California is one of the wealthiest states in the country, yet it also faces persistent poverty, stark economic inequality, and some of the highest costs of living in the nation. These tensions raise fundamental questions about who benefits from California’s economic growth and why so many residents struggle to achieve economic security.

Recorded on October 7, 2026, this panel brought together leading scholars to examine the forces shaping wealth and poverty across the state. Drawing on research spanning inequality, affordability, economic mobility, and social policy, the discussion explored the roots of California’s economic divides, how they are reproduced across generations, and what is at stake for families, communities, and the future of the state.

The panel featured David Grusky, Edward Ames Edmonds Professor in the School of Humanities and Sciences, and Professor of Sociology at Stanford, and Samuel Trachtman, Senior Researcher at the Berkeley Economy and Society Initiative at UC Berkeley. Evan White, Executive Director of the California Policy Lab at UC Berkeley, moderated.

The Social Science Matrix “California Spotlight” series focuses on important issues that are directly relevant to the people of California, in support of the University of California’s mission as a public research institution. This event was co-sponsored by the Goldman School of Public Policy, the Institute for Research on Labor and Employment, the Berkeley Economy and Society Initiative, and the Opportunity Lab.

Podcast and Transcript

An audio (podcast) recording of this panel is available through the link below or through Apple Podcasts.

[WOMAN’S VOICE] The Matrix Podcast is a production of Social Science Matrix, an interdisciplinary research center at the University of California, Berkeley.

[CORI HAYDEN]

Welcome. Thank you so much for joining us today here at Social Science Matrix. My name is Cori Hayden.

I’m in the anthropology department here at Berkeley, and I’m director of Matrix. And I am thrilled to introduce today’s panel, California Spotlight panel on wealth and poverty, which brings together leading scholars To examine the forces shaping wealth and poverty across this state. It is the second fantastic panel we’ve had this semester on questions of wealth and inequality, and I can’t think of a more timely and important topic for all of us to be thinking about together.

The panel has invited— we have invited— Marion has invited— and more on that in a second— researchers who do work on topics ranging from inequality and affordability, economic mobility, and social policy to explore the roots of California’s economic divides, how they’re reproduced, and what’s at stake for communities and the future of this state. Today’s event is part of our California Spotlight series, and it’s co-sponsored by a number of units: the Goldman School of Public Policy, the Institute for Research on Labor and Employment, the Opportunity Lab, and the Berkeley Economy and Society Initiative. I want to say, as I just signaled, I’m gonna offer a big thanks to Marianne Fourcade, my illustrious predecessor in this role as director of Matrix.

And Marion is responsible for putting together this excellent panel, as well as many others for this fall. So thank you so much, Marion. Glad to see you here.

And I also want to note that Professor Marianne Page from UC Davis was initially part of this panel, but unfortunately she’s ill and so can’t attend today, and she sends her regrets. Now, before getting going, two quick things. One, I get to invite you back here as often as you like.

We have a huge roster of events coming up on topics ranging from green transitions to questions of the Voting Rights Act. Propaganda machines. And I wanna draw your attention especially to the October 20 event, the Matrix Teach-In.

This is an opportunity, again, a format designed by Marion, a format designed to invite community members in to be on the receiving end and be in dialogue with award-winning instructors, professors here at Berkeley, known especially for their creative teaching. So do put that on your calendar if you’re interested. Let me briefly now introduce our moderator, Evan White.

Evan co-founded the California Policy Lab, which generates research insights for government impact. CPL performs research across issue silos, builds the data infrastructure necessary to improve programs that millions of Californians rely on. Since 2017, CPL has helped conduct over 300 projects with over 75 agency partners.

As executive director, Evan leads the lab’s Berkeley site and authors reports on questions such as household finance, migration, poverty. Evan has an illustrious background, not just holding a joint degree in law and public policy from UC Berkeley, but also having served as senior advisor to the first director of Consumer Financial Protection Bureau and serving as director of fair housing for a major housing nonprofit here in Northern California. There’s more to say, but I know you are eager to hear from our panelists, so let me turn it over to Evan.

Thanks very much.

[EVAN WHITE]

Thank you, Corey. Welcome, everybody, and those who are joining on Zoom. Can you guys hear me okay?

Great. So I’m excited to moderate today’s panel with David and Sam, both of whom I know and can’t wait to hear their remarks. I wanted to motivate a little bit of the conversation here and set the stage.

So California is a place of incredible affluence alongside incredible precarity. We have the world’s fourth largest economy if we were our own country, but accounting for cost of living, we have the second highest poverty rate in the country, second only to Louisiana. If you count those who are sort of not just in poverty but near poverty, about one in three Californians are near poverty or in poverty.

We have more people on the Forbes wealthiest list than any other state, but we also have a quarter of the nation’s homeless population lives in California. And this gap in not only income but also wealth inequality has been growing over time. So right now, the 90th percentile in income earns about 11 times what the 10th percentile does, but that’s about 60% higher than it was 40 years ago.

So that sort of gap between the rich and the poor has really widened over time. If you look at the wealth side of the equation, it’s even more stark. A lot of millions of households don’t have any wealth at all, and the top 25% have at least a million dollars or more in assets.

Of course, these inequalities are not shared equally. Asian and white households are more likely to have higher incomes, higher wealth. The median wealth of an Asian household in California is 70—sorry, 11 times more than that of a Latino household.

Likewise, age and education gaps persist. So those who have a bachelor’s degree— congratulations to the students here— have about 10 times more wealth on average than those who do not have a bachelor’s degree. And folks who are over 65— and one thing we might return to later is the aging of California’s population— but those who are over the age of 65 have twice as much wealth as those who are in their prime earning years from 35 to 65.

And note these inequalities might be sort of a problem on their own, you might think, but they also can create other social ills that we might be concerned about, right? So, as inequality stretches out, rungs on the economic ladder often disappear, and you find that people are less able to move intergenerationally to different areas of the wealth and income spectrum. And it sort of hardens our social classes.

Our political system deteriorates, right, where large donors become a dominant force in deciding who runs for election and who wins election. There’s good research out there, debated but good, about the health impacts, showing that inequality can lead to higher rates of stress, depression, lower life expectancy. And other ills like trust and increased crime rates and class polarization and the like.

So there’s a lot of reasons in and of itself to worry about the fairness of such dramatic differences in wealth and income, but also the impacts that it has on our society. So, run of show today, we’re going to hear from David first, then from Sam, separately about their research on wealth and poverty in California, and also some ideas they have about how to solve this problem. As Corey mentioned, we’re sad to miss Mary Ann, who has some great research on this as well.

Hope that she improves well, and then we’ll have plenty of time for questions after the panelists. Sound good? All right, David, take it away.

[DAVID GRUSKY]

Yeah, thanks, Evan. Thanks, Mary Ann, for inviting me. It’s great to be here.

I’ll get right to it. This was really set up by Evan, but what we see here is that on the one hand, we’re not making much headway on poverty within California. About 20% of Californian households Are in poverty, and we’ve been hovering around that level for the last 15 years or so.

And then on the other hand, the wealthy are, as we know, getting ever wealthier. This is simply the point that Evan was making, so I won’t belabor it. What is this?

It’s just a second Gilded Age lurching on. Nothing new. What’s interesting, I would argue, isn’t the descriptives in this particular case, because we know them very, very well.

It’s rather, I think the question is, why are we letting it happen? And I think an interesting contrast here is the first Gilded Age. The first Gilded Age in the late 19th century, early 20th century, again, a spectacular takeoff in income and wealth inequality, and we shut it down.

The New Deal was essentially the shutting down of that first Gilded Age. Less discussion, I would argue, about shutting down the second Gilded Age. I think in part it’s because this Gilded Age comes with a boatload of crises, crisis after crisis, safety net cuts, governance problems, AI, many, many more.

And that this crisis-solving— we have to try to take care of these problems, right?— and the crisis-solving absorbs all of our energy, or much of it. And I don’t begrudge any bit of that energy because we need to take on these crises, right? But we ought to have a second front that might be opened up a bit more than it has to this point, and that’s taking on the underlying problem itself, which I would argue is the second Gilded Age, and that was precisely what Evan, I think, put forward so eloquently.

So I won’t belabor that point. So this is a presentation about that underlying problem and how we might take it on. Now, of course, it’s not an easy job.

And a lot of people think is it intractable, the second Gilded Age. And that’s perhaps another reason why we haven’t taken it on. What I want to show is not intractable at all.

We can eliminate extreme inequality. We can eliminate poverty, or nearly so. We can eliminate homelessness, or nearly so.

How? I’m going to take a guaranteed income approach. So I’m standing on the shoulders of many giants here.

Nothing new. I’m just going to lay out how you could take that approach, put it on steroids, and convert it to a full-on automated transfer program. Now, I’m going to do so for the US.

I understand this is about California, but I see no tractable way to take on California’s problems, save with this federal backbone. There’ll be a lot of additional work to be done, but we need the backbone. And so I’m going to talk about that backbone with an eye toward, in the end, of course, taking on California’s problems, as well as that of the country.

Okay, this is the picture of simplicity. That’s why I said I’d do it in ten minutes. The entirety of the proposal: three transfer programs, each targeted to a different problem.

The subsistence transfer, as I’ll call it, is targeted to eliminating deep poverty. And the main beneficiary then would be those who are destitute. The work transfer is targeted to ensuring that work pays.

The main beneficiaries here will be the working class that is mired in a low-wage world. Their work doesn’t pay. And the third transfer is what I’m calling a positional transfer.

It compresses the income distribution, and it can be, in effect, seen as a transfer from those who are well off to those in the middle. Okay, I’ll review each in turn. I got to use up my ten minutes.

Review each in turn in a bit more detail. Start with the subsistence transfer. The goal, to eliminate deep poverty, where that’s defined as falling below 50% of the federal poverty level.

$30K or so for a family of four is the federal poverty level, 50%, about $15K. So why do this? Besides it being the right thing to do, holding that aside, if you need an economic rationale, and many people do, a subsistence transfer Is vastly less expensive than the fallout costs of destitution, as measured, say, in malnutrition, other types of health costs, foregone human capital development, and on and on.

So what does this transfer do? It just tops off current benefits, if you have any, like SNAP, TANF, housing assistance, up to 50% of the federal poverty line. So if your only income is welfare, you would top out at 50% of the federal poverty level.

You would be topped off up to that level based on how many such benefits you have. If you also have earned income, it’s taxed in effect at 25%. So if you’re entirely based on earned income, you’ll actually be getting this subsistence transfer up to 200% of the federal poverty level.

Here’s the definition, but I do only have 10 minutes. It’s just what I said. Why?

What’s the payoff here? Destitution is eliminated. No administrative burden.

Automatic monthly payment via the IRS. It’s absolutely crazy that we have two redistributive systems, one that’s kind of the shopping center, as it were, for those who have less money, and another that’s the redistributive center for those who are well off. We should have one redistributive center, the IRS.

So automatic monthly payment via the IRS. Existing programs continue. It’s a top-off.

Just to eliminate destitution. It will support evidence-based evaluation. Typically, we, of course, oppose any efforts to eliminate underperforming programs because we know what will happen if we don’t oppose that.

There will be nothing, and there’ll be yet more destitution. With this backstop in place by law, you can start thinking about replacing or improving underperforming programs, because you know the destitute will be protected. And then finally, there’ll be carve-outs for externality-rich programs.

So there’s a portfolio of carve-out programs. These are programs that won’t affect whether or not you get the subsistence top-off. They’re so important that they will always be there.

These are programs that are rich in benefits, not just to the beneficiaries, but to their children, to society at large, and they just cannot be eliminated. Okay, so that’s the positional—sorry, that’s the subsistence transfer. Now we’re at transfer number two.

The work transfer. This is simple: to incentivize work, to ensure that all workers, even those that the EITC undervalues, like childless families, are incentivized to work, to ensure that even non-claimers are incentivized for work. We, of course, have programs to increase take-up, programs about programs.

We don’t need that. We just make sure that everyone gets it who qualifies. So we adopt here the time-tested EITC schedule.

I won’t go into it because, of course, all of you have that memorized. But now it’s on steroids. So we just piggyback on the existing system by topping off the current EITC payments.

So this is mainly going to low-pay workers who can’t afford to live in this state, and they’re getting a top-off that incentivizes that work. It’s going to the working class. Final transfer, the positional transfer.

Goal: to compress at the higher ranges of the distribution. The beneficiary is the middle class. It looks like the EITC schedule, but now it’s shifted far to the right of the distribution.

You can see it’s going at its highest levels to the middle of the income distribution. And then the phase-out happens at the high levels of the distribution, and that means that the effective marginal tax rate will be low because they’re making so much money they’ll never even feel the phase-out. Okay, so does it get the job done?

Are we indeed shutting down the second Gilded Age with these types of transfers? And I’m going to show you we do. So what about those who are destitute?

We can take a look at how they’re faring under this transfer regime. So this is coming out of the Current Population Survey. We implemented these transfers in a simulation.

And what I’m showing you here now is what that implementation delivered with respect to changes in inequality. So let’s look at the 50/10 ratio. We’re just comparing the income of those at the middle of the distribution as against those in the 10th decile.

So the gray dot there pertains to our existing 50/10 ratio. It’s just a little lower than 3. So people at the middle make nearly three times as much as those at the 10th percentile.

With the transfer, that goes down, as you see with the arrow, goes all the way down to about two. That’s a dramatic reduction. We soar past the levels that prevailed in the U.S. in 1970.

We never did a good job with the destitute. Even in 1970, before the takeoff, we were a disaster zone. But so we go well past that, and we look like Europe.

We look like the fancy parts of Europe, like Sweden. What about the working class? So now we’re talking about mainly the work transfer and whether or not the supplements to their low pay is getting the job done as regards now 50-20 inequality, because the people in the 20th percentile are roughly where the main beneficiaries are to be found.

And here again you see, now it’s the second row. You see that with respect to the 50-20 comparison, the current US is the light dot. The dark dot is where you get after the transfers are applied, and you see you soar past the US 1970 marker, and again you’re in the land of Europe.

How about 80-20 inequality? So now we’re talking about the positional transfer. It’s to compress the income distribution.

The beneficiaries are mainly the middle class. So I’m going to skip to the middle class right here. And you see that we don’t quite get to U.S. 1970, but we’re almost there.

We’re working on that. This is an easy nut to crack. How would you do this?

How would you do this? One law. This is not a difficult nut to crack.

One law. Establish the Fairness Defense Council. That’s what the law would do.

Its mandate to implement the country’s inequality policy. We now have no one minding the inequality store. The FDC would be minding the inequality store.

It’s a visible coordinative hand for inequality policy. Think about it like we think about the Federal Reserve System. It’s a visible coordinative hand for monetary policy.

We need that for inequality. We need someone to be minding the store. It would be the FDC.

Don’t fear the visible hand. We already have it. Right?

We just need it. We need another one for inequality policy, and then modest tax reform. Can’t talk about it here, but it’s very tractable on the tax front without us even looking like Europe in terms of tax, or even, of course, how we looked in the past.

[PARTICIPANT]

(unintelligible)

[DAVID GRUSKY]

Skip tax. Okay.

[PARTICIPANT]

No, I would love to talk about it, but I don’t know you.

[DAVID GRUSKY]

Yep.

[PARTICIPANT]

We only have ten minutes.

[DAVID GRUSKY]

Okay, what’s the FTC mandate? I’m bringing this home. What?

I said ten, and I didn’t quite do it. Okay. What’s the FDC mandate?

Eliminate destitution. What does that mean? It means you must deliver that subsistence transfer.

You have to bring all family units above 50% FPL. So mandate one, deliver that subsistence transfer just as I described it. Mandate two, ensure that work pays.

That just means deliver the work transfer that will go principally to the working class. Mandate 3: Restore pre-takeoff inequality levels, operationalized as restoration of 1970 levels of 80/20 and 80/50 inequality ratios. Mandate 4: Tailor positional transfer to funding cap, where cap is 2% of average GDP over last 5 years, something in the $500 billion range in 2024.

Plus a countercyclical adjustment. We can talk about that, but the main point here is if targets could be met with a lower positional transfer, use the balance to fund future countercyclical adjustments. If targets cannot be met, you adjust the apex of the positional transfer.

Adjust the apex of the positional transfer downward to use up the money you have. So you’re not going to reach your goals, but you’ll get close, hopefully. You should.

What are the constitutional issues here? The FDC must be established by Congress, given that only Congress has the power via Article I to tax and spend. Congress can only delegate implementation of inequality policy to FDC if it does so via a tight rule-based system.

That’s what I just talked about. The FDC cannot exercise discretion above and beyond Congress’s intent. That’s exactly what we do.

No constitutional issues here at all. This is one law. One law.

And we shut down the second Gilded Age. Okay, what’s the payoff? Last slide.

Should I go for it?

[PARTICIPANT]

Keep going.

[DAVID GRUSKY]

Okay. It’s not trivial. We end the second Gilded Age.

We eliminate poverty and extreme inequality. We do what any society should do. That’s not bad.

A legible system. In designing this, my team was always thinking about What could you teach in a civics class in high school that would be how we teach the New Deal? This is our new New Deal.

It’s got to be super legible. Each one of these transfers has to make sense. They’re straightforward.

High school civics. Instantly implemented, one bill. Immune to behind-the-scenes elite capture.

Unlike predistributive reform, which I love, but the problem with predistributive reform is that it is incredibly susceptible to elite capture. You can promise you’re gonna institute antitrust regulation, but at the end of the day, 10 years later, thousands of white papers, that policy was captured, and it didn’t happen. This is not vulnerable to capture.

People will know exactly what’s promised. They can see the checks coming in. If they don’t come in, what’s in alignment with what’s promised, That’s a problem, and you vote those folks out because you promised to do this and you won’t be doing it.

Instantly verifiable. What are the systemic payoffs? It’s not just a transfer.

It increases the leverage of workers. They have a higher reservation wage. It’s not just that they’re getting a transfer, they actually can use that for purposes of power and by virtue of that, negotiate higher wages.

It allows underperforming programs to be excised without welfare loss. Transfers always backfill. It’s a predistributive reform that unleashes productivity by increasing access to human capital investments, including retraining, and it incentivizes additional predistributive reforms to the extent they’re cheaper than transfers.

Look at it this way. Why don’t we have predistribution? Because the elite doesn’t want it.

We have complete and total elite capture, right? Well, the elite will want predistribution if it’s cheaper than transfers, right? So they’re incentivized, along with the rest of us, to look for them.

Complete change in the game. Thank you.

(audience applauds)

[EVAN WHITE]

Thank you, David. I failed apparently in two respects in my role as moderator. First is that I lost Sam.

(laughter)

He’s back. And the second is that I forgot to do the actual introductions of these fellows. I’m very sorry, David, for not saying more.

I know how everyone lives for the intros. But briefly, I know you’ve already heard from him, but David’s a professor of sociology at Stanford, where he directs the Stanford Center on Poverty and Inequality. Fantastic outfit.

Check out the research. He’s also a senior fellow at the Stanford Institute for Economic Policy Research, a member of the National Academy of Sciences and the American Academy of Arts and Sciences, and co-editor of Pathways magazine. He has several books included, The New Gilded Age, which you’ve heard a little bit about today.

Sam Trachtman is a senior researcher at the Berkeley Economy and Society Initiative, where he leads the research program on the political economy of California, and recently wrote a white paper series on making California more affordable, which he’s gonna talk about right now. So give it up for Sam.

(audience applauds)

[SAM TRACHTMAN]

All right. Thanks, Evan. Thanks to the Matrix, and thank you guys all for being here.

My solutions, I think, are not going to be as simple as David, and also, federal policy is above my pay grade, so I’m going to focus on things in California. So, I think I can skip these couple slides because Evan set this up so nicely, showing that California is at once a very wealthy place and also a very poor place, high poverty rate, once you take into account the cost of living. So what gives?

There’s basically, I think, two reasons why you have this central contradiction at the heart of California economy and society. Number one is the cost of living, and I think, there’s a notion that the cost of living in California is just a product of our high incomes. And if you look at the data, you can see that that’s not the full story here.

So here on the y-axis, you can see estimates of the cost of living from the Bureau of Economic Analysis, set where the kind of US average is set to 100. And on the x-axis, you have median household income, and these are all US metro areas plotted here. And what you can see is there is an upward trajectory, an upward correlation, sorry, a correlation between household income and the cost of living.

But California metros are systematically lying above the regression line, meaning that at any given level of income, California metros are more expensive than you’d expect them to be. So that’s one thing that’s going on that’s driving poverty in California. And the other thing which has been alluded to, this is data from PPIC, is growing income inequality.

So if you look from 1980 forward and look at income growth by percentile, you see growth of over 60% at the 90th percentile and less than 20% at the bottom. So we’re getting a widening income distribution, as we’ve already learned about. I think something that’s important to recognize about poverty in California is that coastal poverty and inland poverty looks quite different.

So coastal poverty is really a product of high housing costs. If you look at a place like San Mateo, its official poverty rate that only looks at incomes is only 5.6%. Adjust that rate by the cost of living, and that rate of poverty bumps up to 16%.

And it has low unemployment, unemployment of only 4%. Compare that to a place like Fresno County, where the official poverty rate and the cost-adjusted poverty rate are the same, 16.5%, and the unemployment rate is double what it is in San Mateo County at 8%. So the solutions for a place like San Mateo to poverty are going to look quite different than for a place like Fresno, where the problem is much more incomes and opportunity.

In San Mateo, the problem is much more the housing shortage. So in the series that Evan mentioned, we try to get at how to make California less poor and more affordable. And I think you can think about a few different ways to go about doing this.

So one, you could try to lower the cost of living. And in the series we talk about two main ways you could do this. One, by fostering growth and remedying the housing shortage primarily, and two, cutting unnecessary rules in California that act as hidden cost-of-living taxes.

So that’s kind of one bucket of reforms you might think about. Another bucket is increasing the value of government programs, so kind of improving the programs that we have so that people are getting more value from the services that government is offering. And then kind of other things that you might think about that are not in the scope of the research that we’ve done are trying to boost incomes at the low end of this distribution, which is, I think, a tricky problem, but one that is worth thinking hard about, and I have some thoughts that I can share in the Q&A.

And then also, you might think, and this is a highly salient political topic in California these days, but how do we raise more revenues for state programs that help people that are struggling in California? And these clearly could help, but I would argue is not necessarily a silver bullet, especially given federalism and the issues of raising a lot of new revenue at the state level versus the federal level. Okay, so I’m gonna, the rest of my time kind of talk through some of the research we’ve done, and I apologize.

We have kind of more information to present than time, so I’ll do my best, but I may not get through everything. So feel free to cut me off, Evan, or I’ll try to be aware.

[EVAN WHITE]

That’s okay. We have two panelists instead of three, so.

[SAM TRACHTMAN]

That’s true. Okay. Okay.

So, I think the first thing to convey from the research is that if we want to seriously address poverty in California, we need to foster growth, we need to build housing infrastructure, other infrastructure that allows for growth and addresses the housing shortage. So there’s an economist, Cullum Clark, who crunched a bunch of data to look at all metro areas in the US and compared the predicted growth in housing supply from 2010 to 2023 based on supply and demand factors to the actual housing growth that these areas experienced over that same time period. And when we look at that data, we see that California metros are systematic underperformers in terms of growth.

So we are growing much less than would be expected based on supply and demand factors. Okay, so if you look just within California over time, basically since 1990, we have been producing much fewer units than we used to, both in absolute terms and as a percentage of total U.S. housing production. So the gray bars are the absolute number of homes built in California, scaled on the left axis, and then the blue line is the percentage of total US homes built in California.

And you can see both of those are trending downward over time, even as prices in California are going quite high, this is kind of defying the laws of supply and demand. where you’d expect, as prices are higher, that more of the US homes would be built in California. So this is clearly a sign that something is going wrong in the housing production system.

So this is a complicated question that a lot of ink has been spilled on, but I would point to kind of three main factors to think about in trying to understand why California is such an underperformer when it comes to the production of housing. So first is zoning. Starting in the ’60s and ’70s in the backlash to the rapid postwar growth, cities imposed much more stringent zoning rules that made it harder to build.

And these have kind of persisted and even grown up to the present day. The second big factor is environmental review. I’m sure everyone here has heard of CEQA, the California Environmental Quality Act, which was signed by Governor Reagan in 1970 and expanded in a judicial ruling in 1972.

And this basically makes it very easy for anyone to sue to try to block new development, new projects from going up, as long as those projects go through a discretionary review. And number three is Proposition 13. This is a famous California proposition that caps property taxes and growth in assessment.

And the way this contributes to housing underproduction is it dries up city revenue that we need to pay for new infrastructure, and it also reduces the incentive for cities to actually want to promote growth in the housing stock, and they’re actually start to favor more commercial production because that produces sales revenue for the city. So three big factors that have kind of persisted over time and are still making it hard for us to build the housing and infrastructure we need in California today. So we’ve actually made a lot of progress on these issues, and I won’t talk too much about this, but over the past three years in the California Legislature, there’s been significant reforms to address these problems, but there’s still a lot to do when it comes to our building codes, when it comes to the impact fees that cities impose on new development.

There’s financing models that the state could adopt, like revolving loan funds that could give us the affordable housing that we need or help contribute to affordable housing growth. And there’s kind of new innovations in things like factory-built housing that the state could support better to drive down the cost to build and ensure that we can build more of the housing that we need. Okay, so I know that was a, quick tour of these issues, but kind of the second way we talk about in the report that you could drive down the cost is by reforming regressive regulations.

And I think this is a tricky subject to talk about for folks who lean on the left, like myself, because I think there’s kind of a reflexive opposition to anything that seems deregulatory and kind of… If a regulation seems like it’s producing some progressive goal, then you want to defend it. And I think there’s a lot of regulations doing a lot of useful things in California.

And at the same time, we have a lot of regulations on the books that, when you look at the details of implementation, are not as effective as we’d want them to be. And in addition, actually, end up increasing the cost of essentials like housing. energy, or childcare.

So what we argue in the report is that we should really be trying to ensure that regulations are effective, number one, and then also, when possible, trying to shift the incidence of who pays for the cost of these regulations up the income spectrum, so they’re funded more progressively, potentially through the general fund. We apply this lens to a bunch of different areas of California policy, but I want to talk in particular about energy. So California now has the most expensive energy in the country, and this is a problem both from a poverty and unaffordability perspective, but also from a climate perspective, because it reduces the incentive for people to electrify their vehicles, electrify their homes.

And there’s two main reasons that California has such expensive electricity. One is that we subsidize rooftop solar through electricity rates, and two is that we pay for wildfire damages and wildfire hardening also through electricity rates. And the argument we make is that this is a pretty nonsensical way to pay for these kind of public goods that we might want, and rather we should pay for them progressively, not regressively in a way that makes it harder for us to meet our climate goals.

And we should have a real conversation also about how much we want to subsidize rooftop solar, which is now a mature technology, and about, kind of the efficiency and effectiveness of the wildfire spending that utilities are doing. Okay, so the other area we talk about in energy is the cost of gasoline. We have very expensive gasoline, mainly due to environmental and climate regulations, and many of those are working quite well, but some of them are not.

These include the Low Carbon Fuel Standard and CARBOB, both of which are kind of functioning now as kind of policies that protect producers of certain products. So in In the case of the Low Carbon Fuel Standard, this is a market-based program that mostly is supporting the biofuels industry at this point, which is not necessarily better for the climate than fossil fuels. If you look at CARBOB, the smog benefit of the California-specific fuel blend is no longer very… a strong case.

If you talk to people who study this closely, most people think this is mainly serving as protection for California oil producers and refiners. So we really should think hard about a lot of these policies that are producing regressive effects and potentially minimal environmental benefits. Okay, so the third and final area I want to talk about, shifting gears a little bit, is how do we improve the effectiveness and efficiency of the social spending we’re doing?

So California has this really dynamic economy. We have a progressive tax system which allows the state to collect a fair amount of revenue. We have a pretty large budget, and we should be using that budget effectively to help people who are struggling with unaffordability and poverty.

And in many cases, due to complexity, due to poor design, these policies are not working as well as we might want them to work. And we’re not getting as much of a bang for our state public dollars as— I messed that up— a bang for our buck with our public dollars as we might want. So I think a good example is, publicly subsidized affordable housing.

This chart is showing analysis from RAND, where they compare the cost of producing publicly subsidized affordable housing in California to peer states. And I think the main outcome from this, or the main finding is that the cost to produce affordable housing in California is much higher than in Colorado and in Texas, and it’s also much higher than it costs to produce market-rate housing in California. So why is this?

The research points to two main culprits. One is that affordable housing developers are having to cobble together a bunch of different funding sources, which leads to delays in the project and more cost. And number two is that they’re having to comply with a bunch of design and labor standards that drive up the cost.

And I think we can have reasonable debates about kind of the value of those standards versus the costs, But the problem is we don’t actually know what costs and benefits we’re getting from those standards. So I’m probably basically out of time. We also have a very complex childcare system.

I won’t walk through it. In summary, if you want to address poverty and unaffordability. Sorry, I haven’t talked much about wealth.

But we really need to foster growth. We need to remedy our housing shortage. We should really take a hard look at the regulatory system and make sure that our regulations are effective and try, when possible, to shift the incidence up the income spectrum or income distribution.

And number three, we should take a hard look at state programs and make sure we’re spending in effective and efficient ways, in addition to other things like what David has proposed. Thank you.

[EVAN WHITE]

All right, mic’s on, gentlemen. Great. Can you guys hear me okay?

Okay. Great. Thank you, Sam, for that.

So I’m going to kick off the discussion, but we’re going to also open it up for questions. So think about your questions in advance. I don’t think we’re gathering them, but I’ll just call out after we have some preliminary discussion.

So I’m going to start with David, and I’m going to start with the question that I’m sure a lot of people in the audience have on their minds, which is, how do you pay for it? What about the politics of it? How would you actually make this happen?

What do you think are the barriers to getting something like this done?

[DAVID GRUSKY]

Yeah, so in the paper that we’re writing, we don’t focus much on funding. It’s kind of a strange asymmetry, I think, out there, in which there’s been a lot more discussion about how to generate more tax revenues than there is about how to spend that money once generated. And so we don’t want to take the oxygen out of the room in kind of weighing in on the different ways in which revenues could be secured, and want to focus on what we ought to do with the money were we to have it.

All I want to say is that you can take any number of the standard proposals that are out there. You would have to probably combine them in a various portfolio, but there are many, many ways to skin this cat, many, many ways to get there. And if you’re opposed to each and every one of these ways in which we generate revenues, you’re opposed to ending the second Gilded Age.

[EVAN WHITE]

Size it for us, though. How much would this cost? And how does it compare to

[DAVID GRUSKY]

Uh-huh.

[EVAN WHITE]

our current safety net?

[DAVID GRUSKY]

Yeah, so it’s about $500 billion to do what I described here.

[EVAN WHITE]

Okay. And what?

[DAVID GRUSKY]

Less than 2% of GDP.

[EVAN WHITE]

Okay.

[DAVID GRUSKY]

And it would not require… If you wanted to do it through income taxes, you could get there without going to a level that’s as aggressive as, say, the European countries. You might have a top marginal rate that’s roughly like theirs, 45%, but you would have that kick in at a much higher level, like a million, rather than the lower levels that’s the case in Europe.

[EVAN WHITE]

And…

[DAVID GRUSKY]

Very tractable.

[EVAN WHITE]

Compare the $500 billion to… What’s the current cost of a program like SNAP or Social Security? If you know off the top of your head. I don’t, so…

[DAVID GRUSKY]

I am weak on facts.

[EVAN WHITE]

Okay. Fair enough. Okay.

[DAVID GRUSKY]

So I can’t do that.

[EVAN WHITE]

Yeah, fair enough. Okay. Sam, I’m gonna go over to you and give you the equivalent hardball question that might come, which is…

I would say a common critique of the type of affordability policies you mentioned is that they would walk back commitments we’ve made on the environment or that we’ve made on wages, right? For example, getting rid of or reforming net metering might lessen the incentive for people to invest in solar. Changes to gas taxes might cause more pollution.

Changes to prevailing wages standards would hurt unionized labor in the construction industry, things like that. Are you arguing that there’s a way to avoid those trade-offs, or do you feel like those trade-offs are worth it in order to make California more affordable?

[SAM TRACHTMAN]

Yeah, it’s a good question. I think in some cases the trade-offs are very much worth it. So, for instance, in the case of the Low Carbon Fuel Standard, that’s a policy that is Driving up the cost of gasoline, subsidizing biofuels.

It’s supporting in-state, it’s supporting refineries, so maybe we would lose some refinery jobs. So if you ask me about that type of trade-off, I would say, this policy does not make any sense. Maybe it’s going to be politically difficult to reform it, but there’s clear benefits for the state of California to get rid of a policy that is protectionist and isn’t having really any climate or environmental benefits.

So then there’s another bucket of policies that we have to think harder about because they are producing Potentially real and substantial benefits, and they’re also producing costs. And in cases like that, let’s say prevailing wages for affordable housing. So if you mandate prevailing wages, it means you get, for a given pot of money, you get less affordable housing units are produced, but the ones that are produced are supporting union jobs and are being paid at higher wages.

Okay, so how do we think about that trade-off? I don’t know, but we should know. We should at least know how many units we’re losing or gaining and what the benefit for workers are, and then have that on the table and then have politicians or have some process to make those trade-offs, and it shouldn’t be kind of invisible or off the radar to discuss.

[EVAN WHITE]

Great. I want to try and bring the two presentations together a bit. David, you focused on the income side of the picture, mostly, and Sam, you focused on the expenses side of the picture.

And you know, these are two sides of the same coin, right? A dollar saved is a dollar earned, I suppose. But why do you think it makes sense, this question’s for both you, to focus more on one or the other when trying to address sort of underlying problems of poverty and inequality?

Either of you could go first.

[SAM TRACHTMAN]

You wanna go first?

[DAVID GRUSKY]

Nope.

[SAM TRACHTMAN]

Okay. I think the reason I focused more on cost is because I think— well, one, this is the area where California looks a lot worse than other places. So if you ask me, like, why is California poor?

The reason number one is that we’ve made it really hard to build the housing we need. So I think that’s a natural place to start. And I think there’s potentially more low-hanging fruit when it comes to the cost side in California than when it comes to incomes.

At the same time, especially when you’re looking at inland California, I think low incomes, high unemployment, low opportunity is a huge issue, and I think one that doesn’t get as much attention than it maybe deserves in California. And I think it’s just a really, really tricky topic. I thought there was a talk last year from Dani Rodrik on how to increase low-end incomes, and he says, okay, you have to increase productivity in the service sector.

And it’s like, okay, that makes sense, but how do you do that? And we don’t really know for sure. In preparing for this, I was reading a little bit about some studies, economic studies on the returns to community college vocational and technical training that looked promising.

So maybe investments in technical training in our community college system. Anyway, I’m going beyond probably the scope of the question, but the main answer is that I think the income question is potentially more difficult, more fraught than the cost question when it comes to California. But I think it’s a conversation well worth having.

[DAVID GRUSKY]

Thank you for going first. I owe you one. I guess the argument I would make is that you have to sort of figure out what’s in the DNA of this country, and for better or worse— and I definitely have a view on that— but for better or worse, what’s become our DNA is markets.

That’s the neoliberal commitment. And yet And to participate in markets, we need money. And the problem is we built markets everywhere, even places where they ought never exist.

Like, we now mete out opportunity to make human capital investments. We mete that out with your capacity to buy access to those markets. That means we have opportunity markets, right?

We put opportunity, which is supposed to be open to everyone. Now that’s on the market, right? Everything is on the market, right?

So if you have everything on the market, and if you think it’s going to be very difficult to reverse that, if you think that’s in our DNA, for better or worse, if you think that’s a bet that’s going to be hard to undo, If you think that, then what you want to do is make sure that everyone has the capacity to participate in those markets. And that means redistributing income so that by virtue of having, if you will, the bad luck of being born into a family that has less money, you’re not locked out of, say, opportunity markets. But your family will have a bit more money so that you too can make investments in human capital.

So if we build a society around markets, it seems natural. To then say, we need to provide people access to those markets through redistribution.

[EVAN WHITE]

I was interested in your proposal that, you kept some of the existing safety net pieces in place, and that in transferring authority to this FDC, You know, the destitution portion of the proposal is an anti-poverty— It’s not at its heart about inequality per se. It’s more about lifting people out of poverty, which the existing safety net is largely designed to do. What’s the argument for moving that over to a new authority that’s focused on reducing inequality?

Do you think that it would be more effective with that framing than some of the existing anti-poverty programs?

[DAVID GRUSKY]

Well, our existing programs do not do a good job with destitution. One of the biggest failures of the current safety net, and there are many, but one of the biggest failures is that deep poverty is not well addressed. Haven’t set up systems that address deep poverty, and that should just be, I think, off the table.

And what the subsistence transfer does is it takes it off the table. Now, We can and should think about programs that might beat out the subsistence transfer, and having that subsistence transfer gives us the luxury of thinking about whether there might be a better way to get that job done. We’re just saying until that happens, until that’s found, we will definitely have the back of those people who need that.

But yeah. So if it were getting that job done, I’d be less interested in trying to repair that deficit. But there is a deficit.

It’s big, it’s substantial, it’s extremely costly, and so we ought to do something.

[EVAN WHITE]

Sam, you mentioned some of the pro-housing production, some of the deregulatory efforts over the past few years. I think there’s a fair argument to say, and I tend to agree with some of the points you’re making, but there’s a fair argument to say that we haven’t seen any results yet from anything that’s been passed. And some of these are actually more than two, three years old.

What do you think are the proof points For these supply-side strategies, showing that they work, and how to convince voters or policymakers that they are worthwhile. Because at some point, you know, you could pass a number of pro-production laws, and if we’re not seeing prices go down, which honestly, they might never go down, they might just stop prices from going up. What’s the sort of case that you’re making, and when would you expect some of these policies to finally bear fruit?

[SAM TRACHTMAN]

Yeah, I mean… A lot of the biggest policies, I think the major progress we’ve seen on CEQA reform, major progress on zoning reform with transit-oriented development just happened in the 2025 session, so I think it’s too early to see effects from those. There were prior kind of YIMBY successes.

A lot of those were kind of not as strong bills as you might want because there were a lot of political compromises that were made. Say with organized labor or with, coalitions of cities that didn’t want to see too much growth. So I think the reality is that the politics of pro-supply housing policy can be quite difficult, and it can be, even when you see bills pass, they may not be bills that are strong enough to totally move the needle, especially in an environment when there are high tariffs that are increasing the cost of Building supplies, an environment where interest rates are high, which also increases the cost to build.

So there’s a lot of kind of complicated factors for why you may not see immediate effects of these policies. But I think one good example is the case of ADUs, accessory dwelling units, which are kind of in-law units in people’s backyards. And the California legislature stepped in many years ago and basically made it really hard for cities to restrict ADUs statewide.

And since then, and they put no labor standards or kind of other ways that made it more costly to build these units. And you see a huge growth in ADUs once you legalize them. So I think if you apply that framework, if you kind of have a simple policy that legalizes statewide a certain type of housing, That housing will get built, and we see that in other states and in other cities like Seattle.

So I think you’re right that it’s a little frustrating and demoralizing, but I think that the evidence, both kind of just from looking around us and also from like reams of economics research, I think is pretty, pretty clear.

[EVAN WHITE]

I want to drag you for a moment and get your questions ready, because I’ll turn to the audience after this, to the current ballot, which everybody in the room is going to have to fill out

[SAM TRACHTMAN]

All right.

[EVAN WHITE]

over the coming days. And some of the topics that you guys both talked about, I think, are quite relevant to the current ballot, and I’m not going to ask you to say which way you’re voting, but maybe you could just offer thoughts. And David, I’m going to ask you to offer thoughts on the billionaires’ tax.

This is Prop 40. You’re also welcome to comment on Prop 3, which is a high-earner tax to fund education and healthcare. Any thoughts about how this does or does not solve the problems that you highlighted in the talk?

[DAVID GRUSKY]

It’s certainly one of the proposals that can get the job done. And I would be in support of it personally, but I recognize that some people might not want to. I just want to get the job done.

And I think there are many, many ways to get the job done. That is definitely one way to really take on wealth. It’s kind of a low-hanging fruit, but I would rather be indifferent to how we get it done and commit to getting it done.

Because it could be the debate about how to get it done that undermines everything, can steal, take all the oxygen out of the room on the question of whether or not we’re gonna get this done and shut down the second Gilded Age.

[EVAN WHITE]

Sam, I’m going to ask you about Prop 45, which is CEQA reform for essential projects, put shot clocks on permitting and things like that. Any thoughts about that? You’re also welcome to comment on Prop 1, which is the housing bond.

Or Prop 37, which offers 3% down payment mortgages for Californians. Just getting you guys ready, all right, for the upcoming ballot.

[SAM TRACHTMAN]

I can’t say that I’ve read Prop 45 close enough yet to have a strong view. My inclination would be that if CEQA, like CEQA reform, weakening CEQA is generally, I would say, a positive thing, even though there may be trade-offs that we need to think about and think closely about. Yeah.

I’ll leave it at that.

[EVAN WHITE]

Okay. Right on. I apologize, we’ll have to end there. Thank you so much to David and Sam. Please give them a round of applause.

(audience applauds over jazzy music)

[WOMAN’S VOICE] Thank you for listening. To learn more about Social Science Matrix, please visit matrix.berkeley.edu.