea of a ticking time bomb. Our budget has had these structural imbalances for years now. And so far, they've just been filling it in with cash reserves that had been untapped. And those are getting drained right now. So very, very quickly, we are going to be in a serious state of deficit. And then you're gonna be faced with that question you know, do you reduce spending or do you raise taxes? And they like you were saying, Isaac, I know which one I'd prefer.
SPEAKER_00Exactly. And I think that's kind of the theme of today's episode is you're gonna hear politicians very soon tell you that there's nothing from this budget that they can cut because it is all essential. It is all needed. Well, just keep these in mind as an example, as examples. The sex chain surgery on the taxpayer dollars, the over, you know, beyond uh welfare spending, the third, the third most of any state in the country. You know, keep those in mind when a politician looks you in the eye and says that, no, actually, we need your tax dollars because all these things are super important. When instead they could be looking at this budget and saying, yeah, actually, we're gonna cut those uh sex change surgeries. We're gonna cut some welfare spending for the people that don't actually need it and keep it only for the people that do need it. Because there is a sp there is a place for it. You know, it's great. We can help out some people that absolutely need it until they get back on their feet. That's that's not what our system is at right now. Absolutely not where our system is, and that is where it should be.
SPEAKER_02Yeah. No, and and anytime someone says that there's nothing that can be cut from the budget, go to golden turkeymn.com and read those past winners because it's just not true.
SPEAKER_00Crazy.
SPEAKER_02Now, all of that is kind of a great setup for our back half interview today with economist John Phelan, who is going to walk us through his affordability to make life in Minnesota, his affordability agenda to make our lives a little bit easier, make our cost of living a little bit lower. So stay tuned for that discussion. American Experiment is supported by thousands of individuals like you. To join the movement, go to www.americanexperiment.org and click the yellow donate button. From all of us here, thank you. We are so happy to be joined in studio today by John Phelan, one of our two economists here at Center of the American Experiment. Welcome to the show, John.
SPEAKER_01Thanks for having me. Pleasure to be here.
SPEAKER_02Well, originally we wanted to bring you on to discuss your piece in the uh, you know, affordability agenda that we've put out here at American Experiment. Before we get into that, though, you were just away out of town for a couple of weeks at sort of a fellowship over in Massachusetts, right? Tell us about that.
SPEAKER_01Yeah, so there's an organization called the American Institute of Economic Research, and they're a kind of think tank organization based out in Great Barrington, Massachusetts. And um, some of the work that I've done for the growth accounting stuff, so the American Experiment United States Tables, um I'm now using that data to try and see what state government can do in terms of policy to boost physical capital investment. Um so it's kind of intricate, you know, it's hardgoing econometric statistical work, and it's really good to go out there and work on it with other people and kind of bounce bounce it off people and get some ideas. So that's basically what I spent two weeks doing.
SPEAKER_02And so it's interesting because this is something that we've developed here through a Minnesota lens, of course, but you can take it and apply it to other states, right? That's kind of the model.
SPEAKER_01Absolutely, yeah. Um, so you've got these physical capital stocks uh for every state in America. Um, and they're the only estimates really of those. I mean, there's somebody else's estimates, I think mine are better, uh, to be honest. Um, but uh, you know, what you if you're gonna talk about policy, um, it's really good to be trying to be able to base it in something and have some kind of you know rigorous grounding in the data.
SPEAKER_02Yeah, and I think that it's so encouraging too to see think tanks across state lines cooperating on issues like this because so much of our work does overlap and we can learn from what you know what each other is doing. I certainly say that in the in the com space for sure.
SPEAKER_01Yeah, and I don't think we should be shy of tooting our own horn a little bit, you know. As a as an organization, we have an incredible presence and profile among other organizations. You know, people come to us for these things, you know. This, for example, I was approached um at an SPN year or so ago um and asked to apply for this, you know. And so, and other people have similar things, you know, in other fields. So, you know, we do well, you know, we're well respected in the in this in the space, yeah.
SPEAKER_02Well, the reason we wanted to bring you on today, we've got this new report uh out recently here at American Experiment titled Supplying Hope and Demanding Real Affordability. It is our affordability agenda. If you have not read this report yet that I'm holding up right now, you can see it at americanexperiment.org slash events. And of course, this was definitely a group effort among our policy fellows here at American Experiment. You know, we had, I know Martha and Jola Moly and Matt Dean and Bill Glaun and Katrin Wigfall have all contributed on some level. I think we've even had some of them on the show to talk about their pieces. Um, but this affordability agenda really has been your baby. What was kind of the driving vision behind this agenda?
SPEAKER_01Well, the word affordability is thrown around all over the place now in kind of political discourse, particularly uh around the election as a question everyone's trying to become, you know, the standard bearer of affordability. Um it's kind of difficult, you know. I mean, if you look back over the and really you're talking about prices and inflation, I think, in a lot of respects. You know, if we look back over the last, say, 40 years, you know, you had a big spike in inflation in the late 70s, early 80s, that was brought down by Paul Volcker with incredibly high interest rates and really tight monetary policy. Um, but you know, it it worked, and for a long time uh in the US and elsewhere in the world that followed a similar kind of policy, we had low inflation. And then you get to COVID-19 and suddenly you know the lid blows off the whole thing. Um, and you have this huge surge in consumer prices, uh, which peaked at something like nine percent um under Joe Biden. And so that really is squeezing a lot of people. Um, you know, people are getting to, you know, that so you go through Walmart, and I know people who are in this situation, you go through Walmart, you fill up your basket, and you get to the checkout, and you're in a situation where you have to put stuff back because you just can't afford it. Um, and so that's really kind of you know, squeezing a lot of people. That's you know, one aspect of it. Um but there's not really much that the state government can do about that. You know, that's to a large extent, the Federal Reserve is responsible for that. The Treasury is responsible for that, the Federal Treasury. Um situation that we have at the moment where um we are to some extent printing money to keep Treasury bond yields down, um, so that you know exacerbates these issues, Fed and the Treasury working hand in glove. But there's other issues as well that are kind of a bit more approximate. So you're talking about things like housing, that's a big issue. So when people talk about affordability, there's the general kind of price level thing, and there's there's a specific aspect to it. So um you look at particular issues, and the report covers housing, healthcare, people are really worried about the cost of healthcare. And these are things which aren't necessarily driven by the Federal Reserve, you know. I mean, these things are, you know, kind of expensive. And what you look at, anybody across America probably will tell you their health is their healthcare is expensive. Anybody in America will tell you that their housing is expensive. The question is, why are they so much more expensive here in Minnesota? So it's not the absolute level that we're trying to explain, it's the difference. And if you look at housing, it's a great example, actually. You know, uh when you look at the famous example of the house in Hugo uh versus the house in uh Hudson, Wisconsin, and they're much more expensive uh in Minnesota than it is in Wisconsin, and there's no real reason for that except for state and local government policy. So there's actually other things going on here. So the the affordability thing, partly it's the Federal Reserve uh blowing the lot of inflation a couple of years ago, but to some extent that's unmassed these underlying problems, which are supply-side problems. And very often uh what you have in government is that they see these issues, so they see these expensive things, and it's a question of what do we do about these things? And there are two very different approaches to something like housing, for example. And what I wanted to do with this report um is to put forward, you know, okay, this is a real problem that's affecting a lot of people in the state. There are basically two opposed solutions to it, one of which I'd argue is no solution whatsoever. And I wanted to put our report forward to say, this is what we should be doing. This is our solution, this is the real solution to the problem.
SPEAKER_02And it's incredible how many solutions are laid out in this report. I think it's 41, more than 40 concrete steps that you guys have laid out, which I appreciate because I think it's so easy for people on both sides of the aisle to just kind of, yeah, complain about the problem, say it's an issue, affordability is top of mind for everyone, but for someone, and especially that should be the role of a think tank, certainly, to say, yes, this is a problem, and here are the solutions. And you're exactly right that there are two very distinctly different approaches to any kind of affordability or cost of living issue. Uh, generally on the left, I think you see them uh wanting to sort of just throw the money at the problem and subsidize everything. Why, as an economist, would you say that that side doesn't work?
SPEAKER_01Well, one of the things I think that's timely about this report is a a year or maybe two years ago now, a book came out called Abundance by a couple of guys called Klein and Thompson. Now, these guys are left of center. Um, and so they are they generally kind of on the other side of a lot of dispute, a lot of these issues. But what they did is they looked at, and there's a great quote in their book, and I think I can't remember if I left it in the report. But they said if you look at a state like California, it's been governed from top to bottom by Democrats for years. And Klein and Thompson, who are, like I say, men of the left, they say, you know, Democrats should be able to point to California and say, if you elect us, we will run the country like we run California.
SPEAKER_03Yeah.
SPEAKER_01Instead, Republicans point to California and say, if you elect them, they will run the country like they run California. And Klein and Thompson really say they've got a point, you know, and they list all these various things, energy, infrastructure, housing, where you just can't get things done in blue states. So that's why you've got all the economic growth is in red states, all the population growth is in red states, and that's happening because, to some extent, to a very large extent, I think, because they're pursuing very different economic models. And so what you've got when you've got a situation like housing, for example, um they argue that their book is called Abundance because they say if something's expensive, get more of it. To some extent, it's a supply side thing. And I have to say, you know, to some extent the book is the left discovering supply-side economics 50 years after everybody else did, um which is welcome, you know. But they make the point that if you if you're short of something, if the prices are high, because prices aren't the problems, prices are the signals. Prices are telling you there's a problem, prices are telling you there's a mismatch of supply and demand, and that something needs to shift if you want to make the problem go away. And so, really, what uh they do in their book Abundance is they talk about that's what we do in our report. You know, I'm completely aligned with them on uh these kinds of issues. The other alternative is the per uh the alternative of tax credits and subsidies, uh, which is a kind of left alternative. Um, and really Klein and Thompson are fighting a kind of civil war on the left, and abundance is their attempt or their shot in that war. But what the left talks about, and you see it a lot here in Minnesota, their solution with affordable housing, for example, just to throw more money at the issue. Now, that doesn't make anything more affordable. That lowers not one single price. All it does is it transfers the cost to the taxpayers. Now we're already some of the most heavily taxed citizens in the United States. So if your solution to a high price is not to try and bring the price down by creating more stuff, but just to throw more taxpayers' money at it, then you exacerbate so many of the problems that have got you into this situation in the first place.
SPEAKER_02Aaron Powell And then you zoom out and then you haven't made their lives any more affordable because you haven't exactly lowered the cost of housing, but you've given them an additional tax burden. So it might look on the surface like they've improved housing costs, but they're they're getting hit with it elsewhere.
SPEAKER_01I'll give you an example from uh Britain, for example. There's uh uh a thing they have there called housing credit, which is essentially just a straight housing subsidy. So if you live in London, for example, and your rent is your income has got to be in a very narrow band. If it's way low, you don't get it. If it's kind of above a small amount, you don't get it. There's this kind of sweet spot which is just above the threshold. Um but this housing credit, money goes to the renter who then pays it in rent to the landlord. And now all the research on this, and it's the same in the US, shows that the only person who benefits from this is the landlord. So in the case of London and uh the housing credit uh in Britain, for example, the only people who benefit from this are, you know, Russians, Arabs, and people abroad who are piling into, you know, Russia uh London real estate like a reserve currency almost. Um yeah, it's incredible. It's the same thing here, though. I mean, if if you're a landlord, you know, and people can't afford your uh your properties, you have to lower the price. But if somebody steps in, you know, some government official steps in and gives someone the money, they give it to you and you make out like a bandit. The only person who gets screwed is a taxpayer.
SPEAKER_02Now, one of the areas covered in the report, it's it's a wide range, but one of the biggest is spending and taxes. And I know you do spend some time specifically on property taxes, which has been a huge area of concern for people in Minnesota. I mean, you're hearing stories of people who have their, you know, property tax burden doubled or even tripled. I mean, and it's this explosive growth is so unsustainable. And the stories are heartbreaking, especially for people on, you know, on fixed incomes who just have no wiggle room in their budgets. First of all, just zooming out, what is driving that growth? Like, I like how are property taxes even calculated at a very base level?
SPEAKER_01Okay, well, the first thing to say is that they are not driven by increases in your property value. That is the great myth property tax. So the idea that you get very often is uh, and I saw I saw somebody who's on the right say this on uh on Twitter yesterday. They say, Oh, the reason your property tax has gone up is because the uh how the value of your house went up. It's nonsense. That's not what happens. Uh what happens is the local authority decides we want to spend X next year, and then they work back from that. So they they just kind of reverse engineer the whole thing. So they decide what they want to spend, they set their budget, and then they calculate, you know, all the various things, what your mill rate needs to be, what your other rate needs to be. It's all very opaque, and that's by design. And basically, it all is designed to kind of explain, you know, why it is that these things go up. But really, they're all driven by the decisions. So this is why, and you see this, you know, every report you'll see about property tax hikes, no one ever says actually, the people who are hike doing the hiking, oh, it's because your uh your property value went up. That's the great myth. They all say it's because of inflation, it's because of unfunded mandates, it's because of X, Y, Z. Um, but no one actually says it's because your your uh your property value went up. It's basically because the spending's gone up. That's the problem. The problem with the property tax is not the value of your house. The problem with the property tax is the local government spending.
SPEAKER_02And certainly some degree of local government spending is driven up by, you know, just regular inflation. But there has to be a huge other chunk of that that is completely unnecessary. It said he's spending on nonsense, right?
SPEAKER_01Yeah, I mean, if you look at uh, you know, so the Twin Cities, for example, um, and I've given a couple of examples on our website. St. Paul was hiring, I think it was something like a diversity employees, two and two, two employees on wages that were higher than the median household income for Ramsey County. Um, you know, I mean what's the point of that? It's garbage. Yeah, these are non-jobs for non-people, really. Um, and you know, people are getting screwed to pay for this. Um, if you look at, you know, you see the same thing in Minneapolis, go through their budget and look at the money that's spent on nonsense. Um, and you can see this if you go all the way through. This is not the biggest driver, but it's part of it. Um, other things are things like unfunded mandates from the state government. And we, you know, you get state government, they like to run around saying, hey, look, look at this wonderful stuff we just passed. Isn't it great? Aren't we, you know, beautiful, bounteous, virtuous people giving you all this stuff? But they don't send any money to pay for it. So they get to run around telling you how great they are and campaigning for re-election and all this stuff, but they've kicked the responsibility of making the books balanced down to some poor guy or you know, woman in, you know, the county headquarters, and they have to figure out how to make it all add up. And so I've got a lot of sympathy for people like that because they've been kind of dumped in this mess to a good degree by the state government.
SPEAKER_02Yeah, then a whole other piece of property taxes is education, right? I mean, uh property taxes do pay for local public schools, right? And uh that's even more frustrating in some ways because, you know, as our education proficiency has just plummeted in this state over the last, you know, 15, 20 years, half of our kids can't read or do math at grade level. Spending has skyrocketed. And so that's driving this increase in property taxes, too, right?
SPEAKER_01As part of it, yeah. I mean, this is like I say, so the the key thing is To remember that's the spending that's the problem. Sure. And so if you're going to get this under control, you've got to get that under control. And I would say there are things I don't support. I don't support exempting seniors from the property tax because the property tax is a payment for a service. And if you're using that service, you should pay for it. And you don't stop using the service when you've paid off your mortgage or when you reach 65. You know, so it's unfair. You know, here we are, we want to understand why young people don't start families more, and then we're shoveling more and more of the tax burden onto them. You know, there is a question of generational equity there, I think. Um so those are things I don't support. I don't support abolishing the property tax, things like that. But what we absolutely should do is put a limit on the growth of the property tax, the growth of spending, because it's two sides of the same coin. And you've got to cap the rate of growth of local government spending. And that's uh the solution I put forward in the report. Uh, you do it basically um at the rate, you add the rate of inflation and uh population growth. So what you're effectively doing is holding the local government's per capita spending rate uh constant in inflation adjusted terms. Now, you can increase that, but to do so, you have to go to the local uh voters with a referendum and say, we want to hike, let's say it's 5%, the two rates together, we want to hike by 10 for some reason, build a new water treatment plant or something like that. Now, one of the things that's interesting there is very often you get these special votes in education, uh, you know, like a tech levy or something like that. And you put these things on the ballot and you say to people, we want to raise your property taxes to pay for this. And about half the time these things pass. I voted for them myself, and I don't wake up in the morning trying to think how to increase my taxes. Um, but if you make the case, if you go to people and say, Look, this is what we're gonna pay for, this is what we need the money for, um, if you treat people like adults, I think they'll behave like adults. Um, and I think it's a lot more honest and straightforward than jacking up spending because of all this nonsense that happened somewhere else, and then allowing the idea to get out there that it's uh gone up because, oh, your property value went up, which is just not true.
SPEAKER_02There's another element here that I think uh drives why Minnesotans are so frustrated by the, you know, rise in spending and therefore rise in taxes, not just with property taxes, but across the board, especially welfare spending. We talked about that earlier in today's episode, um, which is of course the fraud scandal. I mean, Minnesotans for years and years and years said, you know, well, we we pay higher taxes than many other states, but we've got this great quality of life here. You know, we have uh uh wonderful parks and schools, and and and so first of all, so much of that is not true anymore. Again, you know, our schools are absolutely struggling. But on top of that, we're paying the higher taxes. And Minnesotans woke up one day and realized, you know, my hard-earned tax dollars were going towards buying some criminals, you know, luxury home, luxury shoes, vacation properties. Um, and I think that that is another element here that is unique to Minnesota because of course affordability is a concern across the country, again, especially among young people, but it's so much sharper here in our state. I think not only is it worse, but people feel it more keenly because they know that the taxes they've been paying into the system, over nine billion dollars were stolen.
SPEAKER_01Yeah, uh there's actually good kind of several points to that. So if you look at all the money that state government spends, there's some money that is spent exactly as it's meant to be spent, and you wouldn't really disagree with it. So, like, say state troopers' salaries or buying a new car for the state troopers or something like that. Um, then there's stuff that's just stolen, you know, the fraud that we talk about, a lot of these things. But then there's kind of an intermediate ground, which is stuff that is spent, like the state trooper's uh car or whatever else, that is spent exactly as appropriated. But if you explain it to somebody like, what? You know, so I wrote uh last week about the example of a sex change operation that uh the state of Minnesota has apparently paid for for a convicted murderer. You know, now I looked up how much do these things cost, and I got an estimate of between $50,000 and $80,000. So if you take the low-end estimate, $50,000, let's say this was a cheap operation, um, and then you look at um how much the kind of median Minnesota taxpayer pays in taxes, you're looking at about 10 Minnesotans' annual tax state income tax payments have gone to pay for this guy to get a sex change operation. And I think that's a kind of exactly. So people are being screwed. And on the one hand, yeah, they're being ripped off by these criminals, and we're kind of chasing around for them now uh eventually, you know, and to some extent a bit half-heartedly. Um another thing I wrote about last week is that whereas the feds can go after you if you're found guilty of fraud, let's say in the feeding our future cases, if the feds find you guilty of fraud, they can come after your assets. State government can't do that. State government, Minnesota is banned from coming after you for assets. So that's something absolutely that should change. And I think it's these things that bother people. So the partly it's you've got these fraudsters, you know, people doing things like that. There's also this intermediate ground, though, which is state government spending money as it's appropriated, you know, quite legally, but crazy. Yeah, it's legal but crazy. Um and I think that's something else that bothers people. Another thing I found, you know, when I wrote that report about the prisoner, is that um the state government of Minnesota gave $500,000 of taxpayers' money to a non-profit called gender justice. And it was gender justice who brought the lawsuit against the state government, which won, um, which allowed for uh men to be put in women's prisons. Um and the state government, you paid for that. Yeah you know, you, hard-pressed, hard-working, law-abiding Minnesota taxpayer, you paid for this. You paid for it both ends. You paid for it when they paid gender justice to bring the lawsuit, and you paid for it at the other end when this guy living in a woman's prison gets a sex change operation. And I think, you know, it's maybe it's time to dust off the old taxed enough already thing, you know, because it really is outrageous what the people of this state are asked to put up with.
SPEAKER_02Now, again, this report spanned so many different areas of you know, li affordability of life in Minnesota. I mean, it's taxes and spending, it's housing, it's utilities, it's healthcare, it's childcare, occupational licensing, and education. It was designed really for policymakers, potential policymakers to have, again, these you know 41 concrete steps to building a more affordable life here in Minnesota. What would you hope someone who reads this report comes away thinking?
SPEAKER_01Uh it's a great report and they should do it. Uh simple as that. Um I I would say, you know, I'm I I would love, you know, any candidate of any party to come into the office. I'm happy to sit down and, you know, talk through them with this and say, this is what you need to do. Um, you know, this is not rocket science. Um, there are things we can do, concrete steps as soon as the legislature meets next year, that will make Minnesotans' lives better and easier in the not too distant term. You know, this is this is a great state. Um it's maybe not as great as it once was, um, but the ingredients are still there and we just got to kind of get it going again.
SPEAKER_02Well, once again, you can find this report at americanexperiment.org slash reports. John, thank you so much for coming on today.
SPEAKER_01Thanks for having me.
SPEAKER_02Thank you so much to everyone who made it all the way to the end of this week's episode of the American Experiment Podcast.
SPEAKER_00Remember to drop a like and subscribe while you are down below commenting. Uh remember, this week's question of the week is should American or should Americans, should Minnesota taxpayers pay for sex change operations for convicted criminals.
SPEAKER_02That's a tough one.
SPEAKER_00It's a real tough one.
SPEAKER_02That's Gratcher.
SPEAKER_00We said earlier we think it's a 95-5 issue. Let's see if we can get any of those 5% uh in our comment sections. Let's see if we can get anyone. I'm genuinely curious how anyone would defend this. Yeah. But uh, let's see if we can get anyone to comment.
SPEAKER_02Well, and Isaac, thank you for filling in as Catherine's out on vacation. If you want to hear more from Isaac, you should tune into Freedom Fridays every week on the John Justice show, now presented by American Experiment, which Isaac produces every Friday. As always, stay sane, stay safe out there, and we will see you next week.
