Category: Government

Mitch Daniels Views Higher Education as a “Racket” (Health Care Too)

(p. A11) Mr. Daniels, 69, is the most innovative university president in America.
. . .
Mr. Daniels kicks off our conversation with a morality tale: “I’ll speak to an audience of businesspeople and say: Here’s the racket that you should have gone into. You’re selling something, a college diploma, that’s deemed a necessity. And you have total pricing power.” Better than that: “When you raise your prices, you not only don’t lose customers, you may actually attract new ones.”
For lack of objective measures, “people associate the sticker price with quality: ‘If school A costs more than B, I guess it’s a better school.’ ” A third-party payer, the government, funds it all, so that “the customer–that is, the student and the family–feels insulated against the cost. A perfect formula for complacency.” The parallels with health care, he observes, are “smack on.”

For the full interview, see:
Tunku Varadarajan, interviewer. “THE WEEKEND INTERVIEW: College Bloat Meets ‘The Blade’.” The Wall Street Journal (Saturday, Dec. 15, 2018): A11.
(Note: ellipsis added.)
(Note: the online version of the interview has the date Dec. 14, 2018.)

Tech Entrepreneurs Know Innovation Thrives in Flexible Labor Markets

(p. B1) A politically awakened Silicon Valley, buttressed by the tech industry’s growing economic power, could potentially alter politics long after President Trump has left the scene. But if the tech industry becomes a political force, what sort of policies will it push?
(p. B6) A new survey by political scientists at Stanford University suggests a mostly straightforward answer — with one glaring twist. The study is the first comprehensive look at the political attitudes of wealthy technologists, whose views have long been misunderstood to the point of caricature by many outside the industry.
. . .
Over all, the study showed that tech entrepreneurs are very liberal — among some of the most left-leaning Democrats you can find. They are overwhelmingly in favor of economic policies that redistribute wealth, including higher taxes on rich people and lots of social services for the poor, including universal health care.
. . .
Now for the twist. The study found one area where tech entrepreneurs strongly deviate from Democratic orthodoxy and are closer to most Republicans: They are deeply suspicious of the government’s efforts to regulate business, especially when it comes to labor. They said that it was too difficult for companies to fire people, and that the government should make it easier to do so. They also hope to see the influence of both private and public-sector unions decline.
. . .
. . . if they’re not libertarians, what accounts for techies’ opposition to regulation? One idea might be that it’s driven by self-interest. A large fraction said they opposed regulating car-sharing services as if they were taxis, for instance; to the extent that the tech elite have a lot of money riding on the sharing economy, they may worry that regulation of such companies could hurt their wallets.
. . .
To tease out whether self-interest was at play in their views on regulation, surveyors asked a question about Uber’s surge-pricing policy, which increases prices during periods of peak demand. But the researchers disguised it with a business unrelated to tech: “On a holiday, when there is a great demand for flowers, sellers usually increase their prices. Do you think it is fair for them to raise their prices like this?”
A majority of Democrats and Republicans said it would be unfair for a florist to do that. But 96 percent of the tech elite thought it would be fair.
“My guess is there’s an underlying principle to their views,” Dr. Broockman said. “They see an entrepreneur trying to do what they want in the marketplace, and they see nothing unfair about that.”

For the full commentary, see:
Farhad Manjoo. “Tech’s Giants Skew Liberal.” The New York Times (Thursday, Sept. 7, 2017): B1 & B6.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Sept. 6, 2017, and has the title “STATE OF THE ART; Silicon Valley’s Politics: Liberal, With One Big Exception.”)

The Stanford study, discussed above, has been published online in advance of print publication:
Broockman, David E., Gregory Ferenstein, and Neil Malhotra. “Predispositions and the Political Behavior of American Economic Elites: Evidence from Technology Entrepreneurs.” American Journal of Political Science published online on Nov. 19, 2018, https://doi.org/10.1111/ajps.12408.

Little Correlation Between a State’s Tax Breaks and Subsidies to Firms, and the State’s Unemployment and Income Levels

(p. A27) It’s politically difficult for city and state officials to offer incentives to one firm and not another, Timothy Bartik, an economist at the W.E. Upjohn Institute for Employment Research, told me. Like Lay’s potato chips, “you can’t hand out just one,” as he put it. He fears that after the hysteria over Amazon’s HQ2 and the recent $4.1 billion deal struck between the state of Wisconsin and the Taiwanese electronics company Foxconn, incentive amounts will only climb.
Unfortunately, incentives and tax breaks don’t work. Research by Mr. Bartik indicates that there is not a large correlation between a state’s giveaways and its unemployment rate or income levels.
. . .
Lavish benefits also don’t have much influence over the choice of a location. The typical package changes a decision only 25 percent of the time or less — about two-thirds of the incentives are handed to companies that would have moved to the state offering them, regardless.
Instead, the deals often end up being a burden on budgets. Texas schools have lost an estimated $4 billion to the state’s economic development program and Cleveland schools lost over $34 million in one year alone. New Jersey’s budget is at risk of bleeding $1 billion a year, while Michigan’s liability for its business tax credits is set to soar to $9.38 billion over the next two decades and incentives have already led to a $325 million budget deficit. None of that accounts for the extra outlays to upgrade infrastructure and services for the people who move in to take advantage of any jobs that are created.
. . .
The solution, . . . , must be an armistice. States and cities need to collectively swear off big-dollar economic deals aimed at particular companies. If no one offers them, corporations will have to figure out where to locate on their own.
There’s nothing to love about these incentives. Republicans should be outraged by the idea of government picking winners and insist instead that companies be left to choose locations based on the conditions they need to operate their businesses, not sweetheart deals. Democrats should oppose them because they are starving state and city coffers of funds needed for important services, such as schools.

For the full commentary, see:

Covert, Bryce. “HQ2 Winners Are Losers.” The New York Times (Wednesday, Nov. 13, 2018): A27.
(Note: ellipses added.)
(Note: the online version of the commentary has the date Nov. 13, 2018, and has the title “Cities Should Stop Playing the Amazon HQ2 Bidding Game.” Where there are minor differences in the versions, the passages quoted above follow the online version.)

The research by Bartik, mentioned above, is:
Bartik, Timothy J. “A New Panel Database on Business Incentives for Economic Development Offered by State and Local Governments in the United States.” W.E. Upjohn Institute for Employment Research: Prepared for the Pew Charitable Trusts, 2017.

Musk Jabs the SEC as “the Shortseller Enrichment Commission”

(p. B1) Elon Musk risked reigniting a battle with federal securities regulators on Thursday when he appeared to openly mock the Securities and Exchange Commission only days after the Tesla Inc. chief executive settled fraud charges with the agency.
Seemingly without prompt, Mr. Musk sent a tweet in the early afternoon that suggested the SEC was enriching investors betting against the electric-car maker. “Just want to [say] that the Shortseller Enrichment Commission is doing incredible work,” Mr. Musk tweeted. “And the name change is so on point!”

For the full story, see:
Tim Higgins and Gabriel T. Rubin. “Tweet by Elon Musk Takes Jab at the SEC.” The Wall Street Journal (Saturday, October 5, 2018): B1 & B4.
(Note: the online version of the story has the date Oct. 4, 2018, and has the title “Elon Musk Tweet Mocks the Securities and Exchange Commission.”)

Barcelona Fines 136-Year-Old Basilica for Lack of Building Permit

(p. A4) The Sagrada Familia basilica in Barcelona has worldwide fame as an architectural treasure, the dreamlike masterpiece of the Catalan architect Antoni Gaudí, which draws millions of visitors a year though it is still under construction, 136 years after work began.
What it has not had for more than a century, according to the city, is a valid building permit.
The Sagrada Familia basilica has agreed to pay city authorities 36 million euros, or about $41 million, over 10 years to settle the dispute over the legality of the work and help pay for transportation improvements around the basilica.
. . .
The Sagrada Familia’s board had denied any wrongdoing, saying that it had a building permit — one issued in 1885 by Sant Martí de Provençals, which was an independent town at the time. Barcelona officials contend that after Sant Martí was absorbed into the city several years later, the construction required a Barcelona permit; the board says that for more than a century, no one asked for any such thing.

For the full story, see:
Raphael Minder. “A Barcelona Gem, And a Scofflaw?” The New York Times (Saturday, Oct. 20, 2018): A4.
(Note: ellipsis added.)
(Note: the online version of the story has the date Oct. 19, 2018, and has the title “Sagrada Familia, a Barcelona Masterpiece, and Scofflaw?”)

Mirrlees Found that a Flat Tax Would Encourage the Wealthy to Earn More, and Pay More Taxes

(p. B15) James A. Mirrlees, who taught himself calculus as a teenager, became a college professor when he was 32 and received a Nobel award for solving one of government’s greatest economic challenges — how to get taxpayers to pony up their fair share — died on Aug. 29 [2018] at his home in Cambridge, England.
. . .
Professor Mirrlees suggested that too many progressive taxes imposed at the highest income levels could discourage the wealthy from earning even more, reducing the revenue available to pay for government services and assist lower-income households.
He concluded as early as 1970 in the journal The Review of Economic Studies and in subsequent studies with Peter Diamond, an economist and fellow Nobel laureate at the Massachusetts Institute of Technology, that “the income tax is a much less effective tool for reducing inequalities than has often been thought” and that an “approximately linear” — or flattened — tax schedule would be more desirable.
“I must confess that I had expected the rigorous analysis of income-taxation in the utilitarian manner to provide an argument for high tax rates,” Professor Mirrlees wrote. “It has not done so.”
Politically, he was regarded as a social democrat, but his economic model became a rationale, embraced by many conservatives, for flattening tax rates — leading him to reconcile the two positions by saying that his heart was on the left, but that his head was on the right.
. . .
His research on “Optimum Income Taxation,” dating from the late 1960s, was peppered with arcane equations and graphs, but he maintained that much of economics is “in a way quite simple.”
“It is simple to be wrong as well as to be right,” he added, “and it is none too easy to distinguish between the two.”

For the full obituary, see:

Sam Roberts. “‘James Mirrlees, Who Earned a Nobel By Solving a Tax Riddle, Is Dead at 82.” The New York Times (Thursday, Sept. 6, 2018): B15.
(Note: ellipses, and bracketed year, added.)
(Note: the online version of the obituary has the date Sept. 4, 2018, and has the title “‘James Mirrlees, Whose Tax Model Earned a Nobel, Dies at 82.”)

New York City Wrongly Believes Destroying Ivory Saves Elephants

As I explain to my micro principles students each semester, if New York wants to save elephants, they would keep ivory on the market, increasing its supply and reducing its price, thereby reducing the incentive for poachers to kill elephants. [I first saw this argument made in the Baumol and Blinder text that I used many of years ago in my micro principles classes.]

(p. A19) A loud rumble and giant billows of dust interrupted an otherwise serene day in Central Park on Thursday as hundreds of cream-colored carvings of dragons, Buddhas and horses awaited their public execution.

Onlookers waved paper fans reading “Protect their home.” They cheered as sculptures and jewelry made from elephant tusks were carried on a conveyor belt and dropped in a pulverizer.
Brian Hackett, an animal-welfare activist from New Jersey, patiently awaited his turn to choose a carving from a table to be destroyed. For him, the mood was solemn.
“Every piece, no matter how polished, represents a beautiful animal that was slaughtered,” Mr. Hackett said.
The carvings were confiscated in recent ivory busts in New York. They once belonged on the faces of a least 100 slaughtered elephants. Nearly two tons of ivory worth about $8 million was destroyed at the “Ivory Crush” event, which was timed to precede World Elephant Day on Aug. 12 [2017].
. . .
Rachel Karr, 48, the owner of Hyde Park Antiques on the Lower East Side, who specializes in 18th-century antiques, said the ivory-crushing events upset her and other antique collectors because some of the ivory found in bona fide antiques could be 300 to 400 years old and could have religious and historic value. For example, in teapots from the 18th century, the handles were carved from ivory to protect hands from burns, because ivory does not conduct heat.
“Even with my love of nature, I simply cannot understand what good it does to destroy things that were worked on 300, 400 years ago before conservation was part of daily language,” Ms. Karr said.
“Face it, we’re the original recyclers, antique dealers,” she said. “We have no interest in using new ivory at all. We are willing to say we aren’t willing to use it to repair old ivory.”
Sam Wasser, a professor at the University of Washington who has performed forensic analysis on seized ivory for the last 13 years and analyzed the ivory that was crushed, said it was unlikely the destroyed carvings were more than 100 years old. The results are pending.
Iris Ho, who is the wildlife campaigns manager at Humane Society International, said the existing law does enough to protect antiques. The law provides exceptions for antiques that are determined to be at least 100 years old with only a small amount of ivory.

For the full story, see:
Hannah Alani. “Ivory Is Destroyed to Save Elephants.” The New York Times (Friday, Aug. 4, 2017): A19.
(Note: ellipses, and bracketed year, added.)
(Note: the online version of the story has the date Aug. 3, 2017, and has the title “About $8 Million of Elephant Ivory Destroyed in Central Park.” The online version says that the article appeared on p. A21 of the New York edition. It appeared on p. A19 of my copy of the National Edition.)

When Government Mandates a Technology

(p. A20) In 2011, after a lengthy competition among automakers, Mayor Michael R. Bloomberg announced that the Nissan NV200 would become the “Taxi of Tomorrow” with most yellow cab owners required to purchase the boxy, bright yellow van. Eventually, the vehicle was expected to make up 80 percent of New York City’s fleet of over 13,000 cabs.
At the time, city officials touted the NV200’s increased leg room, USB charging ports and sunroof as amenities that would be attractive to riders who had long complained about cramped travel in less than spotless back seats.
But it turns out that tomorrow lasted only seven years.
Last week, the Taxi and Limousine Commission reversed the requirement, expanding the option for drivers beyond the Nissan NV200 to a smorgasbord of over 30 vehicles, including popular, fuel efficient models like the Toyota Camry.
. . .
. . . there are drivers like Sergio Cabrera, 60, who owns his vehicle and the expensive medallion needed to have it on the road, who said the NV200 has given him many headaches.
. . .
“There hasn’t been a worse car for the taxi industry than the NV200,” he said. “It’s not easy for older people to get into. Mechanically it’s one of the worst made cars I’ve ever owned.”
Mr. Cabrera complained that owning the Nissan has been expensive, in part because of regulations that he and other yellow cabdrivers say subjects them to more maintenance rules than drivers for ridesharing apps.
The Taxi and Limousine Commission requires yellow taxis to undergo a 200-point inspection every four months. Each time his Nissan has been inspected, Mr. Cabrera said he has had to shell out at least $1,500 in repairs in order to pass.

For the full story, see:
Tyler Blint-Welsh. “Time Is Up for ‘Taxi of Tomorrow’.” The New York Times (Wednesday, June 13, 2018): A20.
(Note: ellipses added.)
(Note: the online version of the story has the date June 12, 2018, and has the title “It Was Billed as the ‘Taxi of Tomorrow.’ Tomorrow Didn’t Last Long.”)

Some Democrats Trying to Restrict “Zoning, Environmental, and Procedural Laws” that “Thwart” New Housing

(p. A1) SACRAMENTO — A full-fledged housing crisis has gripped California, marked by a severe lack of affordable homes and apartments for middle-class families. The median cost of a home here is now a staggering $500,000, twice the national cost. Homelessness is surging across the state.
In Los Angeles, booming with construction and signs of prosperity, some people have given up on finding a place and have moved into vans with makeshift kitchens, hidden away in quiet neighborhoods. In Silicon Valley — an international symbol of wealth and technology — lines of parked recreational vehicles are a daily testimony to the challenges of finding an affordable place to call home.
Heather Lile, a nurse who makes $180,000 a year, commutes two hours from her home in Manteca to the San Francisco hospital where she works, 80 miles away. “I make really good money and it’s frustrating to me that I can’t afford to live close to my job,” said Ms. Lile.
. . .
Now here in Sacramento, lawmakers are considering extraordinary legislation to, in effect, crack down on communities that have, in their view, systematically delayed or derailed housing construction proposals, often at the behest of local neighborhood groups.
The bill was passed by the Senate last month and is now part of a broad package of housing proposals under negotiation that Gov. Jerry Brown and Democratic legislative leaders announced Monday was likely to be voted on in (p. A13) some form later this summer.
“The explosive costs of housing have spread like wildfire around the state,” said Scott Wiener, a Democratic senator from San Francisco who sponsored the bill. “This is no longer a coastal, elite housing problem. This is a problem in big swaths of the state. It is damaging the economy. It is damaging the environment, as people get pushed into longer commutes.”
. . .
The bill sponsored by Mr. Wiener, one of 130 housing measures that have been introduced this year, would restrict one of the biggest development tools that communities wield: the ability to use zoning, environmental and procedural laws to thwart projects they deem out of character with their neighborhood.

For the full story, see:

Adam Nagourney and Conor Dougherty. “Housing Costs Put California In Crisis Mode.” The New York Times (Tuesday, July 18, 2017): A1 & A13.
(Note: ellipses added.)
(Note: the online version of the story has the date July 17, 2017, and has the title “The Cost of a Hot Economy in California: A Severe Housing Crisis.”)

Tusk Helped Startups Enter by Mobilizing Consumers Who Would Benefit

(p. C6) In August [2018], Mayor Bill de Blasio signed a package of bills capping the number of cars driving in New York City for companies like Uber and Lyft and setting minimum pay for drivers. The mayor had long wanted such restrictions, but for years Uber had successfully pushed back, thanks in large part to strategist and venture capitalist Bradley Tusk.
“The problem is not only did this happen in New York, but now it’s going to happen everywhere,” laments Mr. Tusk, who worked as a consultant for Uber Technologies from 2010 to 2015, earning equity that was eventually worth around $100 million. Under his guidance, Uber mobilized its users to lobby against the legislation and made the case that its service provided transportation to people in the outer boroughs and jobs to immigrants and minorities.
. . .
Since working for Uber, Mr. Tusk has helped other tech companies in similar political battles. As he sees it, politicians too often sacrifice their constituents’ economic interests for their own political gain. “What’s good for politician X isn’t necessarily good for the businesses in his or her district,” he says. “Without at least some people like us, innovation gets crushed by politics and corruption and that’s really bad for the economy and for society.”
. . .
After serving as campaign manager of Mr. Bloomberg’s reelection effort, in 2010 Mr. Tusk founded Tusk Strategies with the goal of running campaigns for companies and institutions rather than politicians. At the time, Walmart was looking for a way to enter markets without pushback from powerful unions. Mr. Tusk urged city councils, including New York’s, to stop blocking its entry by polling customers, launching television ads and mobilizing constituents who wanted the choice of shopping at Walmart.
Then one of Mr. Bloomberg’s former deputy mayors called him with a proposition: “There’s this guy with a small transportation startup. He’s having some regulatory problems. Would you mind talking to him?” It was Uber. The New York City Taxi and Limousine Commission had sent Uber a cease and desist letter, and its then-CEO Travis Kalanick needed someone who understood New York politics. Mr. Tusk mounted successful campaigns on behalf of the company in New York and other cities, including Washington, D.C., and Los Angeles.
. . .
Does he see himself as an example of the revolving door between politics and business? “I’m absolutely using the savvy I learned in the political world–just in a different way than most,” he says. But he has no intentions of ever returning to government. “I felt like I could force more change on the system from the outside,” he says. “Not only am I not doing politics, but most of my work is making politicians crazy.”

For the full interview, see:
Alexandra Wolfe, interviewer. “”WEEKEND CONFIDENTIAL; Bradley Tusk from Political Insider to ‘Fixer’ for Tech.” The Wall Street Journal (Saturday, Sept. 1, 2018): C6.
(Note: ellipses, and bracketed year, added.)
(Note: the online version of the interview has the date Aug. 31, 2018, and the title “WEEKEND CONFIDENTIAL; How Bradley Tusk Went from Political Insider to ‘Making Politicians Crazy’.”)

The book under discussion above, is:
Tusk, Bradley. The Fixer: My Adventures Saving Startups from Death by Politics. New York: Portfolio, 2018.

Cuomo’s Buffalo Billion Fails to Cure Buffalo Blight

(p. A18) BUFFALO — More than six years ago, Gov. Andrew M. Cuomo announced his bold vision for New York’s second largest and perhaps longest-suffering city.
“We believe in Buffalo. Let’s put our money where our mouth is,” Mr. Cuomo said, announcing an economic development package of $1 billion. “That is a big ‘B’ — standing for Buffalo and standing for billion.”
. . .
“I think the Buffalo Billion sounds better than it probably turned out to be,” said Isaac Ehrlich, a SUNY distinguished professor of economics at the University at Buffalo.
Indeed, while construction work blossomed in early years, economists note broader employment growth in the city and region has consistently lagged behind the nation as a whole, as well as behind other Rust Belt cities, despite gains during the nation’s nine-year recovery. Perhaps more troubling, recent reports suggest that the job market essentially slowed to a crawl last year, as activity in manufacturing, retail and business services sectors flagged.
. . .
George Palumbo, an economics professor at Canisius College in Buffalo, said that the gleaming new buildings at the medical campus “take nice pictures,” but said the development was also illusory.
“You don’t have to go very far from that neighborhood to see Buffalo blight,” he said, “not Buffalo billion.”

For the full story, see:
Jesse McKinley. “Six Years Later, Cuomo’s ‘Buffalo Billion’ Project Yields Uneven Results.” The New York Times (Tuesday, July 3, 2018): A18.
(Note: ellipses added.)
(Note: the online version of the story has the date July 2, 2018, and has the title “‘Cuomo’s ‘Buffalo Billion’: Is New York Getting Its Money’s Worth?”)