Who should pay for programs like Medicaid or food stamps?

Summary

Marketplace Morning Report: Who Should Pay for Programs Like Medicaid or Food Stamps?

Release Date: May 23, 2025
Host: Sabri Benishore (in place of David Brancaccio)

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1. Tariff Proposals and Market Reactions

Overview:
In the early segments of the episode, host Sabri Benishore discusses President Trump's recent proposals to impose significant tariffs on goods imported from the European Union and specific import taxes on iPhones not manufactured in the U.S. This move has stirred considerable market turbulence and raised concerns about a potential recession.

Key Points:

• Tariffs on EU Goods and iPhones:
  President Trump has announced his intention to implement a 50% tariff on goods from the European Union starting June 1. Additionally, he targets the technology sector by proposing import taxes on iPhones not produced in the United States.

• Market Impact:
  The announcement led to a negative reaction in the markets, with stock prices declining and bond yields decreasing. Sabri notes that the bond yields fell as a reflection of increased uncertainty and risk aversion among investors.

• Expert Insight:
  Christopher Lowe, Chief Economist at FHN Financial in New York, explains the economic sensitivity to such tariffs:

  "Just about every big American company does a ton of business in Europe, so the economy is quite sensitive to tariff rates that would be high enough to limit economic activity between the US and Europe. And then, of course, the Apple threat. It's one of the bigger market caps in the US stock market. So a 25% tax on all of its goods, that would be really significant."
  (01:37)

• Potential for Recession:
  Lowe further elaborates on the broader economic implications:

  "These two threats put the possibility of recession back on the table. Just what, about two and a half weeks after we began to feel like maybe the US could dodge that bullet?"
  (02:12)

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2. Federal vs. State Funding for Medicaid and Food Stamps

Overview:
The discussion shifts to the financial responsibilities of federal and state governments concerning pivotal social programs like Medicaid and Supplemental Nutrition Assistance Program (SNAP), commonly known as food stamps. The GOP tax bill's provisions could significantly alter the funding landscape.

Key Points:

• Current Funding Structure:
  Currently, the federal government funds over 1,400 state programs, with Medicaid costs covered up to 50% by states and SNAP fully funded by the federal government.

• Proposed Changes:
  The GOP tax bill proposes shifting more costs for Medicaid and SNAP to the states, compelling them to find additional funding sources.

• Impact on States:
  Chris Edwards, an economist at the Cato Institute, outlines the potential responses from states:

  "States really have three choices. They could raise taxes to cover the additional costs, they could cut other spending programs, or they could find efficiencies in these programs."
  (03:19)

• Financial Strain Illustrated:
  Thomas Brosey from the Urban Brookings Tax Policy Center provides data on the financial burden:

  "The loss would equal an average of more than 3% of a state's overall spending, or 7% of what they bring in in state tax revenue, alternatively, 11% of what comes in from income and sales taxes."
  (03:55)
  Examples include:

  • Vermont: Sales tax from 6% to 8.4%
  • California: Sales tax from 7.2% to 9.3%
    (04:13)

• Uncertainty and State Responses:
  Peter Mueller from the Pew Charitable Trust highlights the uncertainty states face:

  "One of the challenges of a moment of uncertainty is states know that there is uncertainty, but they don't know what form it will take or when the changes will kick in."
  (04:32)
  States may consider:

  • Changing program eligibility
  • Utilizing rainy day funds
  • Planning special legislative sessions to address the changes
    (04:52)

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3. Corporate America’s Commitment to Fighting Racial Inequality

Overview:
Reflecting on the five-year anniversary of George Floyd's murder and the subsequent protests, the episode examines whether corporate America has fulfilled its financial commitments to combating racial inequality.

Key Points:

• Pledged Funds vs. Actual Spending:
  According to McKinsey, corporate America pledged around $340 billion by early 2023 to address racial disparities. However, tracking the actual disbursement of these funds has been challenging.

• Sector-Specific Commitments:
  The majority of these pledges originated from financial companies, primarily targeting homeownership improvements to bridge the racial wealth gap.

• Stalled Progress:
  Although there were initial increases in homeownership rates among minority groups, significant economic factors have caused these gains to stall.

• Corporate Accountability:
  Nova Sappho investigates corporate follow-through:

  "We reached out to 50 of the biggest Fortune 500 companies to find out what they've delivered and how much they've spent. And Sabri, can you guess how many actually got back to us?"
  (07:42)
  Only three companies responded, with JPMorgan Chase being the most transparent: "Five years ago, JPMorgan Chase promised to invest about $30 billion to fight economic and racial disparities. It says it spent $31 billion and counting."
  (07:59)
  Other companies included:

  • CVS Health: Met its $600 million pledge without details.
  • Meta: Donated approximately $40 million to nonprofits and community foundations.

• Conclusion on Corporate Progress:
  While there are signs of progress, the lack of comprehensive data and transparency means that many pledges remain unaccounted for:

  "Overall, some signs of progress, Sabri, but a lot of promises that we are not able to account for."
  (08:43)

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Conclusion

This episode of Marketplace Morning Report delves into critical economic and social issues, from the implications of high tariffs on international trade and domestic markets to the shifting responsibilities of funding essential social programs. Additionally, it critically assesses corporate America's efforts to address racial inequality, highlighting both commitments and shortcomings. Through expert interviews and detailed analysis, the report provides listeners with a comprehensive understanding of these pressing topics.

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Notable Quotes:

• Christopher Lowe on Tariffs and Economy:

  "Just about every big American company does a ton of business in Europe, so the economy is quite sensitive to tariff rates that would be high enough to limit economic activity between the US And Europe."
  (01:37)

• Chris Edwards on State Funding Choices:

  "States really have three choices. They could raise taxes to cover the additional costs, they could cut other spending programs, or they could find efficiencies in these programs."
  (03:19)

• Nova Sappho on Corporate Transparency:

  "Overall, some signs of progress, Sabri, but a lot of promises that we are not able to account for."
  (08:43)

---

This summary provides a comprehensive overview of the key discussions and insights from the Marketplace Morning Report episode released on May 23, 2025, ensuring that even those who haven't listened can grasp the essential points and implications.

Transcript

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[Sabri Benishore]

Tariff drama is back from Marketplace. I'm Sabri Benishore in for David Brancaccio. President Trump says he wants 50% tariffs on goods from the European Union starting June 1, saying talks with the EU are going nowhere. He also wants import taxes specifically on iPhones that aren't made in the US Market. Markets tanked on the news. Bond yields came down, too. Christopher Lowe is chief economist at FHN Financial in New York and joins us. Hi, Chris.

[Christopher Lowe]

Good morning.

[Sabri Benishore]

Sabri, why did markets react so negatively to this tariff news?

[Christopher Lowe]

Just about every big American company does a ton of business in Europe, so the economy is quite sensitive to tariff rates that would be high enough to limit economic activity between the US And Europe. And then, of course, the apple threat. It's one of the bigger market caps in the US stock market. So 25% tax on all of its goods, that would be really significant.

[Sabri Benishore]

So why then are bond yields falling? Why are interest rates falling?

[Christopher Lowe]

Well, so why are interest rates falling? That's sort of the big question. And I think it's because these two threats put the possibility of recession back on the table. Just what, about two and a half weeks after we began to feel like maybe the US could dodge that bullet?

[Sabri Benishore]

Christopher Lowe is chief economist at FHN Financial in New York. Thank you. As always.

[Christopher Lowe]

Thank you, Sabri.

[Sabri Benishore]

Who should pay for major programs like Medicaid or food stamps? The federal government or states? The GOP tax bill would have states pick up more of the tab. The bill now heads to the Senate Marketplaces. Kimberly Adams has more.

[Kimberly Adams]

Right now, the federal government sends money to states for more than 1400 different programs, says Chris Edwards, an economist at the Cato Institute.

[Chris Edwards]

So, for example, with Medicaid, the states are required to cover up to 50% of the costs. And with food stamps, the states don't cover any of the costs. The federal government pays all the costs.

[Kimberly Adams]

This legislation would change that, shifting more of the costs for Medicaid and SNAP to the states. If that happens, says Edwards, then the.

[Chris Edwards]

States really have three choices. They could raise taxes to cover the additional costs, they could cut other spending programs, or they could find efficiencies in these programs.

[Kimberly Adams]

How much would the states have to raise taxes or cut spending? Thomas Brosey and his colleagues at the Urban Brookings Tax Policy center just crunched.

[Thomas Brosey]

Those numbers we looked at by how much the state sales tax rate or the state's personal income tax rate would increase to make up for potential cuts in either Medicaid or SNAP or both.

[Kimberly Adams]

They figure the loss would equal an average of more than 3% of a state's overall spending, or 7% of what they bring in in state tax revenue, alternatively, 11% of what comes in from income and sales taxes. Of course, the actual number varies by state.

[Thomas Brosey]

For example, in Vermont, the sales tax rate would have to go up from 6% to 8.4%, in California for 7.2 to 9.3%.

[Kimberly Adams]

If Congress decides to move ahead with this plan, states will have to scramble to figure out next steps, says Peter Mueller, a senior officer with the Pew Charitable Trust.

[Chris Edwards]

One of the challenges of a moment of uncertainty is states know that there is uncertainty, but they don't know what.

[Kimberly Adams]

Form it will take or when the changes will kick in. State legislatures will have to decide if they want to maybe change program requirements so fewer people are eligible or perhaps tap into a rainy day fund.

[Chris Edwards]

So many states are planning on special sessions in the fall to be able to react to whatever the federal government.

[Kimberly Adams]

Does change, which will give state lawmakers and their constituents a chance to decide what comes next. In Washington, I'm Kimberly Adams for Marketplace.

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[Sabri Benishore]

It's been five years since the murder of George Floyd and ensuing nationwide protests. In response, corporate America pledged billions of dollars to help fight racial inequality. And we wanted to find out whether companies are meeting those commitments. Marketplace's Nova Sappho has been tracking this and joins us now. Hi, Nova.

[Nova Sappho]

Good morning, Sabri.

[Sabri Benishore]

So how much exactly was promised and what has actually been spent?

[Nova Sappho]

So according to consulting firm McKinsey, by early 2023, corporate America had pledged around $340 billion, just a staggering sum of money. But it's been difficult to pin down how much of that has actually been spent, and a lot of outside groups appear to have just stopped trying to pin down the numbers and keep track of them. What McKinsey did find is that by far, a vast majority of the promises came from financial companies, and they were focused on improving access to home ownership because that's a good way to close the racial wealth gap. And we know that for a while, at least. According to the national association of Realtors, homeownership rates among minority groups did improve, but those gains appear to have stalled because of bigger economic factors. So it's really hard to say, Sabri, what the results truly have been. Five years on well, are there any.

[Sabri Benishore]

Firm numbers or other evidence of progress that we can point to? Five years on well, you know, we.

[Nova Sappho]

Reached out to 50 of the biggest Fortune 500 companies to find out what they've delivered and how much they've spent. And Sabri, can you guess how many actually got back to us?

[Sabri Benishore]

I can guess. Not many, just three.

[Nova Sappho]

Three companies gave us actual numbers, and just one of them provided details on those numbers, and that was JPMorgan Chase. Five years ago, JPMorgan Chase promised to invest about $30 billion to fight economic and racial disparities. It says it spent 31 billion and counting. A majority of that, though, is in the form of debt to help improve housing affordability. Aside from JPMorgan Chase, the numbers do get a lot smaller. CVS Health had promised to spend $600 million. It said it met that goal, but didn't give details. Meta said it gave about $40 million to nonprofits and community foundations. So overall, some signs of progress, Sabri, but a lot of promises that we are not able to account for.

[Sabri Benishore]

All right, Marketplaces Novo Sappho, thank you so much.

[Nova Sappho]

You're welcome.

[Sabri Benishore]

In New York, I'm Sabri Benishore with the Marketplace morning report from apm, American Public Media.

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Regardless.

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I was hoping you wouldn't say that.

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I think I would get the whiskey for sure.

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