The U.K. “Is Renowned for Its Excellent Food and Drink,” Deluded Brexit Masterminds Insist
Selling “innovative British jams” to France was only an hors d’oeuvre for the United Kingdom’s Brexporting feast. The post-Brexit plan for enhancing the U.K.’s culinary fame now also envisions selling beer to Germany, whisky to Japan, poultry to China, and tea to India. (In other news, the U.K. will be shipping snow to Canada.)
Theresa May’s government, which is negotiating plans to leave the world’s largest trading bloc, intends to drive the country forward with a rejuvenated export sector. (The pound has conveniently fallen to its lowest level against the dollar in several decades, which could certainly help.) Food and drink is the country’s largest manufacturing sector, and will be at the heart of the upcoming Brexit negotiations.
It’s easy to laugh (or cry) at a country staking its economic future on the one thing it has been famously, even indulgently, bad at. In some ways, the plan floats on the same current of deluded, nationalistic British grandeur that propelled the Brexit campaign. “The UK is renowned for its excellent food and drink,” the report begins, as sunny as the London sky. If there is a foodie culture in the U.K., it is eclectic and internationalist, inextricably tied up in the country’s post-war immigration boom. How fitting that a government that came to power largely on anti-immigrant sentiment now aims to promote traditional British foodstuffs abroad.
A Conservative Group Just Made a Great Argument for Government Spending
I know. It’s hard right now to take your eyes off Donald Trump's exploding oil tanker of a presidential campaign. Now may not seem like the time to argue about fiscal policy, as we might in a normal election cycle.
But at some point Americans will have to go back to arguing about things like taxing and spending. And when it comes to that topic, this week marked a small but fascinating milestone in the world of Washington policy thinking, as one well-known conservative think tank essentially abandoned one of the oldest arguments for why governments shouldn't run budget deficits.
For a long, long time, economists have argued that government borrowing hurts economic growth by “crowding out” private investment. Instead of lending to businesses, the thinking goes, savers end up lending to Washington to finance its deficits, which means companies have less to spend on things like new factory equipment or software that will set up the economy for long-term growth.
Crowding out isn't the only argument against deficit spending. But it's certainly a major one that's considered entirely orthodox. When the Congressional Budget Office makes its long-term economic projections, for instance, it incorporates the effects of government crowd-out into its math. As a result, the concept has historically been a potent talking point for conservative policy advocates and politicians—balance the budget and we'll free up money for investment, leading to more prosperity down the line.
But there have always been reasons to question the extent to which crowd-out is a real problem. And in our weird world of post-recession economics, there's good reason to doubt whether it's an issue at all. That's because the whole concept of crowding out is based on the idea that there's only so much money out there for governments and businesses to borrow. But for more than a decade now, the world has seemingly had the opposite problem. There are too many savings floating around and not enough investment opportunities to suck them up, which has led to persistently low interest rates and swollen asset prices. Nobody is exactly sure why this has happened, though there are plenty of theories. All the way back in 2005, Ben Bernanke theorized that emerging economies like China had created a “savings glut” by building up their currency reserves to fight off financial crises. More recently, Larry Summers has popularized the idea that the world is facing a period of “secular stagnation.” But either way, in a world where governments and corporations can get paid to borrow, nobody's really worried about the limited supply of savings, so concerns about crowding out seem a bit anachronistic.
This week, the conservative Tax Foundation—the Republican authority of choice on all things related to the tax code—publicly agreed that crowding out is so passé. It said so in a long, wonky post about the in-house economic model it uses to assess the impact of tax cuts on the economy. Basically, the foundation’s analysts don't think budget deficits created by giant tax cuts like the ones Donald Trump has proposed will hurt growth over the long term, because corporations and the Treasury will always find more money they can borrow:
Economists all agree that both budget deficits and private borrowing require saving. But the question is how scarce that saving is. At Tax Foundation, we believe saving is not nearly as scarce as the Penn Wharton model shows.
We believe this for a number of reasons: for one, many mainstream economists are discussing ideas like Secular Stagnation and the Global Savings Glut. These ideas suggest there’s oodles of cash on the right side of the equation, looking around for investments to finance and coming up short. As a result, interest rates are coming down in developed countries around the world as the savers bid up the prices of financial instruments.
Under these kinds of circumstances, worries about unavailable saving seem misplaced.
From a political perspective, there are a few funny things about this line or reasoning. First, it's just as good a justification for massive government spending as it is for budget-busting tax cuts. But aside from that, it also weakens the argument for tax cuts on investment income, which, of course, conservatives desperately want. One of the big points in favor of lowering the tax rate on capital gains is that it will lead people to put more money into stocks and bonds, leaving the companies with a bigger pool of money that they can invest. But if there's already an effectively infinite global pool of cash that companies can borrow from, leading people to save even more might be counterproductive, since it will just exacerbate the glut. When I brought that up on Twitter, the Tax Foundation folks countered that cutting capital gains rates will make companies invest more, because they won't need as high a rate of return on new projects to make their investors happy. But that's not exactly the standard argument you hear for slashing the capital gains rate. (I'm also skeptical about it, given that business investment in recent decades has proved to be pretty insensitive to the cost of capital, which also influences profits—but now we're getting a little deep.)
In any event, we've reached an interesting left-right convergence on the idea that budget deficits, in some very important ways, don't really matter anymore, or at least don't matter the way they used to. Of course, centrist wonks are going to keep incorporating crowding out into their economic projections. But if anything, that shows why you have to take those sorts of estimates with a grain of salt; we’re at a point where there are profound disagreements about the basic ways issues like taxes affect the economy. When we're all done rubbernecking at Trump, there'll be lots to argue about.
Who Made Domino’s Great Again?
Domino’s stock is hotter than a jalapeño pizza, up 46 percent since the start of the year. In a third-quarter earnings report released Tuesday, America’s largest pizza delivery company announced that revenues were up 17 percent over last year, which is actually fairly typical of the chain’s recent financial performance.
But it is a little confusing. When, and why, did the world start loving Domino’s?
I’d insert a joke here about the taste, but as a New Yorker, I could lose my rent-controlled apartment and municipal retainer fees for even ordering the stuff. But many people are saying that even here at the heart of the Pizza Belt, where Domino’s operates a modest 70-odd locations, the pizza has obtained a kind of cult status. Domino’s pizza is not an ironic fetish; it’s a genuine predilection.
It was only seven years ago that a couple of North Carolina Domino’s employees filmed themselves smearing their snot all over Domino’s foodstuffs. It was only six years ago that the tagline of the company’s big ad campaign was, basically, We Know Our Pizza Was Bad.
Craft Brewers Are Battling a Hops Shortage
Hops: They're delightful. They give beer its bitter snap and create those lovely piney, citrusy aromas in your India pale ale. Unfortunately, farmers apparently can't produce enough of the little green flowers to keep up with the demand from the ever-growing number of American breweries. And according to the Wall Street Journal, that shortage is one factor slowing down the rise of craft beer sales—which last year increased 8 percent, “ending six years of double-digit growth.”
I wouldn't exactly say it's time to pour one out for the craft beer boom based on those numbers, but the hop problem does illustrate how what economists call “frictions”—and what the rest of us call real life—can muck with the laws of supply and demand. Given the boom in fancy beer sales, you'd expect American farmers to be planting hops like mad to cash in on a blooming industry. And indeed they are. Farmers are devoting 65 percent more acres to growing hops than they were five years ago, according to the Journal. But it takes a few years for hop plants to reach their full yield. (That's a friction.) In the meantime, new craft breweries are still popping up every other day—from 2012 to 2015, the total number jumped some 75 percent. Making matters worse, hot, dry weather ended up destroying a good chunk of Europe's most recent hop harvest (apparently climate change is going to ruin our beer).
The upshot is that right now, supply can't really stretch to meet demand, which has made hops—particularly hot new breeds that beer nerds are clamoring for—much more expensive. As Reuters reported earlier this year, “Prices of some hop varieties have risen by up to 50 percent, industry sources say, while industry insiders say others are up to five times more expensive or simply not available.” Since breweries generally purchase hops using three- to five-year contracts, not all of them are suffering from the price hikes right at this moment. But many are, and newer brewers that haven't locked in their supply are struggling.
So, what does this mean about your beer? Chances are, it's going to get a bit more expensive in the next few years. And since beer buyers are pretty price-sensitive, that suggests we should continue to see sales growth cool off a bit. But beyond that, I imagine brewers will try to compensate by moving to less hoppy styles. So I hope you like sours. Can I recommend this gose?
Donald Trump Also Gave One of His Accusers Some Really Bad Financial Advice
Not only did Donald Trump allegedly attempt to sexually assault a former contestant on The Apprentice, he also allegedly offered her incredibly bad financial advice.
Summer Zervos, a Huntington Beach, California, restaurant owner and contestant on Season 5 of The Apprentice, recounted her harrowing experiences with the Republican presidential candidate in a Friday afternoon press conference. According to Zervos, she stayed in touch with Trump after he told her “you’re fired” on the show in the hopes he could arrange a position for her in his organization. Eventually, in 2007, Trump invited Zervos to meet him for dinner at the Beverly Hills Hotel. But instead of eating in the hotel’s famed Polo Lounge, Trump asked her to meet in a private bungalow on the hotel grounds, where he attempted, she says, to coerce her into having sex, kissing her “aggressively,” and “thrusting his genitals” against her. Zervos fought Trump off, telling him she came to eat dinner with him.
That’s the truly appalling part. What allegedly happened next was merely mystifying and, well, bad. After Trump stopped haranguing Zervos for sex, she says, he went on to offer some ghastly real estate guidance. As Zervos recounted at the press conference:
The conversation then focused on the fact that I had a mortgage on my home, which I told him was in good standing. He spoke about how he was able to maneuver to get out of debt. He told me that I need to let my house go into default and tell the bank they could take it back. He advised that the bank would then take anything to help rid themselves of a problem loan. He told me to call the bank and tell them I was leaving the keys on the table, and tell them to just pick it up. He said that would be a mini-version of what he does. He urged me not to make another payment on my home loan.
If you are thinking of trying this, don’t. Just don’t.
Many, many people missed payments on their mortgages during the housing crisis, around the time of Zervos and Trump’s encounter, and for years after. If only they could have convinced their mortgage lender to “take anything!” But not only did banks not make a deal, as Trump would put it; they instead immediately began to assess penalties, late fees, and other charges onto the loan, making the financial situation of the beleaguered home owner much worse. In millions of cases, the homes would be lost to foreclosure.
Even if by some miracle the kind of default Trump allegedly suggested worked (which wouldn’t happen!), it would have all but destroyed Zervos’ credit record for years. Zervos is not a multimillionaire (or billionaire) real estate developer, or someone making a mint playing a successful real estate developer on a so-called reality television program, or someone profiting by licensing her name. Zervos owned a popular restaurant in Huntington Beach. If hard times came, she would have needed excellent credit in order to even have a chance.
And didn’t she know it! Like Trump, Zervos’ restaurant-owning family declared bankruptcy in the early 1990, and lost almost everything. “They went bankrupt at the same time that Donald Trump did,” she told the Orange County Register in 2006. “He came out a little better than we did.”
So how did Trump do it? The funds Trump borrowed were significantly larger than the amount of money owed by the typical homeowner or small businessperson. Banks negotiated and made deals with Trump when his finances hit a rough patch not because he was such a savvy deal-maker and negotiator, but because they had loaned him so much money that they couldn’t afford to hang him out to dry. According to Reuters, which looked into Trump’s 1990s financial woes, these arrangements were not dictated by Trump but instead arranged by the banks and other lenders so they could get as much of their funds back as possible. It’s one thing to foreclose on a house worth hundreds of thousands of dollars, another thing entirely to take over a property worth hundreds of millions of dollars. No surprise, this is not how Trump recalls it. He claims he threatened to ensnare his lenders in legal proceedings that would go on for years, and that they immediately caved. Not true! And if Trump couldn’t get a deal the way he suggested Zervos should, certainly she wouldn’t have made it work either.
None of this to say that Trump didn’t follow his own advice. He did! But it wasn’t with banks. It was, instead, with small contractors and business owners who worked on properties including his casinos and golf courses. In a number of cases, he would refuse to pay bills, and then, when pressed, often threatened them with litigation, and then offered to settle the claims for pennies on the dollar.
They literally couldn’t say no. There’s a word for that.
Who Will Buy This Wonderful Social Network? There Must Be Someone Who Will Buy!
Salesforce has dropped out of conversations to buy Twitter, the Financial Times reported on Friday, leaving Slate's Moneybox team as the last remaining bidder with any standing. (Just kidding. It's cheap but it ain't cheap enough for us.)
"In this case we’ve walked away. It wasn’t the right fit for us," Salesforce CEO Marc Benioff told the FT. Sources told the paper that the sales process is virtually dead. Salesforce shares are up by almost 6 percent on the news; Twitter has plummeted by more than 6 percent. The company's stock has lost more than a third of its value since Jack Dorsey took over as CEO twelve months ago.
As Will Oremus observed last week, Twitter has a lot of problems right now: user harassment, management upheaval, flattening revenue, little user growth. Its core product has hardly changed since it launched in 2006. And yet, for all those issues, the service has come to feel like an indispensable feature of the 2016 presidential campaign (to say nothing of various breaking news events).
The Trump Brand Is So Toxic That His Company Is Now Planning Hotels Without His Name on Them
The best thing about Donald Trump, Hillary Clinton said on Sunday night, may be his children.
The business development team at Trump Hotels appears to agree. As Politico pointed out on Friday, at the end of September the company, led by Trump and his three oldest children, announced its new hotel brand would be called Scion. That means “descendant of a notable family,” noted the press release.
What’s really notable, of course, is that Scion is the rare—and possibly singular—venture of the Trump commercial empire that does not wear the blustering patriarch’s name like a badge.
If this does not quite signal the Trump Organization's retreat from the scandal, lies, and bigotry that have characterized Donald Trump’s presidential campaign, it does appear to represent a hedge of business against politics. And Scion may be an early indicator of how Trump the brand—which birthed Trump the politician—might wind up feeling, and managing, the backlash.
The golden Trump Scrabble tiles aren’t coming off the facades just yet. Scion hotels will mostly be conversions from the purchases of existing facilities. They are supposed to be hip, and in competition with hotels like the W. In that sense, the Trump name might have been a bad fit even before the boss revealed his contempt for Mexicans, Muslims, veterans, the disabled, and women. Scion is supposed to cater to the “ ‘we’ economy,” according to Kathleen Flores, an executive vice president for Trump Hotels. “It’s not a place to stay, but a place to be,” she told Hotel News Now this summer. Scion is about “connections,” said Trump Hotels CEO Eric Danziger. The concept is modeled on SoHo House.
You don’t need to go furniture shopping with Donald Trump to see why he might not be the most appealing ambassador for that crowd. (In swing states, only 1 in 5 Americans under 35 support Trump for president, according to a September poll.)
Still, Scion represents a sign of humility and realism at Trump corporate HQ that is invisible on the trail. For years, the Trump name was stamped on every asset in the Trump Organization, from condo towers, hotels, and golf courses to steaks and bottled water. Developers licensed the Trump name to encourage investments. And despite never reading books, Trump attached his name to a sham “university” that hawked get-rich-quick schemes.
Now, there are signs—from the business world and from consumers—that Trump may be losing his shine. “Bernie Madoff now has a better brand,” billionaire and Trump nemesis Mark Cuban tweeted last week. Back in August, I found that brokers were disguising listings in Trump-branded buildings using their street addresses.
Managers at the Trump International Hotel in Washington, D.C., told Politico that bookings have taken off and that the restaurant and bar are doing better than expected. But earlier this month, a few days before the World Bank–IMF meetings, New York magazine observed that every five-star hotel in downtown D.C. was booked solid—except for Trump International. Of course, you could argue that the cabal of globalist bankers set on usurping American sovereignty would be the ones avoiding Trump hotels. But I was there on a recent Saturday afternoon and can confirm that the place was essentially deserted.
The “check-in” company Foursquare reported in August that check-ins at Trump venues were down about 10 percent overall during the 12 months ending in July. That could reflect a lot of things, but one of the most important is that the Trump brand might be gaining stigma even if it is not losing customers. Foursquare looks at “explicit check-ins as well as implicit visits from Foursquare and Swarm app users who enable background location.”
In other words, people may still be staying at Trump Hotels, just not Instagramming their Trump-brand slippers. At the Trump Golf Links at Ferry Point, in the Bronx, a plaque on the 12th hole celebrates the “first hole-in-one,” by none other than DJT himself, during the inaugural round in October 2013.
“That’s something a dictator would do,” a friend observed to me disapprovingly. But he has booked a tee time for next weekend anyway.
The Huge Geographic Bias in Sharing Rooms and Rides
Uber and Airbnb may seem like they’re everywhere these days. But they have grown fastest—in some cases, at more than twice their national rate, according to a new analysis—in just a handful of American cities.
In a report released Thursday, Ian Hathaway and Mark Muro of the Brookings Institute make the case that U.S. Census data on “nonemployer firms,” which tracks the activity of businesses that earn at least $1,000 but have no employees, can serve as a good proxy for the independent contractors that underwrite the business model of companies like Uber. (That Uber drivers are characterized as contractors has been the source of controversy and lawsuits, but more mundanely, has also made it difficult to measure the extent and distribution of the start-up’s workforce.)
Muro and Hathaway split up payroll growth in ground transportation and traveler accommodation from “non-employer firm” growth in the same fields, and sort by metro area. What they find is staggeringly uneven growth between metropolitan areas, in a way that can’t be accounted for by the services’ own uneven growth rates. In the four largest cities in California, non-employer ground transportation jobs surged more than 100 percent between 2012 and 2014. In Chicago, an early Uber launch city, those jobs grew less than half as fast. In New York, the rate was half that, and less than half the national average.
Those city-by-city companions lose some value because of the timing: Two years ago was a long time in Uberworld. Service didn’t even launch in Miami, Austin, and Orlando, for example, until halfway through 2014.
Trump’s Tax Plan Will Be Great for Families With Nannies, Says His Billionaire Adviser
One of the worst aspects of Donald Trump's generally reprehensible tax plan is that, as currently written, it would end up raising taxes on many families with children, particularly single parents. This is because the proposal tries to streamline the tax code partly by eliminating some of the important tools, such as personal exemptions, that these households use to minimize their IRS bills. Pretty much everybody I know who thinks about taxes for a living and has looked at Trump's published outline agrees on this. It's not in serious dispute.
On Thursday, two of Trump's top advisers, University of California–Irvine economist Peter Navarro and billionaire financier Wilbur Ross, appeared at Washington's Tax Policy Center to defend the merits of Trump-onomics. Early on, Ross suggested that parts of the candidate's tax plan had been “misunderstood,” and that the legislation would be drafted to fix “any anomalies in the proposal that could cost some taxpayers more under Trump than at present. The intent clearly is that no tax payer, other than those with carried interest, will be disadvantaged.”
This prompted a question from New York University law professor and former Obama adviser Lily Batchelder: If Trump's people knew his plan would hurt some families, why were they waiting for Congress to fix it, instead of addressing the problems now? The response, from Ross, was pretty stunning. He proceeded to explain that, actually, Trump's current plan would not raise taxes on many parents. He then explained that a married couple earning $50,000 per year who employed a nanny would shave more than a third off their taxes. By “anomolies,” he had just meant truly unusual fringe cases.
To repeat: Ross' defense to the charge that Trump would raise taxes on single parents is that married couple who miraculously employ a nanny while earning just $50,000 per year will be held harmless.
In case you think I'm misconstruing anything, here's the clip and full exchange. The most charming part might be where Ross—net worth $2.9 billion, according to Forbes—refers to middle-class families as “little people.” It brings to mind Leona Helmsley's old adage: “Only the little people pay taxes.”
Batchelder: I was interested in your suggestion that Congress should fix the problems with Mr. Trump’s tax plan in terms of raising taxes on people with kids, both married couples and especially single parents.
Ross: That’s not what I said and that’s not what his tax plan does.
Batchelder: I was curious why what seemed fairly obvious—that this plan would raise taxes on a number of people with kids, why this wasn’t something you considered in advance and why you hadn’t quickly corrected that, instead of saying that Congress will correct it.
Wilbur Ross: First of all, you’re incorrect that it raises taxes on the little people. For a married couple, with two children and a nanny, earning $50,000 a year, there’s around a 36 percent decrease in their total taxes. With that same family, with a nanny, earning $75,000, there’s also a 30 plus percent decrease. For a married family, two children, and a nanny, earning $5 million a year, there’s a 3 percent decrease. There is no hardship on the people in the lower brackets. Your numbers are simply not correct. What I was referring to was undoubtedly there’s some person, at the margin, somewhere, who under some convoluted circumstance could be disadvantaged. That’s what we’ll be asking Congress to deal with.*
Is it possible that Ross has some semblance of a point? Are there millions of middle-income parents with nannies on their payroll who might benefit from Trump's deductions? Just to make sure my snark was justified, I went and checked out the U.S. Census' most recent data on family child care arrangements. As of 2011, there were 3.36 million American families with a working mother that earned between $3,000 and $4,499 a month, or up to about $53,000 per year. Less than one-third, or 945,000 of them, paid for any child care at all, much less a nanny. (Check out Table 5, if you're extra curious). It's a similar story for working mothers of all incomes who never married—about 32 percent, or 1.14 million, paid for any child care at all.
Now, if we want to be generous, it's possible Ross thinks that Trump's tax breaks will let working moms upgrade their child care situation to something a bit more luxe. The problem, as always, is that Trump's tax breaks aren't worth nearly enough to pay the entire cost of such an expense. So unless you're an edge case for whom the deductions can make the marginal difference between being able to send your child to a day care center or not, chances are you won't be taking much advantage of them.
The more important point here, though, is that Trump's economic advisers are the sort of people who assume married couples making $50,000 a year are regularly in the habit of hiring nannies. This is his brain trust.
*Correction, Oct. 14, 2016: Due to a transcription error, this story misquoted Lily Batchelder as saying, “I was interested in your suggestion that Trump should fix the problems with Mr. Trump’s tax plan.” The correct quote was, “I was interested in your suggestion that Congress should fix the problems with Mr. Trump’s tax plan.”
Donald Trump Would Raise Taxes on Single Parents. How Despicable.
How appalling is Donald Trump's tax plan? Consider this: While showering trillions of dollars on America's wealthiest families, it would somehow manage to raise taxes on working-class single parents.
That's according to a new Tax Policy Center analysis of the Republican nominee's most recent proposal, which, like its predecessor, is an enormous gift to his fellow millionaires and billionaires. Trump decided to tone down his original tax plan after think tanks calculated it would probably cost somewhere in the neighborhood of $10 trillion over a decade—which is to say, more than the Medicare budget. Version 2.0 has a slightly less astronomical price tag: TPC estimates it would cost $6.2 trillion over its first 10 years, and $8.9 trillion over its second. But its favors are still very much skewed to the rich. About 47 percent of the benefits would go to the highest-earning 1 percent of Americans; the bottom 60 percent would receive just under 11 percent of the benefits.
But Trump's plan isn't merely despicable because it disproportionately benefits the wealthy. According to TPC's analysis, it would actually take money away from single mothers and fathers, as well as married parents with large families. How so? Trump would eliminate the “head of household” filing status, which many single parents rely on, as well as personal exemptions, which let filers deduct $4,050 from their taxes for themselves and each of their dependents. In their place, he's creating a larger standard deduction worth $15,000 for solo taxpayers. But that's less help than what single-parent families receive now. Today, a single mother with one child could get a $9,300 standard deduction as household head and personal exemptions for herself and her daughter, all adding up to $17,400.
Meanwhile, Trump would increase the lowest tax rate from 10 percent to 12 percent. So some parents would find themselves paying higher rates while having fewer deductions to offset them. It's possible that Trump's advisers assume his new deductions for child care expenses will offset the potential tax hikes. But that seems unlikely; many families won't take advantage of the deductions, because even with them, they won't be able to cover the cost of day care.
The end result of all this is that Americans among the bottom 80 percent of taxpayers who currently file as heads of household would on average see their IRS bills rise, while those in the top 20 percent would get a cut.
These changes don't just affect single-parent families. Married couples who have lots of children also benefit from personal exemptions and could be hit by Trump's changes. In other words, Trump's plan takes money from many lower- and middle-income parents and distributes it upward. When Hillary Clinton said her opponent “would end up raising taxes on middle-class families, millions of middle-class families,” this is what she was likely talking about.
Of course, Trump's plans are never set for long, and it's unclear if he or anyone on his staff has actually thought these issues through—the Tax Policy Center sent the campaign dozens of questions about specifics of their blueprint, which it declined to answer. But if someone in the Trump camp has actually considered all of this and decided they were happy with the proposal regardless, it amounts to a massive failure of moral and economic judgment. Both Democrats and Republicans have spent decades now trying to encourage low-income families to work by lowering tax rates and supplementing their wages. This is the polar opposite. It's impoverishing those who need help most.