The Latest CBO Report Shows Republicans Are Incapable of Crafting a Humane Health Care Bill
The Congressional Budget Office confirmed on Monday that Republicans are incapable of writing a humane health care bill. The Senate's Better Care Reconciliation Act, which it revealed to the public last Friday and may vote on this week, would leave 22 million additional Americans uninsured within a decade, according to the CBO, largely by cutting both Medicaid and subsidies for private insurance in order to fund extravagent tax cuts for the wealthy. ($536 billion of them, in fact.)
Technically, that number is a slight improvement over the GOP's previous efforts. The CBO forecast that the American Health Care Act, which the House passed last month after crafting it in a shambolic rush, would eventually leave 23 million uninsured in order to provide tax relief to investors and medical device makers.
That is pretty much all anybody needs to know about the Republican Party's push to repeal Obamacare—every piece of legislation the party produces amounts to a wealth transfer from the vulnerable to the rich that lowers premiums, though just slightly, for some younger and healthier Americans.
But it's worth lingering on one specific portion of the Senate bill: the cruel bait-and-switch it pulls on America's poor.
Reading extremely charitably, one could make the case that the Senate bill is designed to move low-income Americans off of government insurance and into highly subsidized private coverage. It unwinds Obamcare's expansion of Medicaid, which allowed adults to qualify for the program if they earned up to 138 percent of the poverty line. But it also imitates Obamacare by providing tax credits to help low- and middle-income households buy private insurance, capping their premiums as a percentage of their earnings. A woman in poverty would have to pay no more than 2 percent of her paycheck toward her health insurance, for instance. A woman making 133 percent of the poverty line would pay 2.5 percent. It's a worse deal than Medicaid, which is generally free, but it's something.
Except there's a catch. Obamacare's tax credits were designed to cover the cost of midpriced health coverage; meanwhile, the law provided additional subsidies that drastically lowered out-of-pocket expenses like co-pays and deductibles for poorer households. The Senate bill spends $424 billion less on subsidies, and designs its tax credits to cover the price of a low-end health plan with high deductibles—similar to one of Obamacare's bronze plans—while doing nothing to keep down out-of-pocket costs for the needy.
As a result, poor would be unable to use the coverage they could actually afford and unable to afford the coverage they could actually use. For example, a single adult making $11,400 in 2026 would only have to pay $300 per year in premiums for a benchmark health plan. But their deductible would amount to more than half their income. "Despite being eligible for premium tax credits, few low-income people would purchase any plan," the CBO concludes.
Ironically, this is exactly the same complaint middle-class families who currently don't qualify for subsidies have had about Obamacare. The Senate bill does relatively little to help them, while putting poor households in exactly the same predicament. It takes the worst pain some unlucky families have experienced under Obamacare and replicates it, over and over.
Some Senate Republicans clearly want to at least look as if they have compassion. Otherwise, they wouldn't have bothered aiming the BCRA's tax credits at the poor. After all, the House bill didn't; instead, it provided mostly flat subsidies based on age. But just like their colleagues in the lower chamber, the Senate GOP is too wedded to the dogma of tax cuts to properly fund a health care bill that provides for the vulnerable. Their legislation is just a variation on the same heartless theme we've been listening to for months.
Trump Party Planner Assumes Oversight Role of Nation’s Largest Public Housing Authority
On Monday, Trump party planner Lynne Patton assumed her role at the top of the Department of Housing and Urban Development's Region II, HUD's largest bureau, where she will oversee HUD operations in New York and New Jersey.
Patton's experience in government and housing amounts to a six-month stint as the department's director of public engagement, during which she organized director Ben Carson's speaking tour, on which he got stuck in an elevator.
Her appointment indicates the Trump Administration's determination to distribute jobs to well-connected friends and relatives, regardless of their qualifications. The Israeli-Palestinian peace process, for example, is being handled by the president's son-in-law, a New York real estate developer. Affordable housing in New York, in turn, will be handled by the president's son's party planner. (We can only assume the ghost of Richard Holbrooke will be planning the president's parties, to complete the circle.)
Prior to her arrival in Washington, Patton helped plan Eric Trump's wedding, and served as a vice president at his foundation, which is being investigated by New York State Attorney General Eric Schneiderman. Her purview there, she writes on her LinkedIn profile, included overseeing "all foundation outreach & operations, high-net worth fundraising, event planning, social media and vendor/corporate partnerships."
The profile lists a "J.D. (N/A)" from Quinnipiac School of Law, which she attended but did not graduate, and Yale University, which she did not attend. However, her father did get a medical degree at Yale, a fact she noted in a speech at the Republican National Convention last summer.
The confirmation follows a little back-and-forth: Patton's promotion was announced on Wednesday, June 14. Two days later, following outraged statements from politicians in the region, HUD claimed the position was unfilled. Now, Patton is back in charge of HUD's largest regional office, Politico reports. Most previous appointees to the office have had a background in housing, and all have had experience in government.
Patton will be at the head of an organization that functions as a liaison between Washington and the New York City Housing Authority, or NYCHA, in addition to supervising the region's block grants and housing vouchers.
Last week, I wrote a little about the promise and problems of NYCHA:
NYCHA is widely considered a paragon of public housing, an enclave for service workers and the elderly in a very expensive city. The system also has an $18 billion backlog of repairs in addition to an operating deficit. “Housing conditions at NYCHA remain a tenant’s nightmare, with moldy units, holes in floors, and broken walls,” New York City Comptroller Scott Stringer said in April, announcing a brief on the maintenance concerns of NYCHA residents. The waiting list is still a quarter-million people long.
Let's get this party started!
Michael Bloomberg’s $200 Million Gift to Cities Won’t Solve Their Big Problems. Could It Solve Some Small Ones?
The U.S. Conference of Mayors is meeting this week in Miami Beach, a perfect locale for a group that, following President Trump’s withdrawal of the United States from the Paris Agreement, sees itself as the heir to America’s global leadership on climate change.
And then some: U.S. cities (and states) have also recently supplanted the federal government in negotiating with Canada. They have crafted their own immigration policies at odds with federal wishes. They are increasingly responsible for the provision of the safety net, especially as it relates to housing, as Washington and some statehouses have disclaimed responsibility for anti-poverty programs.
The enthusiasm of mayors for that role—as D.C. Mayor Muriel Bowser led the chant at January’s Women’s March, “Leave us alone!”—is matched only by their unsuitability for it. Constitutional power limits and meddling legislatures in both red and blue states have curtailed municipal initiatives from the minimum wage to plastic bag bans. Any effort to effect a greater redistribution of wealth is severely hamstrung by suburban separatism. We may have new stereotypes about urbanites, and need new ones about suburbanites, but one thing remains true: Most American metropolitan areas are still donuts, poverty surrounded by wealth.
Former New York City Mayor Michael Bloomberg is here to help, he told the conference on Monday, with a new grant-making program called the American Cities Initiative. Over the next three years, Bloomberg Philanthropies will distribute $200 million to U.S. cities, beginning with a “Mayor’s Challenge” to grant $5 million to an urban project on any issue and millions more to runners-up.
The return of Bloomberg’s urbanist philanthropy, which has more recently focused on Latin America and Europe, to the American city is in response to two things, the billionaire told the New York Times. First, the recognition that cities now "replace Washington and, in some cases, state governments, to provide services.” And second, the more abstract concept that innovative urban governance is a way of restoring America’s image and influence in spite of Trump's anti-urban agenda.
First: This is a very small amount of money for Bloomberg to dangle, especially for the big-city mayors who conduct foreign state visits and so on. The $100,000 grants dedicated to runner-up proposals in the new Mayor’s Challenge, which reprises a Bloomberg project from 2013, wouldn’t buy a public toilet. The grand prize is small potatoes relative to billion-dollar big-city budgets, and the entire dedication of $200 million is pocket change against the billions the Trump budget cuts from the transit grants, housing voucher programs, and other federal outlays on which cities depend.
Still, small grants give mayors the political capital to try new things, or go out on a limb with endeavors that might not seem like an obvious use of public money. The development of 911, for example, was spurred largely by small local grants from the Robert Wood Johnson Foundation. Urban resilience efforts in the U.S. (to say nothing of city-focused journalism, including much of my own work at, say, Next City or the Guardian) have been fostered by the Rockefeller Foundation. The last time Bloomberg Philanthropies tried its challenge here, in 2013, big cities like Houston and Chicago won grants—and plenty more applied. These little gifts spur matching investments from cities and states, functioning as affirmations that something is a good idea and worthy of investment.
Since then, Bloomberg has turned his focus in the U.S. toward politics, via the quietly effective Everytown for Gun Safety project, started in the spring of 2014, and donations to candidates who support gun control or others that Bloomberg likes. In 2016, he threw $65 million into races and referenda, especially those supporting charter schools and soda taxes.
But maybe Bloomberg, a Clinton supporter who spoke at the DNC in Philadelphia, has come to the conclusion that money in politics is a little less effective than money with no politics. Why bother spending money on getting a candidate elected who supports your project when you can just pay for it yourself? This is a philosophy that is, on a superficial level, perfectly tailored for American mayors, whose political aims have coalesced so closely that one administration is almost indistinguishable from the next. The question is less who to elect but which of an array of competing but favored projects to pay for; Bloomberg has an answer.
Listen to the technocratic veneer that Mitch Landrieu, the mayor of New Orleans and the current head of the USCM, applied to mayoral control in the New York Times: “We’re moving to a different model in this country, and it’s really going to be nonideological,” he told the paper. “It’s going to be problem-solving driven.” Technocracy is its own ideology, of course. But what Landrieu really means is that Bloomberg is going to focus on the easy stuff in cities: free money for good projects, the type that we would all fund if we could.
The more daunting, underlying problems—like regressive tax regimes, no annexation power, and political independence—will have to wait for some other benevolent billionaire.
Senate Republicans Just Made a Politically Suicidal Change to Their Health Care Bill
After spending seven years attacking Obamacare's unpopular individual mandate for requiring Americans to buy insurance, Senate Republicans have decided to replace it with a rule that could be even more politically toxic.
Under the proposal, Americans who let their health insurance lapse for 63 days over the previous year will have to wait at least six months before they can get coverage again—even if they're deeply ill and in need of medical attention. The rule is designed to prevent people from waiting until they are sick to buy insurance and is essentially a more stringent version of restrictions already in place thanks to the Affordable Care Act. It was included in a new, revamped draft of the Senate GOP's health care repeal bill released on Monday morning, and—at the risk of speculating—I am guessing it will poll about as well as lighting leukemia patients on fire.
After the Senate released its draft legislation last week, both fans and critics pointed out a glaring flaw: The bill kept Obamacare's regulations guaranteeing coverage to Americans with pre-existing conditions—but didn't include any rules to make young, healthy people buy insurance in order to balance out the market. Obamacare, of course, tries to accomplish this with the individual mandate, which makes people get covered or pay a small tax penalty. But after railing against this weak nudge as a tyrannical imposition on personal liberty for the better part of a decade, Republicans had to junk it. If they didn't do anything to make young people get coverage, however, their legislation risked sending the insurance market into a death spiral—not the imaginary death spiral Republicans accuse the law of having set off, but a real one.
And as the GOP is obviously learning, it's really hard to come up with a solution to this problem that both works and is politically palatable. Threatening the uninsured by locking them out of the market for six months may get a few more twentysomethings to sign up for coverage, since they won't be able to get it in an emergency. But this solution is now generating headlines like “Trumpcare's Newest Provision Might Be Its Most Odious.” As New York's Eric Levitz puts it: “Instead of coercing Americans into buying insurance through a small financial penalty, the GOP would do so by locking some cancer patients out of access to insurance for a potentially fatal amount of time.”
This is ever-so-slightly unfair. Under current law, uninsured Americans who get cancer still have to wait until the next open-enrollment period to buy insurance coverage unless they qualify for an exception (for instance, if they lose their previous insurance because they got fired). The main difference with the new Republican approach is that even people who try to sign up for a health plan during open enrollment will have to wait six months before their insurance takes effect if they didn't have continuous coverage over the past year.
Another way to put: Under Obamacare, you're better off getting sick closer to open enrollment. Under Trumpcare, you're waiting at least six months to get insurance no matter what. The policy approach is more vicious by increments. But by making some desperately sick people wait even longer than they would have to now for coverage, the optics seem orders of magnitude worse.
Health care: Nobody knew it could be so complicated.
Travis Kalanick’s Loyalists Are Petitioning Uber to Let Him Return
Uber CEO Travis Kalanick may have been pressured into resigning on Tuesday after major investors demanded he do so, but now some of his former employees are demanding he remain in place in an “operational role.” Michael York, a product manager at Uber, sent around an email to staff on Wednesday with a petition for company employees to sign, as Recode and BuzzFeed have reported. The email received more than 1,100 responses in favor of bringing back Kalanick, which amounts to about 10 percent of the company’s employees (excluding drivers). Their argument: Yeah, he was flawed—but he was also a unique inspiration.
Kalanick’s ouster followed an onslaught of reports of a sexist, dehumanizing culture at the company and increasing criticism from Uber users upset with company policies and action. But York and other Uber employees are advancing a different narrative, summed up in the note: “Uber is TK and TK is Uber." (Kalanick will remain on Uber’s board.)
America Is a Tough Place for Older People. The GOP Health Care Plan Will Make It Much Worse.
One of the expressed intentions of Republicans’ efforts to repeal and replace Obamacare is to undo some of the age-related distribution inherent in the system. Today, healthy young people pay more so that older, less-healthy people don’t have to pay quite as much.
The Republican plan unveiled in the Senate on Thursday sharply scales back the distributional nature of the system—on an income basis, and on an age basis. The tax credits that help people afford policies on the exchanges will be sharply scaled back. So let’s say you and your spouse are 60, your kids are grown, and you’re insured on the individual market. Poverty level for a family of two is $20,420. If you make $80,000 a year between you, you’ll have to pay as much as 16 percent of your income for a high-deductible plan under the Senate’s Better Care Act as its currently written. (CNN found that, if the House plan passed last month were to become law, a 64-year-old earning $24,600 in 2026 would pay a premium of about $14,600—about 60 percent of total income.)
Asking older people to pay so much for health care is particularly devastating given the ongoing structural changes in our economy. Most Americans don’t make that much money. The median household income in the U.S. is about $55,000. But the median household income for those in the 55–64 cohort is markedly below the median for those in the 45–54 and 35–44 cohorts. Most Americans don’t have much savings. The median retirement savings for people between the ages of 50 and 55 in 2013 was $8,000.
Now, the best way to avoid paying a large chunk of your income and savings for insurance for a few years until Medicare kicks in at 65 is to keep a payroll job with health insurance. But increasingly, American employers don’t want to keep people in their 50s on their payrolls. The closer Americans get to Medicare eligibility, they more likely they are to be pushed out of their jobs—and out of the workforce entirely. The data from the Bureau of Labor Statistics tells the tale. In 2014, 79.6 percent of Americans between the ages of 45 and 54 were in the workforce. But of those between the ages of 55 and 59, 71.4 percent were in the workforce, while 67 percent of those aged 60–61 were and just 53 percent of those between 62 and 64 were.
In virtually every industry, at virtually every level of the income ladder, employees are explicitly seeking to move people off the payroll as they age into their 50s. Which means more of those Americans must buy insurance on the market the Republicans are currently trying to remake.
After the financial crisis, the big autoworkers worked out two-tier wage systems with unions which protected existing wages and benefits for older workers while allowing them to add new people to the payroll at lower rates and with less extravagant promises. So, of course, these large employers have lots of incentives to hasten the retirement of older workers.
Earlier this year, Fidelity Investments offered voluntary buyout packages to employees over the age of 55. In April, Brigham and Women’s Hospital in Boston offered buyouts to employees over the age of 60. Last year the Museum of Modern Art in New York offered buyouts to, you guessed it, employees over the age of 55. In education, some states are trying to get rid of tenure, and Wisconsin has already taken steps in that direction.
You see it at the high end, too. Many professional services companies, like consulting and accounting firms, require partners to retire at the age of 60. Law firms routinely push older partners to go off counsel. At Goldman Sachs, it’s hard to find people working in senior positions past their mid-50s (unless they’re in the C-suite).
As for the media, I defy you to go into a television newsroom, digital media company, or newspaper and find more than a handful of people over the age of 50, let alone 60.
Given the relentless global competition and pressure continually to boost profits, it is likely that this dynamic will intensify in coming years. Which should push reasonable policymakers to make it easier for older people to afford health insurance on their own, either by maintaining existing premium support, or by, say, opening up Medicare to people over the age of 50. But of course, the Republican plans are going in precisely in the opposite direction.
There is one area where employees who enjoy generous payroll benefits, including health insurance, can age in place. The average age in the 115th Congress is 58.
The Klondike Kickback: How the Senate Health Care Bill Screws Blue States on Medicaid While Sparing Alaska
Buried deep in the Senate health care bill is a provision that is designed to penalize Northeastern states that have traditionally run generous Medicaid programs while carving out special exemptions for sparsely populated Western states like Alaska, which are conveniently represented by Republicans.
Call it the Klondike kickback.1 It is not the most egregious part of this legislation by any means, but it is one of the more infuriating bits if you happen to, say, live in New York.
As you probably know by now, Republicans want to make a historic change to Medicaid by capping the amount of money the federal government spends on each patient. Currently, Washington and the states split the program's costs, with the feds covering a set percentage of every enrollee's care—whether they rack up $500 in medical bills or $50,000. Under the new system, that open-ended commitment would end. States would instead receive a fixed amount of money per Medicaid enrollee. Those grants would grow over time with inflation, but initially, they'd be based on each state's historical spending.
Some states are worse off under this system than others. Places like Alabama, Nevada, or South Carolina that have traditionally spent very little per enrollee would have their federal contribution capped low. Places like New York or Massachusetts that that spend a lot per enrollee would have their federal contribution capped high, and may be able to continue their own state funds to sustain their programs. This is a political problem for the GOP, since Republicans represent a lot of parsimonious states that try to keep their Medicaid budgets small.
So they've added a caveat. On page 64 of the bill, it says that if a state spends 25 percent more than average per patient, Washington will reduce its Medicaid contribution by up to 2 percent the next year. (So, if were scheduled to grow by 2.4 percent, it might only grow by .4 percent). If a state spends 25 percent less than average, it will see its contribution increased by 2 percent. Essentially, states—including much of the Northeast—would be penalized for being generous, in order to fund more Medicaid spending in states that are not. It's only a one-year penalty—so it's not designed to ratchet down funding for, say, New York or Massachusetts over time. But “it really is hurting states that, for a variety of reasons, have higher spending per beneficiary,” Edwin Park of the Center on Budget and Policy Priorities told me.*
Except, that is, in states like Alaska. The bill states that this rule will not “apply to any State that has a population density of less than 15 individuals per square mile, based on the most recent data available from the Bureau of the Census.” In other words, rural areas like Montana, the Dakotas, and the great white north will be spared from this redistribution scheme.*
Of course, some might say this is only fair. Medical care is expensive in rural areas because there aren't very many doctors. Alaska and North Dakota simply can't help it that they spend more per Medicaid than any other states in the country.
Of course, there are perfectly good reasons why densely populated and urban states spend big, other than their desire to run generous social welfare states (which they shouldn't be penalized for). Services like medical care are expensive in New York and Boston too, after all. But Chuck Schumer and Elizabeth Warren aren't Republicans. Alaska's Lisa Murkowski, of course, is.
1Credit for the nickname goes to Jon Bosscher on Twitter. Thanks Jon!
*Correction, June 22, 2017: This post originally misstated that the penalty would be based on whether the federal contribution was 25 percent above average. It is in fact based on combined state and federal Medicaid spending.
*Correction, June 23, 2017: Due to a copy-paste error, this post originally misstated that the Medicaid penalties would not apply to any state "that has a population density of less than 15 individuals per 23 square mile." The "23" was a line number in the bill.
Here Are the Six Lines of Text That Could Decimate America’s Biggest Health Care Program
The defining feature of the Senate Republican health care bill is that, over the long term, it would absolutely decimate Medicaid—moreso even than the House legislation passed last month. And it accomplishes this wrecking job with surprising efficiency, a mere six lines of text in a 142-page document.
Here's what that translates to. Like their House colleagues, Senate GOPers want to cap the amount of money Washington gives the states each year to pay for each Medicaid patient (currently, there's no limit to how much the feds can spend). Between 2020 and 2024, they would increase that funding each year based on the consumer price index for medical expenditures—which is already expected to grow more slowly than Medicaid would.
So far, this is the same as the House bill. Here's where those six lines come up. In 2025, the bill takes a draconian turn. Instead of using the CPI for medical expenditures, it would use the normal consumer price index—which includes everything from groceries to cellphones to home furnishings. This would amount to a devastating budget cut to Medicaid. As the Urban Institute has shown, we are talking about a difference of hundreds of billions of dollars over time.
Medicaid is America's largest health insurance program by enrollment. It covers 62 million Americans—almost as many as Medicare and the entire individual market combined. It helps the poor, the disabled, the elderly, and—thanks to Obamacare's expansion of it, which Republicans would roll back—many working-class families. As the New York Times recently noted, it insures about half of all births and 40 percent of children. It is indispensible, and Senate Republicans are planning to throttle it.
Details of the Senate Health Care Bill Just Leaked. Prepare to Be Appalled.
Details of the Senate’s “draft” health care bill, which Republicans were set to unveil Thursday after weeks of secretive negotiations, have finally leaked—and from the sound of things, Mitch McConnell and his cohorts have written a morally appalling piece of legislation that many conservatives will nonetheless find deeply underwhelming.
According to the Washington Post, which cites “a discussion draft circulating Wednesday afternoon among aides and lobbyists,” the plan looks much like the Obamacare repeal legislation passed last month by the House, with a few key depatures. Here's a brief rundown:
1) Instead of providing Americans tax credits to buy insurance based on their age, as the House bill does, the Senate would offer them based on “financial need”—which is more or less how Obamacare works. But under the GOP’s proposal, fewer Americans would qualify for help. Under the Affordable Care Act, households can receive insurance subsidies if they earn up to 400 percent of the poverty line. Senate Republicans would lower that threshold to 350 percent. Subsidies will also be smaller for those who still qualify.
In short, it sounds like McConnell’s working group is keeping Obamacare's subsidy structure but making it stingier. It is unclear who this will please.
2) The Senate bill eliminates all of Obamacare’s taxes except the “Cadillac tax” on expensive health plans. This will please the medical device makers, investors, high earners, and insurance companies that were taxed by the ACA.
3) It rolls back Obamacare's Medicaid expansion “more gradually than the House bill,” according to the Post, though how much more gradually is unclear. Senate Republicans have been haggling over whether to phase out the expansion over as little as three years or as many as seven—but the final outcome would be the same either way. Meanwhile, it sounds like the Senate is going to run with its plan to impose even more draconian spending cuts on Medicaid over the long term by capping per-patient spending, then increasing funding more slowly each year than the House would. (I wrote about that plot earlier this week.)
4) What about consumer protections? The House bill notoriously allowed states to opt out of Obamacare's insurance regulations, such as rules barring carriers from discriminating against patients with pre-existing conditions or requiring them to cover certain services. Sensing that it might be politically suicidal to strip cancer and heart patients of their protections, Senate moderates have reportedly resisted going down that path. Right now, it's unclear who won the argument.
Axios reports that the Senate will instead give states more leeway to use Obamacare’s existing waiver system, allowing them to jettison some of the law’s coverage requirements—though not the popular protection for pre-existing conditions. This approach would encourage carriers in states with laxer rules to limit their offerings to minimal plans that would be largely useless to people with extensive health problems.
5) The Senate bill would kill funding for Planned Parenthood but wouldn't bar the government from subsidizing private insurance that pays for abortions, which will infuriate religious conservatives.
So, to review: The Senate bill keeps Obamacare’s subsidy structure in place while paring back eligibility, guts Medicaid more slowly but more severely than the House bill, and still lets states drop essential consumer protections, although not as many as the House. But fear not. “Aides stress that the GOP plan is likely to undergo more changes in order to garner the 50 votes Republicans need to pass it,” the Post reports. Surely it will only improve as McConnell frantically tries to whip his caucus next week, right?
Travis Kalanick, Who Personified Uber and Its Demons, Has Resigned
When the pugnacious Uber CEO and founder Travis Kalanick announced he was taking an indefinite leave of absence last week, it was, at least in part, an effort to mollify his critics inside and outside the company—the ones who said that Uber’s sexist, brutish workplace culture had become too toxic not to require a wholesale overhaul, the ones repulsed by the startup’s mercenary business tactics, the ones who kept piling on after months of self-inflicted scandals, and, of course, the investors who worried all of this chaos at a firm worth $69 billion could suddenly cost them fortunes. Uber had to change, so Kalanick, who built the company in his image, vowed to work on “Travis 2.0, to become the leader this company needs and that you deserve.”
It wasn’t good enough—and now, Kalanick is out.
The New York Times was first to report that Kalanick stepped down Tuesday after five of Uber’s large investors called for his exit:
In the letter, titled “Moving Uber Forward” and obtained by The New York Times, the investors wrote to Mr. Kalanick that he must immediately leave and that the company needed a change in leadership. Mr. Kalanick, 40, consulted with at least one Uber board member, and after long discussions with some of the investors, he agreed to step down. He will remain on Uber’s board of directors.
In a statement, Kalanick said, “I love Uber more than anything in the world and at this difficult moment in my personal life I have accepted the investors request to step aside so that Uber can go back to building rather than be distracted with another fight.”
Fighting and building used to be synonymous goals for Uber, whether it was tussling with city and state regulators, rivals like Lyft (for ride-hailing) and Apple (for self-driving cars), or Uber’s own drivers, like the one whom Kalanick was caught on video berating for complaining about shrinking pay. That stance, laid out in a series of company principles such as making bold bets and “always be hustlin’,” unquestionably helps account for the massive scale and valuation Uber has achieved since its founding in 2009.
But the consequences of that attitude, filtered down from an executive who once added the hashtag #FML to a memo advising employees not to have sex with co-workers in their same chain of command on a company retreat, became too much in aggregate, especially after former Uber engineer Susan Fowler wrote a horrifying post about the sexual harassment she’d faced working at the startup. That eventually led the company to commission former Attorney General Eric Holder to investigate Uber’s culture; the company’s board adopted all of the suggestions of a resulting report last week.
The board wasn’t finished. While Kalanick controls the board through his own shares and the seats of his allies, the group of investors who demanded he step down has about 40 percent of the voting power, the Times reports. They’ll now seek a new chief executive—in addition to filling many other senior roles left vacant by a recent employee exodus. Those investors insisted that Kalanick support the talent search, which he undoubtedly will—even if, in the back of his head, he’s also muttering “#FML.”