A blog about business and economics.

June 30 2016 7:14 PM

Elizabeth Warren Wants to Bring Back Trust Busting. The Democrats Should Listen.

One big question hanging over the candidacy of Hillary Clinton is how she'll use her presidency if she wins the White House in November (current probability: high) but finds her agenda stymied by Republicans in Congress (current probability: also high). This is an especially tricky issue when it comes to the economy, since big domestic initiatives typically need to make it through Capitol Hill.

Conveniently, Elizabeth Warren, who of course happens to be on Clinton's vice presidential shortlist, just threw her weight behind one idea that could help fill in the blank: Make antitrust law great again.


That was the message of a major speech the senator from Massachusetts delivered Wednesday at the New America Foundation. For better or worse, much of the news coverage it generated focused Warren's suggestion that tech giants Apple, Google, and Amazon have used their massive platforms to “snuff out” competitors. But her bigger theme was that Washington's lax approach to antitrust has left all sorts of industries, from banking to beef production to cable to airlines, dominated by a small handful of businesses, and that in turn has hurt consumers, small businesses, and the middle class. “Anyone who loves markets knows that for markets to work, there has to be competition. But today, in America, competition is dying,” Warren warned, before calling on regulators to get more aggressive about stopping mergers that would further consolidate the corporate landscape. “Strong executive leadership could revive antitrust enforcement in this country and begin, once again, to fight back against dominant market power and overwhelming political power.”

This is a subject that's been getting increasingly popular among progressive policy thinkers—the Center for American Progress and Roosevelt Institute have both put out reports dealing with antitrust and competition issues this year, as has the White House Council of Economic Advisers. There's a growing sense that the wave of corporate consolidations that began, more or less, during the Reagan era may be at least partly behind many of the ills currently ailing our economy—the growth of inequality, the decline of startups, the shrinkage of corporate investment, and even rising health-care costs (hospital mergers are probably making your appendix surgery more expensive). The idea is that massive corporations have been able to use their market power (and lobbying dollars) to subdue competition and make a killing without spending to innovate like they used to. That allows their workers to collect massive salaries compared to their friends at less rapacious employers (some recent research suggests that income equality is driven as much by differences between companies as by differences between individuals or professions). “Today’s markets are characterized by the persistence of high monopoly profits,” Nobel Prize winning economist Joseph Stiglitz wrote in May. He continued:

The implications of this are profound. Many of the assumptions about market economies are based on acceptance of the competitive model, with marginal returns commensurate with social contributions. This view has led to hesitancy about official intervention: If markets are fundamentally efficient and fair, there is little that even the best of governments could do to improve matters. But if markets are based on exploitation, the rationale for laissez-faire disappears. Indeed, in that case, the battle against entrenched power is not only a battle for democracy; it is also a battle for efficiency and shared prosperity.

A lot of the evidence about monopoly power's influence on the economy is, admittedly, circumstantial. But it's still compeling. The Council of Economic Advisers notes, for instance, that the biggest tenth of public nonfinancial companies have seen their returns on capital investment skyrocket over the last decade and a half.



Now, maybe that's because the tech industry offers amazing returns to scale and prizes are simply bigger for the world's largest corporations because they can truly play on a global stage. Or, perhaps, the disappearance of competition from the market has allowed giant corporations to collect excessive profits—or “economic rents.” The truth could be a little of column A and a little of column B. But once you start considering the way mergers really do seem to be followed by things like price hikes or declines in research spending, the latter story starts to look at least plausible.

From a purely political perspective, meanwhile, getting back to good old-fashioned trust busting (or, you know, challenging a few more mergers) is appealing because it doesn't require help from Congress. Yes, rewriting the laws to be more explicitly competition friendly would help. But the Reagan administration relaxed U.S. antitrust rules largely by rewriting the Justice Department's enforcement guidelines to emphasize the conservative theories of Robert Bork, who basically said mergers should always be allowed if they encouraged economic efficiency and lower consumer prices. There have been rewrites since, but nothing truly fundamental. And while the Obama administration has been willing to stand in the way of some important megamergers—its thwarted the marriages of AT&T and T-Mobile and Comcast and Time Warner Cable, for instance—A Clinton administration could go further by rethinking the guidelines once more.

Americans are generally distrustful of big business, and there are mounting clues they have every right to be. So, who knows. If Elizabeth Warren doesn't work out as VP, she might make an intriguing attorney general.

June 30 2016 6:26 PM

Kansas’ Insane Right-Wing Experiment Is About to Destroy Its Roads

Kansas has had trouble paying for much of anything since 2012, when conservative legislators decided to implement a bevy of right-wing economic policies—and lead their state into a fiscal crisis.

In order to keep funding its government despite dramatically decreased tax revenue, the legislature has flipped all their piggy banks. One of them is the Kansas Department of Transportation—or what sarcastic Kansans now call “the Bank of KDOT,” for the stupendous quantity of money that has been diverted from its coffers to the Kansas general fund and state agencies.

Kneecapping the agency that builds roads isn’t just a great metaphor for Gov. Sam Brownback’s tenure. Like the cut to the state’s university funding, this damage will be most keenly felt years from now, when deferred maintenance and high debt loads take their toll. An ex-head of the Kansas Turnpike Authority said in December that the practice had created a “long-term disaster for our state highways.”

June 30 2016 4:33 PM

Hershey Just Refused to Let the Owner of Cadbury Drink Its Milkshake

The owner of Oreo, Cadbury, Toblerone, and Sour Patch Kids tried this month to take over the Hershey Company—and it’s now officially been rejected. Had it succeeded, Mondelez International Inc.’s $23 billion bid to buy the iconic sweets manufacturewould have made it the world’s largest candymaker. Instead, Hershey found the deal about as unpalatable as a handful of Good & Plenty’s.

It didn’t matter, then, that the company’s stock price has been flat for nearly three years, and demand for sugary products has been on the decline. Nor did it matter that the company isn’t experiencing much growth; Hershey’s core offerings remain iconic American products, and its net income has been pretty consistent over the past few years. Nor was Hershey swayed by the Illinois-based Mondelez’s offer to move to Hershey’s eponymous Pennsylvania hometown and rename itself, well Hershey. (Nor is this the first time Hershey has rejected a suitor. Nestle, for instance, was rumored in 2002 to have interest in buying the company.)

June 30 2016 1:48 PM

The Government Says Americans Have Stopped Hanging Out. No, They Haven’t.

The annual American Time Use Survey was released last week, and provoked the same question it does every year: How the hell do you people get so much sleep?

The average American, according to the Bureau of Labor Statistics project, is getting eight hours and 50 minutes of sleep—an entire Lord of the Rings trilogy of shut-eye!—every night.

The report has good news for television (including Netflix), which retains its dominant role in American life, occupying two hours and 50 minutes of the average day. And bad news for reading, which takes up just 8 minutes in the average weekend day of a 15-to-24-year-old. In short, younger millennials are basically reading the back of the cereal box and nothing else.

Most striking is this: Nothing has changed more in the past decade than the amount of time we spend socializing.

June 29 2016 6:36 PM

Bernie Sanders’ Take on Globalization Is Simple, Ideologically Comforting, and Factually Wrong

The Brexit referendum has given Bernie Sanders an opportunity to say, ”I told you so.” In Wednesday morning's New York Times, the still-technically-a-presidential candidate argues, as many have, that Brits voted to leave the EU as an angry rebuke to elites over growing economic inequality brought on by globalization—the same issues that he's made the focus of his White House campaign. The man makes some fine points. But then, about midway through, there's this:

Let’s be clear. The global economy is not working for the majority of people in our country and the world. This is an economic model developed by the economic elite to benefit the economic elite. We need real change.

This is Bernie Sanders', and much of the left's, elevator pitch on globalization. It's a simple, ideologically comforting take—black hats vs. white hats, Wall Street financiers vs. hard-working factory employees. But it just doesn't track with reality. The fact is, most of the world has seen its standard of living improve quite a bit in the era of free trade. And while you can argue about whether or not that means the global economy is “working,” or working optimally, it is absolutely impossible to have a meaningful discussion about how the world has changed in the past 30 or so years without acknowledging and weighing that progress.

You may have seen this chart before.

These days, it's the most important graph in the world, so far as economics blogs are concerned—a go-to explanation for the simultaneous rise of hard-right, xenophobic, anti-trade movements all around the United States and Europe. First published in a World Bank working paper by Branko Milanovic, it shows the winners and losers from globalization between 1988 and 2008. The global poor and middle class (with the exception of the bottom 5 percent) have seen their incomes rise a great deal. So have the global rich, the top 10 percent. But, as Milanovic writes:

The biggest losers (other than the very poorest 5%), or at least the “non-winners,” of globalization were those between the 75th and 90th percentiles of the global income distribution whose real income gains were essentially nil. These people, who may be called a global uppermiddle class, include many from former Communist countries and Latin America, as well as those citizens of rich countries whose incomes stagnated.

As has been written over, those “losers” are now “rebelling” or “revolting” or staging a mutiny by doing things like voting for things like Donald Trump and Brexit. Those are the people Sanders is focused on. But talking about them, without acknowledging the winners—the entire global middle class, and much of its poor—is simply dishonest.

I'm not trying to mount a full-fledged defense of the status quo for free trade. You can certainly argue about whether the export-driven approach to development that helped so many Asian communities escape dire poverty was actually the best way to accomplish progress, or if it's sustainable long-term—lefty economists like Dean Baker would suggest otherwise. And of course, no matter how good free trade was for the rest of the world and many in the West, there's no reason the United States or Britain couldn't have offered more help to the communities and people who have been left behind by it. But you at least have to start the conversation by acknowledging that there have been a whole lot of winners other than people who own factories or trade derivatives for a living. Trade isn't just good guys vs. bad guys. It's a morally and economically complicated issue. And we should treat it that way.

June 29 2016 12:40 PM

Walmart, Jilted Lover of American Retail, Offers Free Shipping Bonanza

America’s biggest big box store is moving into the little box business.

Walmart announced this week that its ShippingPass program, which promises two-day, no-fee, no-minimum deliveries of Walmart products for an annual subscription cost of $49, would offer a free, 30-day trial to new users.

It’s the company’s latest attempt to make headway in digital sales and delivery, where it has struggled mightily.

June 28 2016 6:09 PM

Airbnb Just Sued San Francisco. Does the City Have a Leg to Stand On?

Earlier this month, San Francisco’s Board of Supervisors voted to require Airbnb and other short-term rental websites to post only the listings of hosts who have registered with the city. The registration procedure is supposed to help the city enforce stringent but widely disobeyed regulations governing short-term rentals. But few users register.

On Monday, Airbnb sued the city in federal court, alleging the registration requirementlaw—whose penalties were levied on intermediary companies like Airbnb, rather than on users directly—violated laws on privacy and online corporate liability.

It’s a bitter twist in what had been a story of cooperation between Silicon Valley and City Hall.

June 28 2016 4:19 PM

Donald Trump, Defender of the American Worker, Sure Used to Love Outsourcing

Donald Trump just got done giving a speech, staged appropriately in front of a pile of recycled trash, about the evils of trade. This has, of course, been one of his consistent campaign themes—that incompetent (or possibly courrupt) U.S. politicians (especially Bill and Hillary Clinton) have sold out U.S. workers in one bad trade deal after another, and that only he, Donald Trump, is willing to stand up for the interests of American blue-collar workers. (He even had a charming, seemingly ad libbed aside in this speech about how presidents after him might go back to mucking things up.)

Because, like an elephant, the internet never forgets, some writers have been having fun remembering the days when Trump wasn't so sour on the idea of sending jobs overseas. NBC's Alex Seitz-Wald pulled up this 2005 gem from the Trump University blog, titled, “Outsourcing Creates Jobs in the Long Run.”


It reads:

We hear terrible things about outsourcing jobs—how sending work outside of our companies is contributing to the demise of American businesses. But in this instance I have to take the unpopular stance that it is not always a terrible thing.
I understand that outsourcing means that employees lose jobs. Because work is often outsourced to other countries, it means Americans lose jobs. In other cases, nonunion employees get the work. Losing jobs is never a good thing, but we have to look at the bigger picture.
Last year, Nobel Prize-winning economist Dr. Lawrence R. Klein, the founder of Wharton Econometric Forecasting Associates, co-authored a study that showed how global outsourcing actually creates more jobs and increases wages, at least for IT workers. The study found that outsourcing helped companies be more competitive and more productive. That means they make more money, which means they funnel more into the economy, thereby, creating more jobs.
I know that doesn’t make it any easier for people whose jobs have been outsourced overseas, but if a company’s only means of survival is by farming jobs outside its walls, then sometimes it’s a necessary step. The other option might be to close its doors for good.

Now, to be fair to Trump, he was railing about foreign countries taking advantage of the U.S. in trade since way back in the 1980s. Maybe his affection for outsourcing was just a momentary lapse of judgment. Or maybe he's just more comfortable with IT firms sending jobs overseas than manufacturers. Who knows.

But it does add to the sense that his opinions on globalization can be a bit mushy, or, you know, hypocritical. Before he was praising Brexit, he once wrote a Davos-pegged op-ed for CNN praising Europe and saying that we'd have to “leave borders behind and go for global unity when it comes to financial stability,” whatever that meant. There's the fact that the anti-immigration demagogue and friend of the American worker happily uses seasonal guest workers at his Florida golf clubs (he says he can't find qualified Americans to work short term, which seems like a fairly weak excuse). Then there are his clothing lines, which are of course made overseas. He says it's difficult to have apparel manufactured here (that'd be true, if he added the words "cheaply" to the end of that sentence). Add it all up, and you get the impression the man might not have cared all too deeply about the plight of middle-class wage earners until recently. Perhaps we should start calling him a born-again protectionist.

June 28 2016 1:08 PM

Obamacare Rate Hikes Will Hit Just Before the Election. Is That a Problem?

The “Leave” campaign’s claim that the United Kingdom could use the 350 million pounds a week it currently pays in European Union dues for social welfare programs, including the U.K.’s popular but somewhat beleaguered National Health Service—a flat-out lie, as Slate’s Jordan Weissmann has pointed out—was one of the motivating factors behind last week’s vote for Brexit.*

Could health care spending concerns spark enough voter anger here in the United States to disrupt the election? A few weeks ago Politico warned of “Obamacare’s November surprise”: Many consumers enrolling in the health care marketplace on Nov. 1, just one week before the election, can expect increased rates.


Given the current disparity in the polls, it’s unlikely that alone could change the outcome of the election. But it is quite possible it will cause a bit of turmoil in the last week of the campaign. It’s beginning to look likely than many shoppers aren’t going to like what they find.

A report from the Kaiser Family Foundation released earlier this month estimated that the average weighted premium increase for the benchmark second lowest cost silver plan will come in at 10 percent. Last year? It was 5 percent.

True, tax credits help defray costs for more than 80 percent of those using the exchanges. But that helps neither the several million people who don’t receive subsidies, nor those who purchase insurance off the exchanges, likely because they aren’t happy with the options on offer. In 2015, the average subsidy for those who purchased health insurance through the federal exchange paid for a little under three-quarters of the premium.

But tax credits won’t help at all with another likely problem: the continuing narrowing of networks—insurance speak for limiting consumers’ choice of doctors and hospitals. Blue Cross and Blue Shield of Minnesota, for example, announced last week it would not sell any individual policies in the state either on the exchanges or on the private market, beginning next year, citing $265 million in losses last year. Instead, its parent company will offer consumers the Blue Plus HMO, which has a narrower network.

In addition, many will experience less choice of plans altogether. In Alaska, last year three insurance companies withdrew from the exchange, not offering plans in 2016. This year, another—Moda Health —announced it would not offer plans on the exchange in 2017, though it would continue to offer individual plans on the private market. That leaves only one insurer—Premera Blue Cross Blue Shield—as the only company participating in the state exchange in 2017. Alabama and Wyoming will also only have one insurer offering individual insurance on the exchanges in 2017. United Healthcare announced recently it will withdraw from almost all exchanges in 2017.  In the few states where it is continuing to participate, it is requesting rather stiff price hikes—in New York, for example, the company asked state regulators to approve an astonishing 45 percent increase in premiums.

Yet despite all this, it seems unlikely this will have any more than a minor impact on Nov. 8, even if there are a series of nasty headlines in the weeks heading into the election.

First, of course, asking for a double digit rate hike and receiving it are two different things. It seems fairly unlikely any company will be approved by state insurance regulators to increase premiums by, say 45 percent.

Moreover, while Obamacare isn’t exactly popular, it seems likely it’s not going to be a high priority issue for many. While a poll conducted earlier this year by the Robert Wood Johnson Foundation with National Public Radio found that consumers who said their health insurance situation was impacted by the Affordable Care Act were more likely to believe they had been harmed than helped by the program,  a majority of those they questioned didn’t believe they suffered any effects at all from the legislation at all—not something that leads to voter revolt.

Finally, the Republican Party isn’t exactly campaigning on a platform to make things better. Instead, last week Republicans debuted a plan that even they admitted was only, “the beginning of a conversation,” one that was more than a bit light on specifics and details. And while their outline continued such popular Obamacare changes as allowing children to remain on their parents’ health care plans till they turn 26, it is otherwise lacking such important details like, “how much money it will give Americans to buy coverage,” as Jordan Weissmann pointed out.

In other words, change could make the health care situation in the United States worse, not better. And, unlike in the United Kingdom, no one is campaigning on a promise to spend billions more on health care.

*Correction, June 28, 2016: This article misstated the amount of EU dues the U.K. pays weekly. It's 350 million pounds, not billion.

June 28 2016 11:19 AM

The Weird Idea That Brexit Would Be Good for London

Thursday’s vote in England suggested Brexit was a referendum on the global elite; a rebuke of cosmopolitanism, globalization, and the postwar order. London, an island of strong Remain support, was marooned in a sea of Leave. Dispatches from the British hinterland confirmed the impression of Capital against Country. “In shorthand,” Peter Mandler wrote in Dissent, “Britain’s EU problem is a London problem."

In the immediate aftermath of the vote, it certainly seemed that wealthy London—a city of students, immigrants and tourists, corporate headquarters and creative industries doing business abroad, all thriving under the status quo—had been castigated by Britain. There was talk of banks relocating from the city to Dublin, Frankfurt, and Paris; anti-immigrant graffiti and attacks; and Londoners renouncing their country. As the U.K. voted to exit the established international system, London’s position as the world’s preeminent global city was diminished. The question was not whether London would suffer the consequences of Brexit, but how much it would suffer.

Easy to forget, amidst all this: Brexit’s most famous advocate, Boris Johnson, is the bicycle-commuting, subway-riding former mayor of London, who claimed that a well-managed Brexit was the best possible solution for the city itself. “If you want our great capital to be genuinely open to the world—rather than locked in and diminished by a failing EU system,” he wrote in The Evening Standard before the vote, “then go global, vote Leave, and take back control next week.” Brexit as vote may have been an expression of anti-London sentiment, but Brexit as policy hasn’t always been conceived that way.

Johnson and co. have long argued that London, the global metropolis, had more to lose from the bureaucratic tyranny of the European Union than from a well-managed departure.