Make Me Smart April 5, 2023 Transcript

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Kimberly Adams 

But let us do the thing.

Samantha Fields 

I’m ready.

Kimberly Adams 

All right. Hello, I’m Kimberly Adams, welcome back to make me smart where we make today make sense.

Samantha Fields 

I’m Samantha Fields filling in for Kai Ryssdal and this is what do you want to know Wednesday, the day we get to answer your questions. If you have a question you’d like us to answer, you can leave us a voicemail at 508-U-B-SMART or email us at makemesmart@marketplace.org. And hey, Kimberly, the first question we have today is for you. Let’s hear it.

Kimberly Adams 

I’m ready. Let’s do it.

Chris 

This is Chris from Somerville, Mass. The reports I’ve seen over the weekend about Donald Trump taking in over $4 million in campaign contributions since this indictment has me asking the question, can that money be legally used to help pay for his indictment defense?

Kimberly Adams 

Very good question. So in case you missed it, former President Trump’s 2024 campaign is using his indictment and arrest, you know sort of arrest-ish. is using his indictment as a big fundraising opportunity. On Monday, the Trump campaign said they’d raised $7 million since his indictment was announced last week. And look, Trump is absolutely no stranger to donor funds being used to pay for his legal fees. He’s been doing that pretty much since he started running the first time. And it’s… but it’s still not clear if he can use these funds to pay for his legal defense in this particular case. So for example, the Trump campaign used a little over $58 million in donor funds to cover legal and compliance expenses between 2015 and 2020, according to The New York Times, and The Campaign Finance Institute, because those legal fees were associated with things that his campaign was doing. Like I don’t know, debating the legitimacy of the presidential election. Since he left left office, Trump has been using money raised by his PAC, which is called Save America to pay for his personal legal legal fees, which is sort of… A PAC can spend money on whatever it wants to. So basically, the fundraising emails from the Save America PAC, you know, basically giving Trump money to spend on what he wants to. But since Trump became a 2024 candidate, some campaign finance experts really question if he can keep doing that, because to do so could be seen as a campaign contribution for him, which would be subject to the legal legal limit of $3,300. And then there’s also rules about how you can spend that money. So for example, the Federal Election Commission does allow candidates to pay for legal expenses using campaign funds but if those expenses are related to campaign activity, and that covers expenses that would only have been incurred due to the individual’s status as a candidate. So for example, Trump’s lawyers could potentially argue that the hush money case he’s been arrested for is a campaign activity related legal expense because it has to do with him potentially influencing an election or they could make the argument that he’s being politically targeted because of his campaign. But, you know, it falls into a gray area. Particularly because Trump’s personal political and business interests have always been so so intertwined.

Samantha Fields 

Extremely confusing and complicated.

Kimberly Adams 

Yeah, I mean, the thing is, our system wasn’t built, or like the campaign finance system was not built for this. And there’s no political appetite to update those rules because too many people benefit from it on both sides. Okay, moving on to our next question. Let’s hear it.

Kristen 

This is Kristen calling from Philadelphia, where we made national news because our water was possibly contaminated by a chemical spill. So now I’m wondering if you can make me smart. What is the value of a clean water system? And what is the cost to not having it? I know we had to run out and buy bottled water because the city advised us to. But is there a bigger economic story here? Thanks for helping make me smart. Take care

Samantha Fields 

Another great question. Thank you for sending this one in Kristen. This one is kind of hard to answer I would say. My sense is that you’re thinking a lot about it because you just went through this and realizing, as sort of I do anytime I’m somewhere where there is not clean water coming out of the tap, that the value of clean water is huge for public health, for quality of life, and for all sorts of economic things like you mentioned, agriculture, restaurants, manufacturing. All sorts of things. But it’s really hard to quantify, economically, financially the cost of having or not having a clean water system in sort of one neat, clear number. But I’m gonna give you a few different ones that I hope are kind of interesting reference points. For one, let’s start with this fact, which is that almost 9 million people in this country, in the US, don’t have access to clean water. And at least 2 million don’t have running water at home. And that alone cost the US economy about $9 billion a year. And it’s also as you mentioned, Kristin, expensive. It can be expensive for people who don’t have clean water they spend or you know, they might spend money on bottled water, in average, from this report that we will link on our site, found that people who need to buy bottled water to have at home spend on average, about $1,300 a year buying bottled water, which is a lot of money. And people also spend or lose about 15,000 more dollars a year not having clean water, either on health care costs, or lost productivity, than people who do have it at home. So those are kind of the personal costs. And then, you know, one other example that I think is always worth bringing up when we’re talking about clean water is Flint. Of course one of the most sort of well known water crises in this country, though certainly not the only one. But in the nine years that it’s been going on, and I think it is worth mentioning that that crisis is still going on, it has cost the state of Michigan more than a billion dollars so far. Over 600 million of that was in a settlement with people families who have been affected by the water crisis. Meanwhile, this statistic was kind of shocking to me, if they had just treated the water properly in the first place so that the lead pipes did not corrode, it would have only cost about $80 a day. So that’s sort of a worthwhile comparison to make, I think. And just in case you want one more number in case that wasn’t enough, the EPA estimates it’ll cost at least $472 billion over the course of 20 years to maintain and improve the drinking water infrastructure in this country. So not totally sure if that answers your question Kristen. But, you know, I’m sure you’ve been thinking a lot more about the value of clean water since sort of going through this experience in Philadelphia. And it really comes with a lot of high costs, not having access to it, for the economy, personally, health, mental health wise, and all sorts of different ways.

Kimberly Adams 

Yeah, I remember I did a story about a community that’s like, I don’t know, 70 miles from Washington, DC, where people did not have clean running water. So, it was that, you know, pipes didn’t go out to where they live. And sure plenty of people all over the country use well water. But if you can’t afford to dig a well, or your well is in bad repair or contaminated, then you’re just out of luck. And these people were you know getting water deliveries from charitable organizations. And it was really stark to think about how close they are to the nation’s capital. Not that it’s okay, anywhere, but just the disparities and access to something like clean water here in the United States.

Samantha Fields 

Yeah, and just how much time people can spend looking for clean water, whether whether that’s here in the US or in other parts of the world where they don’t have access to it sort of all of the things that they’re not able to do because they have to spend time sort of looking for it or sort of purifying it. And then just the health piece, I just keep coming back to you know. Like, it’s such a huge piece of public health. And obviously, that has enormous economic costs. All right, great question, Kristin. Thank you for that one. We have another one from Alan in Minnesota. And he wrote us an email that asked: Can you make me smart on why banks aren’t increasing interest rates to encourage more deposits?

Kimberly Adams 

Short answer because they don’t have to. But the longer answer is…

Samantha Fields 

Done next.

Kimberly Adams 

Done, next. You know, it’s sort of about supply and demand. So bumping up interest rates on savings accounts is an effort by banks to appeal to more depositors so that they can increase the amount of cash that they’re holding, so that they can have that money to lend out at higher interest rates, you know, for a variety of things, right? Typically, savings interest rates ebb and flow along with the feds interest rates adjustment, but not always. So while the Fed has been hiking interest rates over the past year, average savings interest rates have really lagged behind. And we can partially blame the pandemic for that. Many Americans stashed their stimulus checks in savings account. And banks, as a result had a lot more money on deposit… more than they needed to loan out so they didn’t have any incentive to offer higher interest rates because people were gonna put the money in there anyway, right? So but this started to change as those pandemic relief programs came to an end, and yet people kept on spending. And so those numbers of that amount of cash that people were keeping in banks started to drop. And right now the average rate on a savings account is .23% according to Bankrate. Less than 1%. Now, who’s really using that? People who aren’t thinking about it, right? If you maybe have automatic deposit into your savings account. You aren’t really paying much attention because you’re just stashing the money there. But online banks offer rates that are much higher, especially because they need those deposits. So you can see some in the 4% range. And as interest rates keep going up, there’s more of a push for banks to stay competitive as other high yielding options close more closely tied to the Feds interest rates increase interest rate increases, like treasury bills, are becoming a lot more attractive to depositors, especially as people find out about them. And this is especially true for smaller banks. Like, really big banks have a lot of cash, they’re not too worried about it. So you’re probably going to get a higher interest rate from a smaller community bank than you might from sort of a huge Wall Street bank or something like that. The other thing that’s happening is that rates for savings accounts and certificates of deposit are climbing. And CDs, if you remember them from your youth, are having their moment in the sun after I guess a whole generation of falling out of favor. Banks are keep it…. the way a CD works for those who maybe have not been familiar because they haven’t been popular in a while is that you give the bank your money for a set period of time. And the longer you let the bank have your money, the higher an interest rate it pays you. And so some banks are offering rates around 5% if you keep your money with him for a year. While the benefits of moving money into these higher paying accounts may seem obvious, a lot of people still are not doing that. And, you know, money experts say that one reason people might be a little bit reluctant to do that is because it could be a big hassle to change banks, that’s according to New York Times. The other thing is a lot of people are afraid to lock up their money in anything that makes it seem like you can’t get it right away, especially in an environment where people are feeling a little nervous about the economy.

Samantha Fields 

Yeah, for sure. I feel like I have a chunk of change, I have to figure out what to do with and it does. First of all, it’s just it’s a big hurdle to get over sometimes mostly just mentally I’m sure to just move your money around. But I think that’s an that’s a big consideration is feeling like it’s liquid, you know?

Kimberly Adams 

Yeah. Alright, last question of the day. Here we go.

Alicia 

Hi Make Me Smart crew. This is Alicia from Portland, Oregon. I have a multipart question about i bonds. I see the interest rate is set to change April 30. With normal bonds, the interest rate doesn’t change over the life of the bond but since i bonds are tied to inflation, if I buy a bond at today’s rate, will that rate change during the life of the i bond? If the rate is subject to change why was there such a rush to purchase them last fall right before that rate change? Thanks for making me smart.

Samantha Fields 

Great question. And short answer is yes, the rate will change over the life of the i bond. Basically, I bonds as you said they’re inflation adjusted savings bonds issued by the US government. And the interest rate on them is actually a combination: there’s a fixed rate and then there is a variable rate. So the fixed rate you get for the life of the bond, and it’s usually very low, less than 1%, as we were just talking about with many savings accounts. But then the variable interest rate on the bond is tied to inflation and changes every six months. And lately, because inflation has been so high, that variable interest rate on I bonds has also been higher than normal. So when you buy an i bond, you lock in the variable rate, which is usually the higher rate for the first six months that you own it. And then sort of the next six months is a different rate because as we said it sort of changes in May and in November. Right now, the rate on i bonds that you buy between last November and the end of this month is 6.89%. So that’s pretty high. But last fall, the reason people were rushing to buy them was because the interest rate was even higher. It was 9.62%. And that was better than you could get at least guarantee on almost any other kind of investment, at least a very low or no risk investment, which i bonds are. So people really wanted to get in on that rate of return at a time when sort of everything else feels either volatile or you know, like it’s not going to give you much of a return at all. Even if that was only for six months that 9.62%, people want did it before it dropped you know? And the thing is they’re low risk investments. And I think a lot of people were feeling like, why not? So I did a story back sort of, in the day or two before that rate expired, about how the Treasury’s website was crashing because so many people wanted them. Everyone was trying to get in on them at the end. But one interesting thing, actually, that I was reading in Yahoo Finance, is that people who bought the i bonds, or buy the i bonds now sort of before the end of April, may actually, depending on how long they hold it, end up making more in the long term because that fixed rate, even though it’s super low, is higher now for bonds you buy now than it was for the bonds people bought sort of, you know, before October. So so it depends on how long you keep it,

Kimberly Adams 

We need to unpack that a little bit more. So since there’s not a fixed rate, that’s actually the inflation rate, you know, that is going to last beyond that six month window. And so that’s why you can make more money over time. Right?

Samantha Fields 

Right. Depending on how long you hold it. You have to hold it for a pretty long time in order for that super low fixed rate to sort of beat out the shorter term variable inflation rate, right? So if you only have it for a few years, the variable inflation rate which is generally higher is the one that matters more, but if you’re gonna hold on to it for a long time, the fixed rate can matter to you.

Kimberly Adams 

Okay. That’s interesting. All right.

Samantha Fields 

Yeah super interesting.

Kimberly Adams 

And that is it for today. But before we go, we want to share some super exciting news. Make me smart has been nominated for a Webby Award, which yay! Alex in the engineering booth givin us raised hands. Love it. This is kind of like a People’s Choice Awards for the best of the internet. And we are super honored to be nominated, but we’re not going to be able to win without your support. And you know we love to win. So you can vote for make me smart from now until April 20 by going to the webbyawards.com. We’ll also include a link on our show page, tell your friends, cast a vote if you feel so inclined. We’d really appreciate it

Samantha Fields 

Early and often. Make Me Smart is produced by Courtney Bergsieker. Ellen Rolfes writes our newsletter. Our intern is Antonio Barreras. Today’s program was engineered by Drew Jostad.

Kimberly Adams 

And shout out one more time to Alex Simpson here in St. Paul who helped me out on my last day here. Ben Tolliday and Daniel Ramirez composed our theme music. Our acting senior producer is Marissa Cabrera. Bridget Bodnar is the director of podcasts. Francesca Levy is the executive director of Digital. I know I didn’t have the time posts, but that’s okay.

Samantha Fields 

Close enough.