Moneybox
A blog about business and economics.

June 23 2016 4:53 PM

We Tell Ourselves Stories to Leave

Boris Johnson, the former mayor of London and leading Euroskeptic, loves to talk about the European Union's policy on bananas. In his mind, European rules on banana sales—which prohibit bananas with "abnormal curvature"—typify the problem with Brussels calling the shots in Birmingham. He's not always right about the details, but it's been an effective talking point for years.

In fact, the British press has made something of a cottage industry of exaggerating European rules—to the extent that the European Commission keeps a specialwebsite for collecting and debunking the hundreds of false claims that newspapers like the Daily Mail have made. No doubt these have played some role in reinforcing the perception that Brussels is a power-mad bureaucracy that aims to disenfranchise the people of the United Kingdom. Nevertheless, they are hilarious, and if the UK votes to leave, we will be sorry to lose this special genre of journalism.

June 23 2016 3:53 PM

I Don’t Believe That Anybody Feels the Way I Do About UKIP Now

File this under poll results that are not at all surprising and yet I couldn't be gladder someone gathered them: According to a BuzzFeed poll, U.K. voters in favor of Britain exiting the European Union are significantly more likely to be Oasis fans than Blur fans (68 percent vs. 32 percent), while among voters in favor of staying in the EU, that spread takes a notable dive (58 percent vs. 42 percent). Pollster YouGov told BuzzFeed that there is a “statistically significant difference between EU vote preference and those who preferred either Blur or Oasis.” Things haven't been so heated between Blur and Oasis fans since the time the two bands competed for U.K. singles-chart dominance in 1995's Battle of Britpop.

So what might account for the political split among the bands’ enthusiasts? As Jordan Weissmann pointed out this week, Brexit supporters are less educated, less urban, and more conservative than the Remain set. Blur, in the band's 25-year journey from sun-drenched proto-alt-rockers to incisive Britpoppers to skronky indie importers to moody sonic catholics, is the far more adventurous and cosmopolitan of the two groups, while Oasis, in both its sloppy public antics and its hook-first pop primalism, makes more or less static Britpop for the common man. To put it more plainly and reductively: The folks in the village pub like Oasis and dislike the EU. Former college radio DJs like Blur and the continent.

I will admit to wondering how the mid-'90s incarnation of Blur—the one that pioneered an explicitly British, downright parochial alternative to American alt-rock on albums like Parklife and The Great Escape—might have viewed the referendum, and the members don't appear to have weighed in publicly with their present views. Oasis' Noel Gallagher, however, shared a characteristically nihilistic take, telling the CBC:

I see politicians on TV every night telling us that this is a fucking momentous decision that could fucking change Britain forever and blah, blah, blah. It's like, okay, why don't you fucking do what we pay you to do which is run the fucking country and make your fucking mind up. What are you asking the people for? 99 percent of the people are thick as pig shit.

Thanks for that, Noel.

June 23 2016 1:27 PM

How and When Will We Know the Brexit Verdict?  

Polls in the Brexit referendum close Thursday evening across Britain at 10 p.m. BST, which is 5 p.m. Eastern time and 2 p.m. Pacific time. In last year’s general election, exit polls allowed the TV networks to correctly predict that the Conservative Party had won a narrow majority seconds after the voting ended. That won’t happen this time around, though.

The first result of the night is expected around 12:30 a.m. (7:30 p.m. ET), probably from Sunderland. This city in northeast England takes outsize pride in counting votes quickly—the first declaration of the night has happened here in every British election since 1992. In fact, there’s a fierce rivalry among the city’s constituencies—in the 2015 election, Houghton & Sunderland West called a winner 48 minutes after voting ended. (Sunderland doesn’t have many other claims to fame. It’s home to a Premier League soccer team, and judging from his accent, it’s where Game of Thrones’ Ser Davos Seaworth grew up—but not the actor who plays him; Liam Cunningham is Irish.)

The counting will happen at 382 local centers, rather than at the constituency level. Sadly, this means we won’t get to see the wonderfully theatrical declarations that make British elections such fun to watch, nor will we hear great constituency names like Halesowen and Bognor Regis or Mole Valley.

The Guardian reckons that by 4 a.m. (11 p.m. ET), we’ll know how big cities like London, Manchester, and Glasgow voted, and unless the race is very tight, the overall result should be clear by 5 a.m. (midnight ET).

The final declaration is expected to be made at “breakfast time” on Friday morning, British time, so perhaps around 2 a.m. ET. The venue for the big announcement will be Manchester. Why there? The Electoral Commission was vague, but I like to think that my hometown was chosen in tribute to its inventiveness. As I wrote in 2004, Manchester was home to “the first factories, the first passenger railway, the first real canal, the first public bus service, the first industrial park, the first stored-program computer, and so much more.”

And yes, the referendum results are being televised in America. C-SPAN 2 will air a simulcast of referendum coverage from ITV, Britain’s main commercial network, starting at 5 p.m. And BBC World News will have special referendum programming starting at 6 p.m.

June 23 2016 1:13 PM

Is British Immigration Really out of Control, Like Brexit Proponents Claim?

It’s official: The U.K. has voted to leave the EU. This post was written on Thursday before the final results.

If you believe the polling data, frustrations about immigration have driven the Brexit campaign more than any other single issue. EU rules requiring open borders for workers have brought a flood of new arrivals to Britain, especially from Central European countries like Poland. Last year, net migration reached 333,000, more than double the level in 2000. To hear the Leave campaign tell it, those numbers are simply out of control. But how immigrant-heavy is today’s Britain, really?

One way to think about it is to compare the U.K. and United States. In 2014, immigrants made up 13.3 percent of the U.S. population, up from 7.9 percent in 1990, according to the Migration Policy Institute. And Great Britain? The numbers are remarkably similar. The Migration Observatory at Oxford says the country was about 13.1 percent foreign-born in 2014, up from 7 percent in 1993. Migration as a percentage of the population is also a little bit higher here in the states than across the pond—3.86 per thousand people versus 2.54 per thousand, according to the CIA Factbook.

You can argue about whether or not the U.S. is better equipped culturally to absorb that many migrants, or if either country is up to the task. But what’s occurred in the U.K. isn’t beyond the scope of what’s happening in some other parts of the West. And for those inclined to see parallels between the Brexit campaign and America’s Trump-led anti-immigrant revolt, these numbers give us one more similarity.

foreignborn

Also, here’s another important note about Britain's immigration dynamics. While some of the more flatly nativist rhetoric from far-right Brexiters would give you the impression that the whole of Great Britain has been taken over by Polish and Romanian migrants, that's not really the case. The epicenter of the country's immigration wave is London—the Migration Observatory finds foreign-born residents make up 39 percent of the population in inner London and 33 percent in its outer boroughs (for context, that's similar to New York City, which is 37 percent foreign-born). London also claims about 37 percent of the country's entire foreign-born population. The next most heavily immigrant region in the country is just 13 percent foreign-born, and most others are closer to 5 percent. However, the arrival of immigrants in these areas may be more noticeable—and disturbing to some—because they had so few 20 years ago. They've gone from a virtually no-migrant population to a small one.

Notably, multiethnic London itself is generally considered a stronghold for the Remain campaign, while the leave camp tends to fare better in outlying areas. It seems similar to the dynamic here in the U.S., where some of the fiercest anti-immigrant sentiment is often found in places, like Alabama, where very few immigrants actually live. (Of course, that might be part of the reason so few choose to move to those regions in the first place.)

regions

June 23 2016 12:12 PM

While Democrats Protested for Gun Control, the GOP Tried to Stand Up for Financial Advisers. It Failed.

Don’t ever think the Republicans controlling the House of Representatives don’t know their priorities. Even as Democrats staged a historic sit-in on the House floor beginning Wednesday, singing “We Shall Overcome” and reading names of people who died as a result of gun violence in an attempt to force a vote on gun-control legislation, GOP representatives made sure to let the financial services industry know they cared.

Yes, I’m back to writing about the fiduciary standard. That’s the Obama administration regulation that is scheduled to go fully into effect in 2018 and will require financial advisers giving retirement advice to put their clients’ best interests ahead of their own, something many are not currently required to do.

The House was scheduled to vote on a bill Wednesday afternoon that would have blocked the new regs from taking effect. Instead, the vote occurred in the late evening, as Democrats chanted “No Bill, No Break”—referring to the Republican’s refusal to allow a vote on proposed gun regulations—as the roll call was tallied.

As a tweet from the Americans for Financial Reform put it:

The bill, which has already passed once and been vetoed by President Obama, failed to garner the two-thirds majority it needed.

As I’ve written numerous times in the past, while most of us think anyone we seek out for investment advice needs to adhere to some sort of financial equivalent of the Hippocratic oath, that’s not true. Many financial advisers are held to a lower standard, something called the suitability standard. According to the Obama administration, this enriches the financial services industry at the expense of retirement savers by about $17 billion annually.

So all’s well that ends well for the United States’ retirement savers? Sigh. Not really. In the past few weeks, a number of industry groups opposed to following rules that will require them to act in the best interests of their customers have filed five separate lawsuits in an effort to stop the federal government from implementing this basic, common-sense protection for investors. They include the U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association, and the American Council of Life Insurers.

These lawsuits will, no doubt, play out over the next few years. In the meantime, I leave you to ponder the fact that a majority of members of the House of Representatives appear to be more concerned about preserving the rights of financial schlock salesmen and saleswomen to continue making a mint by giving Americans less than ideal investment advice than they are about the deaths of thousands of Americans annually due to gun violence.

June 22 2016 6:09 PM

Burger King’s Mac n’ Cheeto Is Our Future

Following in the grand culinary tradition of Taco Bell's Doritos Locos Tacos, Burger King has unveiled a delightfully trashy new fast food hybrid: The Mac n' Cheeto. Yes, the dish consists of deep-fried macaroni and cheese sticks with a Cheeto-flavored shell—five for $2.49. They are weird and silly and already causing a minor freakout on Twitter, as these products are meant to do, and will be on sale for a limited time starting June 27.

This is, of course, yet another sign of the great divergence in fast food, in which brands have decided to either head upmarket, embracing fresher and more expensive ingredients, or downmarket into the world of high-calorie novelty noshes. McDonald's, for instance, has been busy trying to elevate its image a bit by dallying with custom burgers and American regional cuisine—hello lobster rolls and Gilroy garlic fries. But the private-equity owners of Burger King seem to have taken a cold, hard look at their brand and concluded that rather than try to industrialize semi-current food-blog trends, they should just lean into their inner freak with bright red hamburger buns and chemically enhanced, deep-fried noodles. Which, by the way, don't sound that bad. Cheetos are a tasty cheese-flavored product, and adding mac is mostly just going to create a pleasant textural contrast, I imagine. The early reviews, anyway, seem positive.

June 22 2016 2:50 PM

Republicans Left the Single Most Important Detail Out of Their Plan to Replace Obamacare

Half a decade after winning back the House of Representatives, Republicans in Congress have yet to pass a bill to fully repeal and replace the Affordable Care Act. They have failed to do so both because the party is barely cohesive enough to carry out the elementary functions of government—like moving basic spending bills—and because giving an up-or-down vote to actual health care legislation requires getting specific about the potentially unpopular trade-offs in their approach. But because Speaker Paul Ryan wants to provide some semblance of an intellectual counterweight to Donald Trump's frothing lunacy, he has been unveiling a series of policy proposals he hopes will help define the modern GOP. And on Wednesday, we got a paper outlining a Republican substitute for Obamacare.

It contains little that is new. It is also missing what is by far the most important detail of the entire plan—namely, how much money it will give Americans to buy coverage.

The truth is that Republican policy thinkers have long had a basic outline for how they would replace the ACA. Erstwhile presidential candidates like Marco Rubio and Scott Walker offered variations on it during their campaigns. Even Donald Trump sort of haphazardly managed to follow its contours when he issued his extremely bare-bones health reform agenda. It goes something like this:

  1. Eliminate Obamacare. Kill it dead.
  2. Allow Americans to purchase health insurance across state lines, so they can find cheap, catastrophic plans in states that allow companies to sell coverage with limited benefits.
  3. Give Americans who don't get insurance through their employers, Medicaid, or Medicare a refundable tax credit—which is to say, a monthly subsidy—to help them purchase said catastrophic coverage.
  4. Expand tax-exempt health savings accounts so that people with cheaper insurance can (maybe) afford to pay out of pocket for routine care, like check-ups.
  5. Create special, state-subsidized “high-risk” pools to cover people with pre-existing conditions.

These are the main ingredients in the burrito bowl that is GOP health policy. You can add garnishes if you like. Most Republicans would like to gradually cut Medicaid spending and hand control of it over to the states by turning the program into a block grant, which would be a massive change to the welfare state but also basically tangential to replacing the ACA, sort of like dumping a double order of guac on top of your carnitas. The major questions all concern how much money Republicans would be willing to spend to make their system work, since that will determine the kind of insurance Americans will find affordable, and whether anybody would actually order this particular hodgepodge off the menu.

The plan Ryan debuted Wednesday checks off all of the major GOP health care boxes: insurance across state lines, health savings accounts, high-risk pools, tax credits. Meanwhile, it keeps some of Obamacare's most popular features, like allowing young people to stay on their parents' health plans through age 26 and preventing insurers from canceling insurance for customers who get sick.1 The document also includes one very important number: $25 billion. That's the minimum that Ryan would be willing to spend in order to fund those high-risk pools. That may or may not be enough, and it's unclear that rabid anti-government Republicans would really vote for such a sum, or the taxes to pay for it, but it's at least a hard number that can be debated.

But again, one number is conspicuously absent. The GOP plan does not spell out how much Americans can expect to receive in tax credits to buy coverage. Instead, it merely says that, "Given the increased flexibility in the insurance market, the new fixed credit would be large enough to purchase the typical pre-Obamacare health insurance plan.” This is vague to the point of meaninglessness. In 2013, before Obamacare's major reforms were finally implemented, Americans on the individual market paid an average premium of $235 per month. Last year, the average Obamacare insurance subsidy was $268 per month. If the ACA's subsidies are supposedly an unaffordable expense for the federal government, as Republicans generally seem to feel, it is difficult to imagine that they really plan to give people enough money to buy a “typical” pre-reform plan. What they actually intend is left to our imaginations.

The Republican health care plan, as it has been for years now, is to give Americans a small amount of money capable of helping them purchase cheap, not very comprehensive insurance. The most important question is: How cheap? Paul Ryan still isn't willing to give us an answer.

1 The plan says it would stop insurers from denying coverage to people based on pre-existing conditions but doesn't mention whether it would allow companies to charge new customers higher rates for being sick, which is kind of key.

June 22 2016 2:24 PM

Ford Is Testing out a New Car-Sharing Program, and Literally No One Has Signed Up 

Back in March, Ford’s financial-services division, Ford Motor Credit Company, launched a pilot program in Austin called Credit Link, through which prospective car buyers could split a lease with two to five other consumers rather than lease or buy one by themselves. The idea was to test out an alternative car-ownership model. In this case, one in which the leasers would create a schedule to determine who has the car, when they have it, and to split car payments however they chose. Channeling the gospel of the bourgeoning sharing economy that has powered companies like Airbnb and Uber, Credit Link program boasts that “it’s time for a new kind of mobility.” Unfortunately, Ford can’t seem to mobilize anyone to sign up.

June 22 2016 5:45 AM

Trump’s Campaign Wishes It Were a Garbage Fire. Garbage Fires Get the Job Done.

As surely as the presidential contest is a horse race, the Trump campaign—and, more broadly speaking, the GOP nomination fight—has been a garbage fire. The Huffington Post and Salon have both used the term for the candidate’s campaign, and New York Magazine can’t seem to write about him without it.

Samantha Bee called Trump a “trash can fire.” FiveThirtyEight’s Nate Silver and Harry Enter likened his nomination to a “dumpster fire,” a formulation that has also been employed by Mother Jones and theAmerican Conservative. In March, the Hillary Clinton campaign referred to the debate where Rubio and Trump sparred over the size of the latter’s penis as a dumpster fire. (And who could forget Slate’s own, excellent headline from this January, envisioned by writer Michael Beeman, “Hot Mess Endorses Dumpster Fire”?)

The political press covering the Trump campaign has not so much trashed Orwell’s rule of good English writing—“Never use a metaphor, simile, or other figure of speech which you are used to seeing in print”—as crumpled it up, thrown it away, and turned it into a rhetorical inferno.

In this case, our whole crew boarded the good ship Garbage Fire without pausing to think much about garbage fires at all. If we had, we would have realized it wasn’t a very good metaphor for Donald Trump’s terrible campaign, because actually, garbage fires are good.

June 21 2016 6:23 PM

Could a Brexit Actually Save Europe?

With Britain's referendum on whether to depart the European Union fast approaching, Europe's political leaders and major media organizations have been busy more or less begging U.K. voters not to bail. "Please don't go!" the German magazine Der Spiegel urged on its cover earlier this month (German Chancellor Angela Merkel, true to form, was a little more restrained.) Sweden's biggest financial newspaper resorted to an ABBA joke—“Take a Chance on EU”—while Hungary's prime minister went and bought a full-page ad in the Daily Mail imploring the U.K. to stay. Then there's European Council President Donald Tusk, who sounds like he's one step from crooning some Al Green to the next Brit he spots on the street.

It's understandable why Europe's elite ain't too proud to beg. The great fear among many is that a Brexit could encourage other nationalist movements and kick off a partial unraveling of the entire EU. Even if no other countries bid goodbye, the departure of Britain would still diminish and weaken the European project, the thinking goes.

But could that conventional wisdom be wrong? What if a Brexit is precisely what Europe needs in order to get over the seemingly intractable economic and political problems that have hobbled it these past several years? That's the theory Andrew Lilico, a British economist at the consulting firm Europe Economics, puts forward in an interview Tuesday with Vox, which the site calls “the best argument for Britain to leave the European Union.” That's slightly misleading. It's more of an argument for why the EU should be happy to see Britain go.

Lilico argues that Great Britain is essentially holding back the rest of the EU from fulfilling its destiny as a fully integrated United States of Europe, which it needs to become in order to resolve the contradictions that have trapped it in an unending economic crisis. The eurozone, it is often noted, is a monetary union without a fiscal union. Members are required to live under the same interest-rate policies, which can make or break their economic growth. But there isn't any system to transfer money from flourishing countries to struggling ones, the way the Washington transfers money from New York to Mississippi, for instance. As a result, you see massive disparities in unemployment and growth between countries like Germany and Spain (or, worst of all, Greece). The way to fix that, of course, is to become more like the United Stated: “they need eurozone-wide taxes, a eurozone treasury, an elected eurozone president, a eurozone parliament, and eurozone civil servants to manage expenditures,” Lilico writes.

The problem is that a handful of countries in the EU, including the U.K., don't use the euro, and therefore won't allow the necessary changes that would stabilize the currency union (after all, the British are already ticked off about the money they're sending to Brussels).1 A Brexit, the argument goes, would fix that:

Once the UK is out, there will be enormous pressure on other countries to say when they will be joining. Countries that refuse to join will get rolled together with Norway (which isn’t in the single market but has a free trade arrangement with the EU). Then the eurozone can take full control of the EU's institutions and be able to function properly to make it work as a currency union.

In short, the EU needs to reach a point where all of its members use the euro and therefore share the same common set of interests for the future. Brexit helps make that happen.

It's not a totally crazy notion. The idea that the euro will continue to be a shambling disaster until Europe creates some sort of system in which rich Germans can lend a hand to poor Greeks is pretty much taken for granted among American observers, and a tighter fiscal union is most definitely a key part of the EU leadership's long-term plan. And, who knows, maybe this would be easier to achieve if every country in the EU also was stuck with the euro.

But there are two problems. First, this isn't really a reason for Great Britain to leave the EU—right now, it still gets the best part of membership (access to Europe's free trade zone) without having to suffer through the worst aspect (being stuck in a bum currency bloc). And, unless you believe the pro-Brexit camp's promises that the U.K. will be able to instantly negotiate wonderful free trade deals once it’s off on its own, seceding is still probably going to require some economic sacrifice for at least the medium term. In this case, what's (maybe, theoretically) good for Paris and Berlin might not be so great for London.

Second, it's not really clear that freeing itself from Britain will really bring Europe much closer to a glorious federal future. As Pew has found, people also have a pretty unfavorable view of the EU in eurozone countries like France, Germany, and Spain—and the idea of national governments handing even more power to Brussels doesn't go over particularly well anywhere. As of now, the notion of a U.S. of E. has next to no democratic legitimacy, and attempting to force it on voters seems like a recipe for more referendums like what's happening in Britain.

ever_closer_correct

Pew

Still, Lilico does make a fundamentally good point. So long as Britain is part of the EU, the fate of the eurozone will probably rest in part on the whims of a country that's not part of it. Europe can't live with Britain, even if it can't live without 'em.

1 He argues that the eurozone countries themselves could create their own rules and institutions separate from the EU's existing infrastructure with some new treaties, but that's unlikely to happen. Which sounds about right.

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