Moneybox
A blog about business and economics.

June 16 2017 3:32 PM

Will Buying Brands Like Bonobos Give Walmart the Upscale Cred It Covets?

On Friday morning, news broke that Walmart had purchased the menswear retailer Bonobos for $310 million. Arriving, as it did, in tandem with the announcement that Amazon had acquired Whole Foods for a far more astonishing figure, Walmart’s purchase threatened to become a footnote. Nevertheless, the Bonobos deal suggests an important story about the ways Walmart is striving to reach out into new markets—some of Amazon’s markets, in fact—especially when seen in light of some of its other recent moves.

Bonobos is just the latest in a series of online fashion acquisitions by Walmart. TechCrunch notes that since 2016 the company has purchased ModCloth, Moosejaw, Hayneedle, and Shoebuy, allowing it to massively expand on its existing array of Fruit of the Loom–esque basics. Almost in passing, the site observes that “Bonobos and other fashion purchases that Walmart has made … are not known for cut-price goods.” Duh. But it seems less likely that the company as a whole is moving up than that it is expanding outward, striving to reach new consumers—especially those who may have been turned off by its long-standing reputation.

As Neil Irwin writes in the New York Times, “Walmart’s move might seem a strange decision,” since Bonobos’ relatively expensive garments are pitched to a more upscale clientele than those sold in the mass market retailer’s many stores. Irwin rightly suggests that the move is part of the company’s ongoing struggle with Amazon to become “the predominant seller of pretty much everything you buy.” But if Walmart has lagged behind in that struggle, its difficulties may be about more than its digital strategy: Its trouble likely begins with its proletarian aura, associations that may make it hard to reach some valuable consumers.

On this front, Walmart stands to gain a great deal from its acquisition of brands such as Bonobos and ModCloth. The digital-first Bonobos has always traded on a combination of convenience and cool. Since its debut a decade ago, the company has promised men pants that fit better than those of its competitors. It maintains that promise today, telling visitors to its site, “We’ve made adjustments to ensure all our pants will fit you no matter your body type or style.” While that’s an appealing idea, it’s also faintly absurd: “A trimmer cut through the thigh” might work for some, but it’s bound to be hell on a seasoned dead-lifter. Likewise, a “curved waistband” is a nice feature, but it won’t do much to prevent “baggy seats” if you have a flat butt.

If those dubious promises have stuck for the company, though, it’s at least partly because they appeal to those who want to look good, but don’t want to put in much effort, and who are willing to pay a steep price for the luxury. To help persuade those who weren’t quite convinced, it advertised a crack team of customer service “Ninjas,” a groan-inducing term that seemed borrowed from Silicon Valley’s attempts to linguistically elevate otherwise mundane tasks. The message was clear, though: Bonobos was a company that kicked ass and threw shurikens—and they were going to make sure that you kicked ass too, even if you were all out of shurikens.

ModCloth’s appeal was different, but it played to similar impulses. As I’ve written in the past, it sold itself in part on the premise that it refuses to digitally alter photographs of its models. That body-positive attitude helped it claim that it was selling clothes for you, no matter who you are or what you look like. That, in its own turn, helped the company develop a fanatically loyal customer base prepared to buy its affordable—but not quite cheap—pocket dresses and colorful outerwear.

These are the kind of customers that Walmart needs to cultivate as it strives to expand its already considerable customer base—and, presumably, to improve its image as a crusher of mom-and-pops and a thwarter of decent working conditions. Among other things, it may mark an attempt to overcome partisan divides: Research tends to indicate that Walmart consumers swing right politically, which may speak to the company’s difficulty reaching left-leaning consumers. To be sure, Walmart’s reputation isn’t terrible, but as Forbes argued earlier this year, stocking more expensive brands may be linked to a trend that shows more Americans “graduating up out of the ‘middle class’ in income terms.” As they do, it may help the company to have a stable of friendlier sub-brands through whom it can reach out to otherwise inaccessible demographics.

If that’s Walmart’s endgame, it’s not making a show of the strategy. Visit ModCloth’s site today, and you’ll be hard-pressed to find a single mention of its relationship to Walmart, even on its “About Us” page. Much the same is true for Amazon competitor Jet.com, another recent Walmart acquisition, which cheerily announces on its “Vision and Values” page, “We share a sense of community with our shoppers and our partners, and we’re striving to create a business model that reflects that,” without acknowledging its corporate parent. For now, at least, Walmart’s gamble is presumably that it can scale up these already web-savvy brands, even as it siphons off just a bit of their hard-won fashionable charms.

June 16 2017 3:14 PM

Suburbs Finally Figured Out a Way to Get Rid of Pesky Drivers on Waze Shortcuts

In recent years, traffic has gotten bad in the tony Silicon Valley town of Los Altos Hills, California.

The big-picture problem is that the San Francisco Peninsula has become a global business hub but hasn’t adapted its road and rail network (or its housing supply, for that matter) to accommodate that. So there’s traffic in places like Los Altos Hills, which straddles Interstate 280 west of Mountain View.

As a result, mobile navigation apps, and especially Waze, the Israeli mapping software owned by Google, have maximized the utility of the local road network by sending drivers off the highway and arterial streets and through residential areas like Los Altos Hills. (Users of the app report traffic patterns and obstructions in real time.)

First, Los Altos Hills asked Waze to remove three roads from its map. Waze does not entertain such requests. So Los Alto Hills came up with a Plan B: Close the streets to people who don’t live there. In May, the city erected “No Thru Traffic” signs on three roads where they crossed the city limit. Waze complied, according to a report from the Los Altos Hills manager, which means it will no longer direct users to drive on those streets.

This kind of fix is about to be a very popular solution to a problem that has vexed suburban homeowners across the country. A Takoma Park, Maryland, man started reporting phantom wrecks and traffic jams to keep cars off his street before Waze banned him. He was inspired by like-minded residents in Los Angeles. In the end, he put up his own “No Through Traffic” signs, and even got his councilman to reach out to Google Maps, Waze’s minder.

Cities with old-fashioned grid patterns, the transportation engineer David Levinson has observed, tend to distribute traffic more evenly. It’s in suburbs with heavily used arterials and hard-to-find back roads that the apps have made their greatest impact. Some have tried traffic-calming infrastructure, like speed humps, traffic circles, and the like, which reduce the time savings of unorthodox shortcuts. Fremont, California, across the bay from Los Altos Hills, has new rules on rush-hour turns onto heavily trafficked shortcuts. But it’s hard to beat the algorithm.

Now—at least by the letter of the law—those streets will be closed off to people who don’t have a reason to be there. According to Los Altos Town Crier, the city is in a trial period with the signs and isn’t yet pursuing violators.

This doesn’t work everywhere. In Alabama, disappointed residents trying to shut down a shortcut learned that “No through traffic” was just a recommendation and everyone had a right to travel on public roads. In Atlanta, there was a backlash to the city’s decision to put up the signs after the collapse of Interstate 85 earlier this year, with one mayoral candidate saying it was a mistake to “wall off neighborhoods.”

In Takoma Park, public works director Daryl Braithwaite told me the city doesn’t put up “No through traffic” signs because they are impossible to enforce. Unlike turn restrictions, where violators can be easily observed, seeing who has business in a neighborhood would require extraordinary scrutiny by the police. “You’d have to stop every car,” she said.

But, she added, if those signs would indeed get Takoma Park roads off of Waze routes, residents might be interested in installing them anyway.

June 16 2017 10:42 AM

Amazon’s Whole Foods Purchase Isn’t Just About Groceries. It’s About Everything.

Amazon will buy Whole Foods for more than $13 billion, Bloomberg News and others reported Friday morning.

The move should awe but not shock. Amazon was already pushing into the $800 billion grocery business via its Amazon Fresh delivery business, which competes with the likes of Instacart, FreshDirect, and Google Express. So far these services have made inroads mostly in the nation’s densest cities, including New York and San Francisco.

The Whole Foods purchase changes the landscape dramatically. Suddenly Amazon owns a nationwide network of already-popular grocery stores that have already solved the tricky logistical problems involved in sourcing and storing fresh food.

What Amazon brings is the world’s largest online sales portal and its mastery of the home-delivery business. Scale, meet scale. Logistics, meet logistics. Loyal customer base, meet loyal customer base. If you’re in the grocery business and your name is not Amazon or Whole Foods, today is not a good day for you.

Grocery stocks
Grocery companies aren't the only ones that should be trembling.

Screenshot / CNBC

But Amazon is also chasing something even larger here. Its move into groceries isn’t just about adding a new territory to its online retail empire. It’s about dominance, comprehensiveness, and the pursuit of monopoly.

Adding groceries to its repertoire gets Amazon that much closer to being a one-stop destination for everything you buy. It gets customers visiting Amazon.com not just occasionally, but several times a week, every week. It reinforces the behavior by which customers search for things to buy on Amazon.com, rather than on a search engine like Google. It builds Amazon’s two-hour delivery business, which it sees as crucial to its future.

There’s more. It encourages people to use the Amazon Echo smart speaker for shopping lists and purchases, which makes far more sense when you’re ordering groceries than it does when you’re trying to buy, say, a new lamp or a pair of shoes. Same goes for Amazon Dash, whose Wand barcode scanner the company has just resurrected. And, perhaps most importantly of all, it will force every Whole Foods customer to strongly consider signing up for Amazon Prime, which turns Amazon into their de facto source not only for online retail but for instant video and other media.

The grocery stocks are down today, but they shouldn’t be the only companies trembling: Google, Apple, and even Uber are threatened by Amazon’s growing hold over e-commerce, media, and same-day home delivery.

In short, Jeff Bezos wants to take over the world—and this is a very significant step in that direction.

June 15 2017 5:06 PM

Texas Governor Who Chopped Down Old Tree Will Chop Down Law Protecting Old Trees

The liberty-lovin’ Texas Legislature meets once every two years, which isn’t always enough time to enact a liberty-lovin’ agenda. Which is why, last week, Gov. Greg Abbott called the legislature in for a special July session covering issues like abortion, property taxes, and school financing—the statehouse equivalent of summer school.

And then, in the middle of an ambitious 19-item agenda, there was this: a bill to pre-empt local laws protecting old trees.

For Abbott, the arboreal beef is personal.

Dozens of Texas cities and towns have “tree protection” ordinances that local advocates say keep the air cooler and cleaner, and reduce flooding and energy bills. In Austin, developers need city permission to fell older trees, and must plant new trees or pay into a tree-planting fund if they do cut them down. Between 2014 and 2016, a period during which Austin was one of America’s fastest-growing cities, the city used its ordinance to preserve some 43,000 trees. Developers were allowed to remove 23,000 trees, and were required to plant 24,000 replacements. It’s not a huge impediment to the development, since Austin only worries about trees over 19 inches in diameter, which make up about 3 percent of the tree population. Still, those older trees constitute about 18 percent of the city’s leaf coverage.

 

For a certain brand of property-rights Republican, these ordinances represent the thin end of the socialist wedge. "City tree ordinances are some of the most egregious examples of property rights violations in our state,” State Sen. Donna Campbell, who sponsored a tree ordinance pre-emption bill this year, told the Austin American-Stateman in February.

“Austin, Texas owns your trees,” Abbott said on the radio last week. “That’s insanity. It’s socialistic.”

June 15 2017 4:22 PM

Iowa Wants to Rewrite Obamacare. What Happens if Trump Lets It?

Right now, the second most important health care story in the country may well be unfolding in Iowa.

The most important story, of course, is the Senate GOP’s attempt to craft an Obamacare repeal bill entirely behind closed doors. But if that effort sputters—God willing—the future of the Affordable Care Act, and the extent to which conservative-leaning states will be able to simply rewrite it on their own, could hinge on what’s currently taking place in Des Moines.

This week, Iowa submitted a plan to federal regulators meant to stave off the impending collapse of its individual insurance market. There is currently a strong possibility that, come 2018, Iowa could become the first state without any carriers offering coverage on its Obamacare exchanges. Of the four insurers currently operating there, two—Aetna and Wellmark—have said they will pull out of the state’s market entirely next year because of the losses they’ve piled up there. Another, Gundersen, only sells coverage in five counties and hasn’t committed to sticking around. The last, Medica, offers health plans across the entire state but has warned it may have to bail ”without swift action by the state or Congress to provide stability to Iowa’s individual market.” If the company does exit, Iowa’s exchanges will be more barren than a cornfield in January.

Insurers are losing money on Iowa’s Obamacare exchanges, and fleeing them, for essentially the same reason they are elsewhere: Their customers have turned out to be older and sicker than anticipated. But those problems are especially acute in lightly populated rural states like Iowa, where the government has made matters worse by letting many residents hold on to their pre-Obamacare insurance plans rather than force them onto the exchanges. That’s made the pool of customers thinner than it might otherwise have been. Much has been made of the fact that Wellmark, which lost $90 million over three years, got stuck covering a young hemophiliac whose medical bills cost the company $1 million per month. But the fact that a single teenager with a rare condition could turn into a budget line item for an insurer is really just a colorful illustration of how tiny and unbalanced Iowa’s individual market really is.

Of course, it also doesn’t help matters that Donald Trump is threatening to bring all of Obamacare crumbling down by withholding crucial subsidy payments from insurers.

With the threat of disaster looming, Iowa officials have asked the U.S. Department of Health and Human Services for permission to implement a “stop-gap” measure that would let them dramatically rewrite the rules of Obamacare within their state, at least until Congress figures out what it wants to do about health care. As Larry Levitt of the Kaiser Family Foundation put it to me, their plan is a bit like a mashup of the American Health Care Act, which House Republicans passed last month, and the Affordable Care Act—in other words, Trumpcare lite.

Under the proposal, Iowa’s individual insurers would only be allowed to sell a single, standardized health policy—the equivalent of an Obamacare silver plan—which would be offered off of the ACA’s online exchanges. Insurers would still be required to cover the essential medical services required under Obamacare, and carriers would still be banned from discriminating against customers with pre-existing conditions. But the state would replace Obamacare’s subsidies with tax credits that would be available to higher earners (they’d scale based on age and income) and would no longer require insurers to reduce out-of-pocket costs for poorer customers. Finally, it would add new enrollment restrictions aimed at keeping people from waiting until they were sick to buy coverage and—borrowing from the House bill—would create a large reinsurance pool to defray costs for insurers who get stuck covering extremely expensive patients.

It’s a fairly dramatic rewrite. Low-income Iowans could come out a bit worse in the bargain while some upper-middle-class residents would come out ahead. Meanwhile, insurers would be less likely to lose money if they have to cover a severe case of hemophilia. While those trade-offs might not be entirely ideal to some, it could keep the insurance market functioning. Wellmark has said it would keep selling coverage in Iowa if the proposal—which it reportedly helped negotiate—is implemented. And a health care landscape with one or two insurers beats a health care landscape with no insurers.

But can Iowa legally do it? That’s not exactly clear. Under current law, the federal government is allowed to let states tear up Obamacare’s rules and experiment with new insurance systems through what are known as 1332 innovation waivers. But those come with a number of strict requirements—among them, states need to show they’d provide coverage that was just as affordable and comprehensive as under Obamacare while also providing a 10-year forecast showing the changes would be budget-neutral to the federal government. It’s not clear Iowa can actually hit all three of those marks at once, or check the many procedural boxes necessary for a waiver—and so the state is asking the administration to relax the rules. “The ‘traditional’ 1332 Innovation waiver was designed to allow states to propose innovative and long-term changes to the functions of the ACA,” its proposal says. “Iowa’s proposal is a short-term solution to prevent the crisis of not having any carriers offering ACA compliant plans in 2018.”

The subtext of Iowa’s proposal seems to be that Republicans will have repealed and replaced Obamacare by 2019, at which point it won’t really matter whether their system meets the waiver program’s strict requirements. (“Iowa intends to revisit the functionality of this program in lieu of any federal guidance that may be applicable for 2019,” the proposal says.) But if Mitch McConnell & co. bungle that effort, giving Iowa a green light to revamp Obamacare, no questions asked, could create a new and potentially powerful precedent. Sure, the state is framing this as a one-time response to an emergency situation. But what counts as an emergency? If a red state found itself with just a few counties lacking insurers, would the Trump administration let it do a top-down rewrite of the law? And what if Trump did decide to eventually cut off those crucial subsidies and bring the ACA markets crashing down? In that case, many states might be able to make a case for emergency measures. Maybe activist groups would sue to stop them from rewriting the law, but if the alternative is a cratered insurance market, maybe not. Under this scenario, we could end up with a landscape of states with radically different health-care regimes—some that look like Obamacare, some that look like Trumpcare, and some, like Iowa’s, that are Frankensteins of the two.

Iowa is facing a legitimate crisis, and many of the steps it’s taking to fix it make sense. But the state is also showing how conservatives could try to kill off Obamacare by regulatory fiat if they can’t pull off the job on Capitol Hill.

June 15 2017 1:31 PM

The Biggest Threat to Uber’s Business: Who Would Want to Work There Now?

On Tuesday, Uber CEO Travis Kalanick announced he would take an indefinite leave of absence from the company. The move followed an ever-tightening spiral of scandals for the San Francisco–based ride-hailing juggernaut that boiled over this week following the resignation of the company’s senior vice president for business, Emil Michael, on Monday; the release of a report by former Attorney General Eric Holder suggesting fixes to Uber’s sexist, Hobbesian work culture; and the company board’s vote to adopt all of Holder’s recommendations.

Could Uber, which has a valuation of $70 billion and is the dominant ride-hailing service across much of the globe, be in danger of losing its perch atop the industry pecking order? Three schools of thought suggest it might be.

First, the company’s leadership has been gutted. Kalanick and Michael joins Uber’s former president, head of mapping, vice president of product, top communications executive, vice president of engineering, and head of finance, all of whom left the company in the past six months. An Uber board member resigned Tuesday after making a sexist joke at the meeting dedicated to reviewing possible solutions to the company’s long history of rampant sexism. How long can a company survive with its head cut off?

Second, as Aarian Marshall argued Tuesday in Wired, Uber is a toxic brand and an unreliable partner. “Bad news cycles are bad news for collaborations,” he wrote, and collaboration (especially with automakers) is essential to Uber’s dreams of one day dominating the self-driving car market. Wall Street backing is also the basis for any eventual IPO, which the company had been hoping to roll out as early as next year. But trust in Uber is in short supply these days.

Third, there are Uber’s customers. As Farhad Manjoo opined in the New York Times on Wednesday, a decline in app users could hose any prospects of future recovery. “To encourage a better Uber, it’s time to play the only card you’ve got” as a consumer, Manjoo exhorted. “If it backslides or otherwise fails to live up to the promises it’s making now, stop using Uber.”

But there are reasons to doubt that these particular doomsday scenarios will pan out. In both its bullish business model and pervasive workplace sexism, Uber is like a ghastly mirror image of the “nevertheless, she persisted” meme that has come to symbolize feminist perseverance in the face of misogynistic headwinds; its awful behavior never seems to dog it for too long. The company has been embroiled in controversy, flayed with unflattering headlines, and buried under court motions for years. But “instead of making any meaningful changes” to the way it operated, BuzzFeed editor-in-chief Ben Smith wrote Tuesday, “Uber simply pressed on,” continuing to win customers, score business deals, and rake in wads of cash despite a thuggish workplace culture and questionably legal behavior. Why should the temporary departure of its CEO and the rechristening of the company’s “War Room” (it's now the “Peace Room”) meaningfully change things for the embattled startup? As Manjoo himself admits, “No matter what it does, a lot of us just can’t seem to quit Uber.”

But there’s a fourth constituency that could end up sealing Uber’s fate: Its employees, both present and future. The company currently employs an estimated 12,000 people worldwide, roughly 7,000 of them in the U.S. And in an employment landscape with as much turnover as Silicon Valley, the ability to attract top talent is the lifeblood of any tech company. Fail to extract the best employees from that churn and you’re not likely to keep your head above water very long. Uber’s failure to hold onto and attract employees might deliver the killing blow long before the company’s erstwhile leaders, jittery investors, or disillusioned customers do.

Of course, we don’t yet know much about how Kalanick’s departure is affecting employee outlook. But if it’s any indication, the company’s head of human resources asked Uber workers to stand up and give their fellow employees hugs after the oft-criticized CEO’s announcement Tuesday. And morale at the company has been low for some time. In part that’s the result of Uber’s infamously hard-charging, regulation-skirting, “bad-boy” corporate culture, which Kalanick both boasted of and embodied during his tenure. But the rumblings of dissatisfaction grew louder after Susan Fowler, a former Uber employee, published a blog post laying bare the undercurrent of unpunished sexual harassment that pervaded employee interactions in the company’s engineering division, which a group of female employees later called a “systemic problem” in a February meeting with Kalanick. Subsequent accounts—including a criminal probe launched last month by the Department of Justice and recent reports that the company’s president of business in the Asia Pacific mishandled the case of an Uber driver accused of raping a passenger in India—have only made things worse. (The victim in the India case, whose medical records were inappropriately obtained and shared by Uber executives, is now suing the company.)

None of this to say that anyone should feel bad for Uber employees who’ve stuck with the company—software engineers reportedly rake in an average of $292,000 annually, after all. But under those conditions it’s not hard to imagine employees, particularly women who feel unwelcome in the industry or who suffer harassment at the hands of co-workers, quickly vacating positions at the company—or simply choosing not to apply to them in the first place.

What’s more, Uber has already demonstrated a lack of grace when it comes to assuaging nervous employees in the wake of other high-profile departures. In late April, Anthony Levandowski, the former head of San Francisco–based company’s in-house self-driving car outfit, distanced himself from the division while under legal scrutiny related to an ongoing court case with Google (he was fired outright last month). The void reportedly sparked a spate of external job-hunting by nervous Uber engineers who worried their jobs might disappear out from under them—fears the company’s management apparently did little to quell, Recode reported at the time.

The company could also end up an unwitting victim of its own outsourcing business model. As Daniel Gross noted Tuesday in Slate, much of the Uber’s workforce—from its legions of nonemployee drivers to the owners of the vehicles that comprise its nationwide fleet—is only loosely yoked to the company. Those looking to jump ship could find a soft landing with Uber’s top U.S. competitor, Lyft, where drivers enjoy higher wages and greater levels of overall employee satisfaction (and for which many Uber drivers are already switch-hitters). Uber has struggled to retain drivers for years; fully half of them quit within their first 12 months with the company, Forbes reported in 2015. And with few employee protections and just 14 percent of driver jobs held by women, Uber’s outsourcing reflects many of the same pathologies of behavioral impunity and gender inequity that plague the wider company—mistakes its plucky rivals are eager to exploit.

That last prospect—an industry competitor scooping up not just Uber’s employees but also its vision for the future of transportation—might end up being the most optimistic outcome for the besieged ride-hailing startup. As Manjoo noted in the Times, there’s no need to eschew the company concept writ large even while kicking Uber to the curb. “Ride-sharing, as an industry and a civic utility, is too big an idea to be left to a company like the one Uber is now,” he wrote. And as I suggested just three weeks (but a lifetime of Uber scandals) ago, it’s looking ever more likely that the tech giant could end up a ride-hailing Ozymandias, a byroad warning to other startups barreling down the gig economy road. Besieged by demons of its own design, ending up a cautionary tale could be the best shot at leaving a positive legacy Uber has left.

June 14 2017 5:13 PM

Lefty Cities Say They Want to Fight Climate Change but Won’t Take the Most Obvious Step to Do It

On June 1, the U.S. Climate Mayors—a network of more than 300 city leaders, including the mayors of the country’s five largest cities—published a commitment to “adopt, honor, and uphold the commitments to the goals enshrined in the Paris Agreement.” The cities would carry out the promises Donald Trump had abandoned.

I have bad news for this feel-good caucus. Want to fight climate change? You have to fight cars. In the nation’s largest cities, cars account for about a third of greenhouse gas emissions. Nationally, transportation is now the single largest contributor to carbon emissions.

And it gets worse, at least from a political perspective. Mayors can fund transit, build bus and bike lanes, end free parking, and reform building codes that require it. (Though they mostly don't.) But ultimately, the only way to combat American automobile dependency is to reform the way we build, and in particular, to help avoid low-density settlement patterns that make it impractical or impossible for Americans to get anywhere without a personal car.

Berkeley, California, is a great case study. More than 90 percent of voters there picked Hillary Clinton in November, and Jill Stein outperformed Donald Trump. If there’s an American polity with more evident devotion to fighting climate change, I don’t know where. The town is home to the University of California and the Lawrence Berkeley National Laboratory. Mayor Jesse Arreguin has promised to introduce a bill to bind the city to the commitments of the Paris Agreement.

But even in Berkeley, liberals have a blind spot when it comes to housing policy and the transportation choices it requires. As a councilman in 2014, Arreguin pushed a ballot measure putting superstrict conditions on new development. It failed, but his elevation to mayor in November was seen as a reproach of his opponent Laurie Capitelli’s pro-development record.* “It was a very clear choice between me and my opponent, who has literally rubber-stamped every [real estate] project that came before this council,” Arreguin told the San Francisco Chronicle last fall.

At Tuesday night’s City Council meeting, which touched on a number of housing issues, this dissonance was on display in a resident’s complaint about a proposed new building that would cast shadows on her zucchini plants. The project was returned to the city’s Zoning Adjustments Board. The zukes live another day.

“Delaying or denying housing approvals suggests to Berkeley neighbors that their stalling tactics will work, and invites more of them in the future,” web developer Kevin Burke wrote in a letter to the council after the meeting, expressing his disappointment with the decision. “I would also much rather have a zucchini garden crisis than a housing crisis.”

More fundamental proposals are also under consideration. A group of housing experts led by Council Member Lori Droste sounded the alarm in an op-ed about the effect certain resolutions might have on the growth of the housing stock. One bill requests city planners consider downzoning Berkeley, shrinking the city’s potential residential capacity. "Downzoning would be a disastrous step backwards for Berkeley, and will undoubtedly worsen affordability and lead to even more displacement and exclusion,” they wrote. A second proposal would raise the fees on new housing units that pay into the city’s affordable housing fund, without studying the impacts. “If the levels are set too high (and they are likely to be among the highest in the Bay Area), we will drive new housing to other cities and will not likely see any affordable housing—or any housing—in Berkeley for a long time.”

Before the meeting, Arreguin announced he had revised the downzoning proposal:

It wasn’t discussed at the meeting. The initiative to increase fees on new development to fund affordable housing was discussed and pushed back to a later date.

That overturning housing restrictions is part of the fight for economic and racial justice is well-established. But in a moment of all-in activism and outrage over climate change, it’s worth reflecting on the degree to which the prohibition of infill housing is an environmentally reactionary policy.

The fewer people live in Berkeley and other job-rich, close-in Bay Area cities and suburbs, the more people have to drive. More than half of Berkeley's greenhouse gas emissions come from cars and trucks.

The city’s 2009 Climate Action Plan got it. Reducing vehicle miles traveled is “imperative,” it says. “The most effective strategy for reducing VMT in the long-term is to site new housing near transit.” It notes that between 1999 and 2006, the city failed to meet the target housing production set by the Regional Housing Needs Allocation, or RHNA. Between 2007 and 2014, the city built about half what the RHNA called for. Yes, that period coincided with a major recession. But Berkeley still lags behind the eight-county Bay Area’s RHNA goal rate of 57 percent.

That plan also passed the buck: “While Berkeley should continue to build more housing, greater emphasis should also be placed on other transit-rich communities that have not met their RHNA goals for accommodating the region’s growth.”

It's not wrong. In some ways, it is unfair to single out Berkeley. There are many, many worse actors in the Bay, especially the job-rich, house-poor suburbs of Silicon Valley. Nearly every single city that considers itself a beacon of environmental progressivism has parking minimums, among a host of other policies that perpetuate the status quo.

Corporate actors are hapless: Apple, which is pledging to spend a billion dollars fighting climate change, just built a headquarters with 11,000 parking spaces that condemns its workforce to decades of car commutes.

Environmental activists and nonprofits oppose new projects on the grounds that they will worsen congestion, occupy vacant land, or threaten local biodiversity. But by pushing demand out of urban areas, those activists promote sprawl and long commutes that worsen regional air pollution.

Politicians transparently undermine the causes they claim to advocate. New York City Mayor Bill de Blasio has extolled sacrifice in the interest of saving the Earth but insists on a two- or three-car SUV cavalcade to drive him halfway across the city to the gym every morning. (In a city where more than half of all commuters use mass transit.)

The Bay Area housing crisis—like, well, climate change itself—is a collective action problem. The region would be far better off if every city agreed to build. But in the interim, more construction means taking a greater share of the population, and the growing pains that come with it.

No doubt Berkeley’s zucchini plants are the least of our problems. But the city's sterling, proud progressive reputation makes it a fair target for scrutiny. It’s supposed to be a paradigm, and better than the rest. It’s a place environmentalists count on to take the moral high ground—and shame its peers accordingly. Infill housing production is the municipal equivalent of driving a hybrid: If you’re serious about fighting climate change, it's no longer up for debate.

*Correction, June 14, 2017: This post originally misidentified Laurie Capitelli as Berkeley’s former mayor. He is a former Berkeley city councilman who unsuccessfully ran for mayor.

June 13 2017 6:12 PM

The Republican Health Care Bill Would Actually Raise Insurance Premiums, Says a New Government Report

When the House was busy negotiating its Obamacare repeal bill this spring, conservative Republicans said they had one—and pretty much only one—goal for the legislation: It had to bring down insurance premiums. Period.

“I can tell you that there is one score that the American people will pay attention to,” Mark Meadows, chairman of the hard-line House Freedom Caucus, said in March, after the first draft of the law emerged. “And that is, does it really lower their health care costs and their premiums? That’s the only score that really matters. And if this doesn’t do it, then we need to make sure that we find something that does do it.”

Meadows and the Freedom Caucus of course threw their support behind the American Health Care Act in May, after negotiating a number of concessions they said would lower the cost of insurance. “Actually, it drives down premiums," the North Carolina representative said on Morning Joe, adding that, "The first bill that came out actually had an increase in premiums in the short term.” In fact, there wasn't any obvious way Meadows could have known what the bill would do at the time, since the Congressional Budget Office hadn't scored it yet. But the CBO's forecast eventually bore out his point: Though some people, particularly older Americans, would see the cost of insurance rise astronomically, the office concluded that by 2026, average premiums would fall across the states.

So, mission accomplished?

Nope. Not at all. It seems the CBO report left out something important: the value of government subsidies. Today, Obamacare provides tax credits to lower- and middle-income families in order to make coverage more affordable. The House bill provides tax credits, too, but they would be less generous for many households, because they're based on age rather than income. Because the CBO only tried to forecast premiums before tax credits in its analysis, it didn't actually tell us whether families would be paying more or less on average for their insurance.

Turns out they might be paying more. On Tuesday, the Office of the Actuary at the Centers for Medicare and Medicaid Services released its own score of the House bill. It finds that gross premiums—that is, before tax credits kick in—would fall 13 percent by 2026. However net premiums—that is, after tax credits—would rise 5 percent, because the law's subsidies would simply be worth less. What's more, average out-of-pocket costs like deductibles and co-pays would skyrocket 61 percent, in large part because the law ends the Obamacare rules that limit those expenses for poorer families. Overall, people will simply be paying more for their coverage and care ($162 a month more, on average, to be precise).

premiums

Of course, the actuary's estimates rely on a number of assumptions. For instance, it guesses that only a quarter of states will choose to waive Obamacare's insurance market regulations, such as the requirements that insurers cover certain essential medical services, as the American Health Care Act would allow them to. It's very possible that more states would take that opportunity, which could drop premiums lower.

These are also only average effects. In the end, the House bill will mean different things for different Americans. Premiums before subsidies will go down for younger, healthy customers and way up for people in their 60s, because the AHCA increases the amount insurers can charge older enrollees compared to people in their twenties. If states waive the Essential Health Benefits rules, people who need more services (like women who want childbirth coverage) will pay a lot more for them. Some upper-middle-class households that were never eligible for Obamacare's subsidies could come out ahead, meanwhile, because they would qualify for the House bill's tax credits.

Finally, it's very likely that the Senate will change the House bill's subsidy structure, and possibly make it more generous—though that would take more money.

But don't let that obscure the greater point. Conservatives said their bill would bring down the cost of insurance for families. This estimate says it's entirely possible that, overall, it won't. If that's the case, the ACHA fails at its one and only job.

June 13 2017 2:18 PM

Uber CEO Travis Kalanick Will Take an Indefinite Leave of Absence

Uber CEO Travis Kalanick announced on Tuesday he would be taking an indefinite leave of absence from the company, after the death of his mother in a boating accident and a series of scandals over Uber's workplace environment and business tactics.

"If we are going to work on Uber 2.0, I also need to work on Travis 2.0 to become the leader this company needs and that you deserve," Kalanick wrote in a letter to the company's 14,000 employees on Tuesday morning. Kalanick said he would be available "as needed" for the "most strategic decisions," but would generally be allocating responsibility's to the company's leadership team—or what remains of it after weeks of high-profile departures.

Eric Alexander, the company's top executive in Asia, was fired last week over his handling of a rape committed by an Uber driver in India. More than 20 employees have been fired as part of a separate investigation into more than 200 HR claims. Emil Michael, the company's second-in-command and head of business, left on Monday—a move that was suggested in the Holder Report, whose 47 recommendations were adopted unanimously by Uber's board on Sunday.

The first of those recommendations? "Review and reallocate the responsibilities of Travis Kalanick." Even once Kalanick has returned from his leave of absence, the company will turn over some of his responsibilities to a Chief Operating Officer, a position that has yet to be filled.

June 13 2017 1:20 PM

Crowdfunding Sites Are Booming Thanks to People Who Need Help With Crushing Medical Bills

Today in heartbreaking indictments of the entire U.S. health care system: Bloomberg is out with a piece about how online crowdfunding campaigns by families who need help paying medical bills have become so common they're driving the growth of major platforms like GoFundMe. And given the direction health care seems to be headed in this country, companies expect that trend to continue.

"Whether it's Obamacare or Trumpcare, the weight of health-care costs on consumers will only increase,"  Dan Saper, chief executive officer of the platform YouCaring, told Bloomberg. "It will drive more people to try and figure out how to pay health-care needs, and crowdfunding is in its early days as a way to help those people."

A few remarkable tidbits from the piece, which I recommend reading in full:

  • Between September 2015 and October 2016, total fundraising on GoFundMe grew by about $2 billion—$930 million of which was for medical expenses.
  • At YouCaring, medical fundraisers were "approaching" half of its business before it purchased GiveForward, where they made up 70 percent of all fundraising.
  • A study of crowdfunding campaigns found that they disproportionately came from states that refused to expand Medicaid under the Affordable Care Act—which makes sense, since they tend to have higher uninsured rates.

As Helaine Olen wrote in Slate a couple years back, the fact that these campaigns have become a mundane, ambient part of American life on the internet is one of the more stinging reflections of our health care system, even with the improvements created by Obamacare. What's especially cruddy about these campaigns is the false sense of hope the create: As Bloomberg notes, while a few high-profile fundraisers can rake in massive donations, people who resort to online begging for more everyday medical expenses often come up short.

Of course, Republicans are now working on a repeal law that will guarantee many years more of heart-rending online appeals by families who need help paying for their kids' open-heart surgery. This is quite literally the future conservatives want.

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