A blog about business and economics.

Dec. 9 2016 3:19 PM

Ohio GOP Moves to Stop Cleveland From Making Its Own Laws

Time for some disempowerment in Ohio.

At a gangbusters lame-duck legislative session, Ohio Republicans have passed an anti-local omnibus billto strip power from the state’s cities and towns.

And to make it harder to oppose, according to the Columbus Dispatch, they’ve folded an anti-bestiality law into it too. The law, which awaits a signature from Ohio Gov. John Kasich, would also strengthen a ban on cockfighting and bearbaiting.

But the bill’s most important provision would prohibit the state’s cities and towns from regulating the minimum wage, paid-sick leave, and employee scheduling—a prohibition that seems aimed squarely at Cleveland, which was set to vote on a minimum wage increase in May.

So, to recap: A vote for local autonomy on labor laws is a vote for schtupping pigs.

Dec. 9 2016 2:26 PM

San Francisco Mayor Vetoes Bill That Would Limit Airbnb Rentals

Airbnb Inc. scored another legislative victory late Thursday when San Francisco Mayor Ed Lee vetoed a bill that would have barred hosts from renting their homes out for more than 60 days a year, down from the current 90-day limit. “This legislation will make registration and enforcement of our short-term rental regulations less effective and risks driving even more people to illegally rent units instead of complying with current regulations,” the mayor said in a statement Thursday. The attempted regulation comes amid claims by housing activists that the San Francisco–based home-sharing service is aggravating the housing crisis in the most expensive city in the country, by encouraging landlords to offer short-term rentals to vacationers rather than longer leases to San Francisco residents.

The San Francisco Chronicle reported that the legislation had the support of the seven members of the board of supervisors, one vote short from the eight needed to override a mayoral veto. London Breed, the president of the board of supervisors who had initially proposed the bill, said that they would create a working group that would make recommendations for “regulations and long-term solutions” by the end of February.

Dec. 8 2016 5:24 PM

Trump’s Labor Pick Is a Big Ol’ Middle Finger to Fast Food Workers (but Good News for Immigrants)

With his pick for secretary of labor, Donald Trump appears to be extending an enormous symbolic middle finger to fast food workers who have campaigned for a higher minimum wage. The president-elect has reportedly settled on CKE Restaurants CEO Andy Puzder, whose company owns the second-tier burger chains Hardee's and Carl's Jr., and is known as a strident critic of regulations that would increase worker pay.

Yet, if you are a liberal who has spent most of the Trump transition suffering from existential nausea, there is one very large silver lining here. Puzder may be an affront to organized labor, but he's also a very eloquent advocate of comprehensive immigration reform. Perhaps he could end up serving as a voice of reason on that issue within the new administration.


Puzder donated to Trump's campaign and served as an adviser on job creation. He's a frequent op-ed writer and TV guest who, unlike some of fellow fast food executives, has come out hard against significant minimum wage increases and said that workers asking for $15 per hour “should really think about what they're doing.” Back in 2014, he complained that California was “artificially” raising the pay floor to $9 an hour and argued that businesses would create more jobs if government would just “get out of the way.” He's also talked openly about replacing workers with automated ordering kiosks, something his fellow fry-mongers have been more circumspect about.

That said, Puzder has offered at least some nuance on the wage issue. “The CBO came out with a report last year that said you could raise the minimum wage to about $9 without much impact to jobs. And you probably could do that,” he said during an interview with Fox Business in May. (The current federal minimum is $7.25 per hour.) But he suggested that if the U.S. were to increase the minimum wage, there should be an exception for entry-level workers and high unemployment regions. States and cities have tried somewhat similar ideas in recent years by varying their minimum wage increase geographically, or exempting teenagers.

Puzder is also a vocal critic of the Obama administration's new overtime rules, which would have extended time-and-a-half to more than 4 million American workers. In a Forbes column he argued that the new regulation “devalues this career progression and forces some businesses to turn entry-level management careers with salaries and performance-based bonuses into hourly jobs.” Defenders of the rule might argue that was the whole point, since many retail and fast food businesses were wrongly classifying low-wage workers as managers to avoid paying them overtime. In any event, it seems unlikely that reg will survive Puzder's tenure. He may not even have to do much to roll it back. In November, a federal judge blocked its implementation, and as Politico notes, it seems unlikely the Trump administration will continue defending the case.

There are other policy implications to having a fast food exec atop the Department of Labor. For one, it seems probably that investigations of wage and hour violations would ease up, since restaurant franchises are notorious for violating the Fair Labor Standards Act.*

But in most ways, Puzder seems like a standard, business-oriented conservative of the sort you might expect any Republican administration to consider for the labor post. And while that might signal a bleak four years for workers' rights advocates, there is an upside to his nomination when it comes to Trump's marquee issue: immigration. Back in July, Puzder and conservative policy maven Stephen Moore wrote an op-ed in the Wall Street Journal supporting the Republican nominee but challenging his stance on undocumented workers. “Legal immigrants are an asset to the country,” they wrote. “We believe that deporting 11 million people is unworkable, and we hope in the end Mr. Trump comes to this same conclusion. Deportation should be pursued only when an illegal immigrant has committed a felony or become a ‘public charge.’ ”

But Puzder was even more forceful about the issue in 2013, when (as the Atlantic's David Frum points out) he backed the bipartisan immigration bill working its way through Congress, which he called “the right thing to do.” He made his comments during an event at the American Enterprise Institute, and even got a little poetic at points (by fast food CEO standards). Here's his mini-oration:

If we had immigration reform and were able to hire these people who want to work, we’d have a more diverse, incentivized and productive workforce. We’d have access to not only low-skilled workers in our business but the high skilled workers that everybody talks about. You’d have consumption from these individuals, because obviously if they’re working and they’re making money and supporting their families they’d be out there buying things. You’d really reinforce the idea that the United States is the land of opportunity, the land of entrepreneurial vision. And that could use some reinforcing. And lastly, it would remind all of us that our freedoms and our liberties shouldn’t be taken for granted. We’re actually a country that was founded on the principle that god gave us the right to pursue happiness. And there are very few nations in the world, if any, that were founded on the principle that god gave you the right to pursue happiness for yourself and your family. That’s been a beacon for immigrants for years. That’s why there are 11 million people who came here illegally. They not only came here because they could get jobs but because they could pursue that goal of fulfillment and satisfaction for themselves and their families and their children going forward. So I think this bill, and I know that’s a lot of indirect ways it effects our business and some direct ways but I think a bill like the bill that’s before Congress now could really be a benefit to the United States. Not only because the CBO says that it would be productive to GNP, our gross national product, and reduce the deficit, but because it’s the right thing to do, it’s the country that we are, it’s the people that we are, and we need to foster that image across the world and in the United States.

During the same event, he praised immigrants' work ethic and suggested the whole country might be a little better off if it looked more like California.

Our Hardee's restaurant operators in the Midwest and Southeast often use the labor force in California as an example of what they would like their labor force to be. They’re very hard working, dedicated, creative people that really appreciate the fact that they have a job, whereas in other parts of the country you often get people that are saying “I can’t believe I have to work this job.” With the immigrant population, you always have a “thank God I have this job.”

Yes, most on the left are going to bristle at the idea that workers should be grateful for mere employment. But complimenting the industriousness of your Mexican employees is a tad preferable to describing them as rapists.

Practically speaking, Puzder could have some direct effect on policy here, since the Labor Department works with the Department of Homeland Security on workplace immigration enforcement. Perhaps more importantly, though, it looks like Donald Trump might have an actual advocate for comprehensive immigration reform, one who's against mass deportations, whispering in his ear. Considering that another leading candidate for labor secretary was apparently an immigration hawk, that's good news.

So Puzder's presence in the administration may be an insult to the Fight for $15. But he's still an above-replacement addition to Trump's Cabinet, at least for those of us hoping to see the incoming White House inflict minimal damage on the country. After all, most Republicans are bad on labor. Paul Ryan isn't going to pass a major minimum wage increase. Almost any GOP-er would deep-six Obama's overtime rule. And Trump himself just spent a night intimidating a steel union member on Twitter. At least this guy might restrain the president-elect's worst impulses when he's debating whether to banish human beings en masse from the country.

Or maybe he could pull off an even more amazing feat. One can almost imagine a scenario where Puzder and Paul Ryan cajole Trump into a Nixon-to-China moment on immigration reform, where in return for building his giant, utterly unnecessary wall and funding more border agents, Trump signs off on some sort of path to legal status for the undocumented. Probable? Of course not. But possible? Just maybe.

*Update, Dec. 9, 2016: The words "would ease up" were originally erroneously omitted from this sentence.

Dec. 8 2016 10:54 AM

Trump’s Potential FDA Pick Says Drugmakers Shouldn’t Have to Prove Their Products Work Before Selling Them

Do you generally prefer that your prescription medications work? That they cure the things that they are purported to cure? That when you pop a pill into your mouth it actually accomplishes the biophysical task for which it was marketed as a treatment? Then you may not be pleased with the news that Donald Trump is reportedly considering whether to nominate Jim O'Neill, an associate of billionaire Trump backer and transition adviser Peter Thiel, as head of the Food and Drug Administration. As both Bloomberg and the health news site Stat note, O'Neill is known for his arch-libertarian views and has previously said that drug companies should not have to prove that their products are effective in order to start selling them, only that they are safe.

“We should reform FDA so there is approving drugs after their sponsors have demonstrated safety—and let people start using them, at their own risk, but not much risk of safety,” O’Neill said in a 2014 speech. “Let’s prove efficacy after they’ve been legalized.”


O'Neill is a managing director at Mithril Capital Management, a Thiel venture fund that has invested in some medical tech companies. He's also a board member of Thiel's Seasteading Institute, which seeks to establish utopian libertarian communities on international waters. Like Thiel, the man is apparently interested in reversing aging as well and is a frequent speaker at biotech events. His main government experience was a stint at the Department of Health and Human Services under the George W. Bush administration. He has said he was “surprised” to discover “that the actual human beings at the Food and Drug Administration like science; they like curing disease and they actually like approving drugs and devices and biologics.”

If you were waiting to see how Thiel's influence might manifest itself in the incoming administration, well, here you go. Presumably, landing a guy like O'Neill at the FDA would be a boon to biotech investment.

What are the chances he actually gets picked? During the transition period, team Trump has occasionally floated the names of truly radical Cabinet candidates—Sheriff David Clarke for Department of Homeland Security, former BB&T CEO John Allison for Treasury—before pulling back and picking someone more mainstream. So I'm kind of hoping that's what's going on here. Trump is also apparently considering former FDA Deputy Commissioner Dr. John Gottlieb for the job.

But who knows? Donald Trump does love snake oil, after all.

Dec. 7 2016 3:22 PM

Why the Feds Protect Some Towns From Flooding and Leave Others Exposed

That a flood is coming for the American coast is obvious.

But to understand which towns and neighborhoods might be spared the cataclysm, look at two recent disputes between inland communities and the Army Corps of Engineers, which builds flood walls, dunes, levees, and other defenses.

Both Manville, New Jersey, and Cedar Rapids, Iowa, have suffered from river flooding in the past decade. Cedar Rapids experienced its two worst flooding events in recorded history in 2008 and 2016; Manville, which lies at the confluence of the Raritan and Millstone rivers in the suburbs of New York City, flooded in 2007, 2010, and 2011. Both places found this year that they did not qualify for federally funded infrastructure under the Army Corps’ cost-benefit analysis.

Why not? Because the houses aren't worth much.

Dec. 7 2016 11:39 AM

A Japanese Billionaire Just Showed How Corporations Are Going to Manipulate Trump

On Tuesday afternoon, Donald Trump emerged triumphantly into the lobby of his midtown office tower and threw his arm behind Masayoshi Son, the billionaire CEO of the Japanese telecommunications and tech giant SoftBank. The two had just finished a private meeting in the president-elect's office, and Son was grinning wildly. “Ladies and gentlemen, this is Masa of SoftBank from Japan, and he has just agreed to invest $50 billion in the United States, and 50,000 jobs,” Trump told the press gaggle, before tacking on a superlative. “And he's one of the great men of industry.” The two shook hands. Of course, the day would not have been complete without a self-congratulatory tweet.

So continued Trump's pre-inauguration deal-making blitz, which began last week when he and Vice President–elect Mike Pence cajoled Carrier into keeping 730 jobs at a plant in Indiana rather than sending them to Mexico. Like that bargain, which Trump had claimed would save some 1,100 jobs, this one quickly turned out to be something less than it initially appeared. And it may have revealed something even more troubling: How CEOs will take advantage of Trump’s desire to be seen making bargains to further their own interests.


First, it seems likely that SoftBank was already planning its big investment in the U.S. before Trump's win. The money, Son explained, was coming from a $100 billion tech fund SoftBank had created with Saudi Arabia back in October. When reporters asked how he would create those 50,000 jobs, Son said he intended to “invest into the new startup companies in the United States.” In other words, he’s apparently planning to plunge more venture capital into Silicon Valley, as people tend to do when they want to bet on the global technology sector. SoftBank and its partners may use much of their money to buy up existing companies, as well. “In addition to startups, Mr. Son also has his sights on acquisitions as large as $30 billion, a person familiar with his thinking” told the Wall Street Journal.

There were other ambiguities. During the press conference, Son held up a piece of paper with the logos of SoftBank and Foxconn, which manufactures Apple's iPhones. It read: “Commit to invest $50bn + $7bn in the US; generate 50k + 50k new jobs in the US; next four years.” This has led some speculate that Foxconn might be planning to open a U.S. plant, though nobody is quite sure. The Financial Times noted that SoftBank and Foxconn have partnered previously, and that Foxconn “confirmed it is in 'preliminary discussions' about a potential investment in the US but gave no other detail.”

For all the question marks, Trump got his headlines about investment and jobs, which were shared thousands upon thousands of times. And what did Son get? A one-on-one with the next president, and the opportunity to lay the groundwork for a merger he's been dreaming of for years. You see, SoftBank is the majority owner of Sprint, which it attempted to combine with T-Mobile back in 2014. It gave up on the deal, however, once it became clear that U.S. antitrust regulators would never approve it. The government had blocked AT&T from gobbling up T-Mobile back in 2011, and by all accounts, the decision had worked out wonderfully for consumers as the smaller company began to compete hard on price and services. With Trump heading to the White House, though, a lot of people think SoftBank and Sprint might give the acquisition another go. Unsurprisingly, the Journal reports that “Mr. Son planned to tell Mr. Trump about what happened with T-Mobile, and how he had wanted to invest in the U.S. but the regulatory climate was too harsh so he invested outside the U.S. instead, the person familiar with the matter said.”

This is part of what's so deeply worrying about Trump's publicity strategy of cutting deals with individual businesses to keep jobs in the U.S. It's bad enough that companies that refuse to cooperate when the White House comes knocking will face the risk of retribution. But it also creates an opportunity for a favor-seeking CEO to engage in some high-level crony capitalism. After all, in order to keep the good news rolling in, Trump needs a regular parade of corporate chieftains willing to stand by his side while he claims he personally convinced them to keep a factory open or bring their money stateside. Right now, it looks like any executive up for the task can get an audience with the incoming president and pre-emptively earn the good will of his administration.

And as Masa Son just showed, those CEOs might not have to offer anything more than a handshake and smile for the cameras.

Dec. 6 2016 5:29 PM

The Supreme Court Just Made It Much Harder to Get Away With Insider Trading

The Supreme Court just made it a lot harder to get away with insider trading. Good!

You are surely wondering: Wasn’t it already illegal to engage in insider trading? Well, yes. But a 2014 court decision made it a heck of a lot harder to prove.


The case the Supreme Court ruled on Tuesday concerned Bassam Salman, a Chicago-area grocery wholesaler. He received stock-trading tips from his future brother-in-law, Michael Kara. Kara, in turn, learned of the insights from his brother, Maher Kara, then an analyst with Citigroup. The siblings were close and talked frequently. Things get said. You know how that goes. You ask about mom, you talk about your soon-to-be in-law, someone shares a stock insight. Happens to us all!

Salman’s lawyers argued his conviction should be overturned because Maher Kara did not benefit financially from sharing the information. The Supreme Court unanimously disagreed, with Justice Samuel Alito writing that Maher Kara “breached his duty of trust and confidence” to his employer, an obligation Salman also violated when he acted on the tips knowing full well that he was trading on confidential information.

This should have been a no-brainer of a decision. Historically, insider trading prosecutions took the position that an insider tip was an insider tip, and whether the leaker had a monetary motivation was not relevant. But in 2014, a New York appeals court overturned the insider trading convictions of two hedge fund traders, Anthony Chiasson and Todd Newman, ruling that unless the confidential information used to make the trades was shared in return for a gain of some sort, it was not legally actionable. The scheme Chiasson and Newman were initially convicted of involved a cast of tipsters who passed along insights like they were playing telephone. (One blog post actually referred to the two men as “downstream tippees.”)

The Supreme Court subsequently refused to hear an appeal in the case. The prosecutor, U.S. Attorney for the Southern New York District Preet Bharara, predicted bad things to come. “The Newman decision goes some way to creating an obvious roadmap for unscrupulous investors,” Bharara said at the time. “You can think of this as a potential bonanza for friends and family of rich people with access to material non-public information.” He would subsequently go on to drop charges in another high-profile case, this one involving Michael Steinberg, a prominent fund manager at the hedge fund SAC Capital Advisors, who was convicted on insider trading charges in 2013.

No surprise, Bharara considers himself a winner today, even though Newman will not be relitigated. The Supreme Court decision makes it much less likely that the convictions of a number of others Bharara has successfully prosecuted, including former Goldman Sachs partner Rajat Gupta will be overturned. His office quickly released a statement celebrating the decision saying, “The court stood up for common sense and affirmed what we have been arguing from the outset—that the law absolutely prohibits insiders from advantaging their friends and relatives at the expense of the trading public. Today’s decision is a victory for fair markets and those who believe that the system should not be rigged.”

Yes to all that. Insider trading is wrong, and not just because, when unpunished, it allows a few lucky upscale slobs to profit on proprietary information. It’s wrong because it ultimately destroys faith in our system of governance and rules.

The stock market works as an investment tool for many Americans, not just a few connected insiders, in part because of the trust we have in it. We believe it is an honest mechanism for establishing value, and we believe that information about investments is equally available to all of us, should we be willing to do the work of ferreting it out. If our trust in it is breached too many times without consequences, many will likely come to believe the stock market is a scheme to benefit a few privileged insiders and pull out entirely. Not only would that likely be harmful for their financial future, it would also bode ill for American society writ large, which depends on our belief in its fairness for it to function.

You don’t need me to tell you that faith took a huge hit in the wake of the housing bubble blowup and the Great Recession, when, as it has famously been observed, the bankers got bailed out and received gigantic bonuses even as the majority of us saw our net worths plunge and millions lost homes to foreclosure. It could be argued that the victory of President-elect Donald Trump is in part a direct result of all that. His appeal was based not on his honesty and moral rectitude but on his supposed business acumen, some of which consisted of seemingly taking advantage of others, like the students who paid more than $25,000 to attend Trump University. Now, one argument goes, he’ll put those street smarts to work on the behalf of all of us. It’s the ultimate skeptics play.

May this Supreme Court decision do its part to roll back the miasma of cynicism that’s so corroding to us all.

Dec. 6 2016 4:05 PM

United Airlines Wants to Do to Flying What Republicans Want to Do to Health Care

Starting early next year, United Airlines plans to begin charging fliers for the privilege of stowing carry-on luggage in their plane's overhead bin—thus slapping yet another irritating fee onto a basic amenity that travelers have long taken for granted. There has been outrage, predictably, and it has already reached the halls of Congress. “The overhead bin is one of the last sacred conveniences of air travel and the fact that United Airlines—and potentially others—plan to take that convenience away unless you pay up is really troubling,” New York Sen. Chuck Schumer fumed in a statement.

United's official line is that there is, in fact, no new fee. Rather, the company says it is merely introducing a new, bare-bones fare called “Basic Economy” that won't entitle passengers to any bin space. Those who pick the no-frills option will be restricted to carrying on whatever small satchel or backpack can fit beneath the seat in front of them. People who want to store their luggage overhead as they always have will still be able to buy a regular ticket, or so United's social media team has been tweeting incessantly.


This would sound more convincing and less patronizing if the new “Basic Economy” fares were slated to be significantly cheaper than what we all already pay to get shoved in the back of the plane. However, Reuters reports, “Prices will be comparable to low fares it now charges for the economy cabin, but with more restrictions.”

Airlines have generally defended their love of fees by appealing to the economic ideals of price discrimination—the notion that customers should be able to pay for only the services they need instead of shelling out for one standard fare that covers a wide range of baseline services. In theory, there is merit to this approach. Consider checked bags. Shuttling heavy suitcases through the air makes planes heavier and requires extra fuel, which pushes up the price of airfare for all. By putting a fee on checked suitcases, you may convince travelers to pack light. Those who can't be bothered will pay more, while conscientious travelers will end up paying less, keeping air travel affordable for more customers so long as they're willing to leave a few pairs of pants at home.

One could try to defend United's new bin policy on similar grounds. Sure, most of us prefer to travel with more than a gym bag's worth of belongings. But if United weren't nickle-and-diming some fliers, it might have to raise prices on all fliers in order to keep its shareholders happy. This at least allows them to keep the cost of flying low for some.

But I would argue that United's carry-on charge is a jet bridge too far. First off, piling on fee after fee for essentials like a place to put your bag becomes a way to mask the real cost of a fare. You're not giving customers options so much as duping them.

Second, at some point price discrimination becomes outright discrimination. Consider who United's new low-cost fare would actually appeal to. It's probably a person on a short trip who's young and hale enough to carry all of the belongings they need on their back or shoulder. A couple living out a New York Times “36 Hours” column in Maine comes to mind. Families traveling with children, though? They used to be able to use the bins, but now they'll be paying that checked bag fee. Elderly passengers who need to wheel their luggage around? Them too. United is slapping fliers with a parenthood and age tax.

Not to get too political with this, but in some ways United's move is reminiscent of what Republicans would like to do with U.S. health care. One of the chief GOP complaints about the Affordable Care Act is that it forces healthier customers to subsidize the cost of coverage for Americans with more extensive health needs by forcing everybody into the same market. One of Obamacare's signature features is that it requires insurers to cover a reasonable bundle of basic services that not every customer will end up needing, like mental health and maternity care, as well as preventive services like birth control. If you're a 29-year-old guy, that means you end up paying more for coverage than you might on a less regulated market, but if you're a 35-year-old woman, chances are you'll end up paying less. Most Republican plans to replace the ACA would do away with those regulations, allowing insurers to sell pared-down plans that appeal to the young and healthy. Older, sicker customers, on the other hand, would likely see their premiums go up, just like some older air travelers will likely have to pay more for the bin space they can't do without.

So you might say United is about to repeal and replace your right to comfortable flight. You have every right to be outraged.

Dec. 6 2016 11:20 AM

Blame the Bay Area’s Housing Crisis for the Ghost Ship Fire

The inferno that killed more than 36 people at a converted Oakland, California, warehouse on Friday night was the worst structure fire in the United States in more than a decade.

How did it happen? The short answer is that the two-story live-work building, which was hosting a concert that night, was zoned only for industrial use but was being used as both an event space and a residence. The cluttered, mazelike interior was ablaze in minutes. A criminal investigation is underway, and the Alameda County district attorney said on Monday afternoon that charges are possible and could range from manslaughter to murder.


It was supposed to be a party, but we shouldn’t let that make us think this was a tragedy of excess. This isn’t a story about a bohemian rave that got out of hand. There were no malfunctioning pyrotechnics here. This was a tragedy of lack: a lack of money, a lack of space. A vacuum of responsibility for keeping things safe. And it seems it would have happened had there been 60 people there or 16.

Most of all, the fire at Ghost Ship, as the live-work space was known, is a jarring indictment of America’s impossibly slow response to the rent crisis. Hundreds of thousands of people live in situations that are like Ghost Ship not because they are dangerous, necessarily, but because they are illegal. In too many cities, for too many people, finding a legal place to live is out of reach. And that means that if something is a hazard, they have few options. They have no leverage with their landlords. They have no recourse to the city.

This isn’t 1960s SoHo, where artists reclaimed vast, unwanted industrial spaces for a pittance. Space like Ghost Ship is cheap because it is illegal, but also because it is small and largely unwanted. Rents in Oakland have doubled in five years, leaving tenants frightened and desperate. In the aftermath of the fire, multiple visitors to Ghost Ship described the place as a “tinderbox.” But reporting an unsafe situation to the city or to the press could have made their friends homeless. That had happened before.

Ghost Ship functioned as an underground community center. Its rooms were lined with art, instruments, antique furniture, and self-made structural additions. Informal, noncommercial meeting spaces form a crucial element in the fabric of any city. Ghost Ship, Oaklanders said, was a haven. About two dozen people, including jewelers, woodworkers, and musicians, called it home.

It was also a known hazard, where problems with heat, electricity, and water had frustrated tenants and alarmed visitors. Complaints had been made to the city about blight, illegal residents, and construction without a permit. But when inspectors arrived to investigate, they couldn’t gain access to the interior.

Nihar Bhatt, a promoter in the local music scene, told the East Bay Express that several people had discussed reporting Ghost Ship for being a fire hazard.* “I think they bit their tongues because we desperately need places to gather,” he said.

And to live. Jose Avalos, a woodworker who lived upstairs, made it clear the building was, to him, a refuge not from rules but from rent.

“I am an artist,” he told the Wall Street Journal, “I was living there because there’s no housing that’s affordable in the East Bay.” His rent was $565 a month. The rent for an average one-bedroom in Oakland, the fourth-most-expensive city in the country, is more than $2,000.

Most illegal dwelling units, from co-ops to overstuffed apartments to garages and industrial spaces, don’t pose deadly safety hazards. But they do leave tenants at the mercy of landlords and master leaseholders. To live outside the law you must be quiet.

In August, I wrote about the co-op movement in Boulder, Colorado. Residents of group houses in that city, northwest of Denver, are violating laws that govern neighborhood culture, not safety. But if a safety issue arises, tenants have nowhere to go.

Fear of eviction is not an abstract concern. Last year, a West Oakland videographer started publishing videos of unsafe conditions in the live-work warehouse he inhabited with dozens of other artists. It turned out the landlords didn’t have permits for residential use. The complaints got the attention of the city, which did a building inspection. In January, dozens of residents were ordered to move out after the space was deemed unsafe for habitation.

That kind of story serves as a conflicted, cautionary tale for reporting living problems to the city. But those tenants might also have known that the previous February, two live-work buildings in Oakland caught fire and killed a pair of artists, Davis Letona and Daniel “Moe” Thomas, who had lived in one of them.

As part of the recovery effort, organizers are trying to help tenants bring living spaces up to code. That’s supposed to be the responsibility of property owners, of course, but it’s tenants who are worried. The city of Oakland is going to be under more pressure to crack down on illegal living situations. That could work two ways: It could drive low-income residents and their culture out of the city. Or it could further discourage people from making complaints.

But the problem isn’t a party without a permit. The problem is that artists in Oakland have to live in a building where the water is barely potable, a few miles from the country’s newest concentration of billionaires. Sometimes it is hard to see the victims of America’s housing crisis. Not right now.

*Correction, Dec. 6, 2016: This post initially misidentified Bhatt’s first name as Neil. It is Nihar.

Dec. 5 2016 2:49 PM

Charity Can’t Replace the Safety Net. This New Study Is a Reminder Why.

There are lots of reasons why private philanthropy can't replace the government safety net, but one of the most fundamental is that people tend to stop giving to charity right when the poor need it most. Total donations plunged in the U.S. during the Great Recession, for instance, dropping 7 percent in 2008, and 6.2 percent in 2009. When the economy turned south, Americans closed their wallets.

This week, researchers from Texas A&M University are out with a new working paper asking why. Was it just because people's personal finances got worse during the downturn? Or did something else change?


To find out, the team, led by economist Jonathan Meer, looked at data from the federal government's Survey of Income and Program Participation, tracking more than 13,000 people over time. That allowed them to look at individual giving behavior instead of simply tracking aggregate national figures. The authors found that Americans became less likely to donate at all after 2008 and that the decline couldn't be explained entirely by changes to their income or wealth. Among those who continued donating, there was mixed evidence about whether the recession led them to contribute less. But on average, giving dropped, and by more than you'd expect based on families' financial circumstances, “suggesting that broader shifts in attitudes towards giving or increased uncertainty are at work,” Meer & co. write. It's possible that a lot of Americans looked at the economic carnage around them and decided that, even if they still had a job, they'd be better off saving more instead of donating that year. Giving may have just started to seem like too much of a luxury.


Meer, Miller, Wulfsberg*

This isn't exactly a shocking result, but it has at least a couple implications. The first, which Meer and his co-authors point out, is that the Great Recession could end up being a long-term drag for U.S. charities, since many households seem to have broken their habit of giving entirely rather than merely curbing the amount they donate.

The second, which I'm choosing to extrapolate, is that nobody should be under the illusion that private charity will be able to come to the rescue during a severe economic downturn. Human beings are not endlessly altruistic and when the job market gets rough, some households get scared out of giving even when they can still theoretically afford to. Unfortunately, given the cuts congressional Republicans will have a chance to enact on safety-net programs like food stamps, we may soon have no choice but to bet against human nature.

*Correction, Dec. 5, 2016: A photo credit in this post originally misspelled Elisa Wulfsberg’s last name.