Rortybomb's 2014 Yearly Roundup

Dec 30, 2014Mike Konczal

2014 is over, and good riddance. This year I wanted to start some formal projects, as well as write longer pieces, and I managed to do just that. Here’s the high-level stuff I did this past year.

Financialization. I started a project on financialization with the Roosevelt Institute, and I’m helping with a big inequality project helmed by Joe Stiglitz. All this will bear fruit next year, but I did a piece on financialization for Washington Monthly, Frenzied Financialization, that gives you some sense of what we’ll be doing.

(Seeing one's name on a magazine stand is still the coolest.)

Voluntarism. I wrote a big article on The Voluntarism Fantasy (pdf) for Democracy Journal, that had a lot of responses (collected here). One of my favorite pieces I’ve done; Philanthropy Daily, of all places, red-baited me, which was a neat enemy to make in 2014.



(Remember this cover?)

Piketty-Mania. There were races to see how quickly reviews of Piketty’s Capital in the 21st Century could get written. My review, Studying the Rich for Boston Review, was scheduled for late summer and had to be turned around in a week after the demand for readable summaries of the book exploded. I think my review holds up in describing the way the fault lines around the work would unfold.

The two points I wished I had included were Russell Jacoby’s fantastic comparison to the actual Marx’s Capital, on how economic critique has moved from Marx’s factories of production to Piketty’s spreadsheets of distribution, and that what constitutes a “wealth equality” agenda isn’t clear, which I later covered for The Nation. Speaking of...

The Score. I started as a columnist for The Nation with a new economics column, The Score, where I alternate with my former colleague Bryce Covert. It’s still starting up but I’m already happy with columns on socializing Uber and the growth of incarceration. It’s great to work with Bryce again and get to work with the talented editor Sarah Leonard, who is boosting the economic content of The Nation (she also helped launched The Curve with Kathy Grier since joining).

Issue Editing. I also got to help curate and edit an issue of The New Inquiry, The Money Issue. Rob Horning and I had wanted to do something with the weirdness and newness of the finance blogs circa 2007-2009, and hopefully part of that got through here with pieces by Izzy Kaminska and Steve Waldman. I’m very happy to have helped edit the excellent Disgorge the Cash by JW Mason, which will soon relate to the financialization project mentioned above.

Other Writing. I wrote less for the blog this year, but some notable pieces that caught people’s interest included how the “pragmatic” libertarian case for a basic income makes basic errors about the welfare state, explaining the end-of-year fight over financial reform, pieces on how neoconservatism and libertarians have helped get us to the policing situation in Ferguson and elsewhere, and on the limits of liberalism after the 2014 election.

Big pieces for other sites included a review of Playing the Whore for Wonkblog, explaining how we already have a public option for banking and we could expand it for Al-Jazeera America, and a group book review on the role of profit in the state for Boston Review.

What else? In other news I turned 35. My wife got me a Nick Cage in The Rock birthday cake, which is really the best present ever. I moved to Washington DC after a crazy final summer in New York. I’ve been reading a lot of history lately and want to keep incorporating that into my stuff, and I’m enjoying the Eric Foner MOOC of the Civil War era.

Anything you’d like to see different next year? Thanks for reading everyone, see you in 2015.

(Previous editions:  2013, 2012, 2011.)

Follow or contact the Rortybomb blog:
 
  

 

2014 is over, and good riddance. This year I wanted to start some formal projects, as well as write longer pieces, and I managed to do just that. Here’s the high-level stuff I did this past year.

Financialization. I started a project on financialization with the Roosevelt Institute, and I’m helping with a big inequality project helmed by Joe Stiglitz. All this will bear fruit next year, but I did a piece on financialization for Washington Monthly, Frenzied Financialization, that gives you some sense of what we’ll be doing.

(Seeing one's name on a magazine stand is still the coolest.)

Voluntarism. I wrote a big article on The Voluntarism Fantasy (pdf) for Democracy Journal, that had a lot of responses (collected here). One of my favorite pieces I’ve done; Philanthropy Daily, of all places, red-baited me, which was a neat enemy to make in 2014.



(Remember this cover?)

Piketty-Mania. There were races to see how quickly reviews of Piketty’s Capital in the 21st Century could get written. My review, Studying the Rich for Boston Review, was scheduled for late summer and had to be turned around in a week after the demand for readable summaries of the book exploded. I think my review holds up in describing the way the fault lines around the work would unfold.

The two points I wished I had included were Russell Jacoby’s fantastic comparison to the actual Marx’s Capital, on how economic critique has moved from Marx’s factories of production to Piketty’s spreadsheets of distribution, and that what constitutes a “wealth equality” agenda isn’t clear, which I later covered for The Nation. Speaking of...

The Score. I started as a columnist for The Nation with a new economics column, The Score, where I alternate with my former colleague Bryce Covert. It’s still starting up but I’m already happy with columns on socializing Uber and the growth of incarceration. It’s great to work with Bryce again and get to work with the talented editor Sarah Leonard, who is boosting the economic content of The Nation (she also helped launched The Curve with Kathy Grier since joining).

Issue Editing. I also got to help curate and edit an issue of The New Inquiry, The Money Issue. Rob Horning and I had wanted to do something with the weirdness and newness of the finance blogs circa 2007-2009, and hopefully part of that got through here with pieces by Izzy Kaminska and Steve Waldman. I’m very happy to have helped edit the excellent Disgorge the Cash by JW Mason, which will soon relate to the financialization project mentioned above.

Other Writing. I wrote less for the blog this year, but some notable pieces that caught people’s interest included how the “pragmatic” libertarian case for a basic income makes basic errors about the welfare state, explaining the end-of-year fight over financial reform, pieces on how neoconservatism and libertarians have helped get us to the policing situation in Ferguson and elsewhere, and on the limits of liberalism after the 2014 election.

Big pieces for other sites included a review of Playing the Whore for Wonkblog, explaining how we already have a public option for banking and we could expand it for Al-Jazeera America, and a group book review on the role of profit in the state for Boston Review.

What else? In other news I turned 35. My wife got me a Nick Cage in The Rock birthday cake, which is really the best present ever. I moved to Washington DC after a crazy final summer in New York. I’ve been reading a lot of history lately and want to keep incorporating that into my stuff, and I’m enjoying the Eric Foner MOOC of the Civil War era.

Anything you’d like to see different next year? Thanks for reading everyone, see you in 2015.

(Previous editions:  2013, 2012, 2011.)

Follow or contact the Rortybomb blog:
 
  

 

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Daily Digest - December 23: Big Money is Destroying America's Two-Party System

Dec 23, 2014Rachel Goldfarb

The Daily Digest is taking a break for the holidays. It will return on Monday, January 5, 2015.

Click here to subscribe to Roosevelt First, our weekday morning email featuring the Daily Digest.

The Daily Digest is taking a break for the holidays. It will return on Monday, January 5, 2015.

Click here to subscribe to Roosevelt First, our weekday morning email featuring the Daily Digest.

Americans Are Sick to Death of Both Parties: Why Our Politics Is in Worse Shape Than We Thought (Alternet)

Roosevelt Institute Senior Fellow Thomas Ferguson and Walter Dean Burnham say the combination of incredibly high political spending and low voter turnout signals a serious problem with our democracy.

McDonald's Can No Longer Hide Behind its Franchises (The Hill)

Roosevelt Institute Senior Fellow Richard Kirsch says that holding McDonald's accountable for labor practices at its franchises is the kind of common-sense labor policy we need today.

Forecast for the 2015 Economy: Sunny (MSNBC)

Suzy Khimm gathers up economists' predictions for the coming year. Trends point toward some increases in wages, which means more people will feel the recovery in their lives.

Yellen’s First Year at Fed: A Remarkably Steady Course (NYT)

Binyamin Appelbaum reviews Janet Yellen's actions and accomplishments this past year. Her distinguishing characteristics as Fed chair include a focus on unemployment and jobs.

Volkswagen’s Employee Engagement Plan Could Weaken Labor (In These Times)

Alexandra Bradbury explains the concerns around Volkswagen's plan, which recognizes groups representing at least 15 percent of workers but doesn't allow any collective bargaining.

Republicans Block Reappointment of CBO Chief Doug Elmendorf (Bloomberg Politics)

Dave Weigel says the decision not to reconfirm Elmendorf to the Congressional Budget Office revolves around the GOP's desire for dynamic scoring, an unproven method of calculating budget costs.

New on Next New Deal

Chuck Schumer and the Democrats' Identity Crisis: Economic Policy vs. Rhetoric

Roosevelt Institute Senior Fellow Richard Kirsch says that New York Senator Chuck Schumer embodies the dilemma facing the Democratic Party: Wall Street funding vs. the populism it promises voters.

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Chuck Schumer and the Democrats' Identity Crisis: Economic Policy vs. Rhetoric

Dec 22, 2014Richard Kirsch

A populist message won't be enough to save the Democratic Party if its leaders continue to serve Wall Street.

A populist message won't be enough to save the Democratic Party if its leaders continue to serve Wall Street.

Two weeks before New York Senator Charles Schumer once again delivered for Wall Street with the omnibus budget deal, he gave a major speech in which he sounded like a progressive champion. Schumer offered a stirring defense of government as the only force that can stand up to the private sector’s attack on the middle class, and argued that for Democrats to “roll to victory in 2016... First, we must convince Americans that government can be on their side and is not just a tool of special interests.”

Schumer is not just any Democrat. He led the successful election efforts for Democratic senators in 2006 and 2008, is number three in the Democratic Senate leadership, where he is responsible for policy and communications, and he sits on several of the most powerful Senate committees. His speech at the National Press Club on November 25 was billed as a major analysis of why Democrats did so badly in the midterms and how they should chart a path to victory in 2016.

Unfortunately, Schumer embodies the contradictions that will tear the Democratic Party apart over the next two years. He understands the need to embrace a populist, progressive narrative and program, but his ties to Wall Street and big money lead him to blunt any real moves by Democrats to take a bold stand for working people against corporate power.

The budget proposal to allow more government bailouts of banks that gamble with their depositors’ money was a huge lost opportunity for Democrats to paint Republicans as being on the side of the big banks that wrecked the economy. That opportunity was negated by President Obama’s pushing for the budget and Senator Schumer’s stealth maneuvers (widely known in Congress) to keep the Wall Street deal intact. As a result, the leaders of both parties demonstrated, as they’ve done before, that government is in fact on the side of the rich and powerful.

Schumer knows that this is a problem if Democrats hope to win at the polls. While his speech at the National Press Club got a lot of attention for his negative comments about the President’s strategy on the Affordable Care Act, those remarks were only a small part of a long analysis that has a lot in common with progressive views of the economy and the role of government. Some highlights:

The most salient factor in our political economy is that for the first time in American history, middle-class incomes have been in decline for over a decade… The powerful have much more access and influence over government and specific and strong actions must be taken to curb that influence so government can really represent the average person… We must illustrate that government can provide solutions by delineating specific concrete programs that if enacted would actually improve lives and incomes… We must convince the middle class that the only way out of their morass is by a stronger and effective government, not by demeaning or running from it…

When large forces harness power and push you around, you need a large after force to stand up to -- to stand up for you. The only force that can give you the tools to stand up to the large tectonic forces that can mitigate the effects that technology creates on your income is an active and committed government that is on your side.

Schumer highlights the same key economic fact that progressives emphasize: wages have not kept up with productivity. But it is in his explanation of what is behind stagnant wages that he departs from progressives. For Schumer, “it can be described in one word -- technology. Technology allows capital to garner [a] far greater share of increases.” He goes on to note globalization as another factor.

Schumer leaves out the powerful political forces that drove down wages. The biggest omission is his total failure to discuss the role of Wall Street in wrecking the economy and, more broadly, in driving down wages at the expense of corporate profits. Schumer, who as much as anyone in government is responsible for unleashing Wall Street is incapable of making that case. Schumer, a leading champion of banking deregulation, has collected more than $20 million in campaign contributions from the financial sector, more than any other senator who hasn’t run for president.

And it’s not just Wall Street that Schumer leaves out of the story. It is also the corporate attack on labor unions and on labor standards.  He makes no mention of the slashing of taxes on unearned income, so that the rich pay lower taxes than the rest of us, or of the gutting of corporate tax collection. Where are the corporate villains – abetted by both political parties – who have enriched themselves at the expense of American families while driving down taxes and government investment in the public structures that are foundations of a powerful economy?

Schumer emphasizes that Democrats need a policy program to go along with their message of being on the side of the middle class, but he punts on what ideas they should propose, saying, “In the coming weeks and months we will have this debate within the Democratic Party.” Still, he declares that the Democratic program must be “attainable and effective, which means they must work politically.” That’s a recipe for more small-bore ideas, which will neither meet the big challenges facing the country nor inspire people.

In his conclusion, Schumer again asserts that what can unite Democrats “from Elizabeth Warren to Hillary Clinton to Joe Manchin” is working to “convince middle-class Americans that we are the party that will put government back on their side… and passing legislation that is effective and acutely focused on reversing the middle class decline.”

Richard Nixon’s Attorney General John Mitchell famously said, “Watch what we do, not what we say.” But in today’s world of minute-to-minute coverage and social media, that isn’t so easy to pull off. CREDO Action, one of the big progressive netroots groups, immediately called out Schumer, along with President Obama and other Democrats who enabled the Wall Street budget deal.

Schumer is a brilliant politician and legislative tactician, but the reality of the corporate attack on American workers will overwhelm any messaging gloss that Democrats can put on it. He’s right; Democrats will have to take sides between working families and the middle class or the super-rich and CEO campaign contributors. 

Richard Kirsch is a Senior Fellow at the Roosevelt Institute, a Senior Adviser to USAction, and the author of Fighting for Our Health. He was National Campaign Manager of Health Care for America Now during the legislative battle to pass reform.

Image via Shutterstock

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Daily Digest - December 22: Yellen Speaks and the Markets Answer

Dec 22, 2014Rachel Goldfarb

Click here to subscribe to Roosevelt First, our weekday morning email featuring the Daily Digest.

Markets Bounce After Yellen Announcement (Melissa Harris-Perry)

Click here to subscribe to Roosevelt First, our weekday morning email featuring the Daily Digest.

Markets Bounce After Yellen Announcement (Melissa Harris-Perry)

As guest host, Roosevelt Institute Fellow Dorian Warren leads a roundtable discussion about how Janet Yellen's statements are impacting the current economy.

Wall Street Is Dismantling Financial Reform Piece by Piece (TNR)

Friday's announced delay of the Volcker rule, which prohibits proprietary trading, shows the financial sector's ability to limit Dodd-Frank's interlocking provisions for its benefit, writes David Dayen.

  • Roosevelt Take: Dayen links to Roosevelt Institute Fellow Mike Konczal's recent piece on Next New Deal with Alexis Goldstein and Caitlin Kline to explain how another rule eliminated in the recent budget negotiations fits into this picture.

Obama Labor Board Comes Down Hard on McDonald’s (Politico)

In a significant first, the National Labor Relations Board has filed legal complaints that hold McDonald's accountable to workers at its franchises, reports Brian Mahoney.

Workers’ Rights at McDonald’s (NYT)

In an editorial, the Times asks McDonald's if it wouldn't be easier to just bargain directly with employees, instead of illegally interfering with the Fight for $15 movement.

Ocwen Head to Resign in New York Settlement (WSJ)

James Sterngold and Alan Zibel report on the settlement between Ocwen Financial Corp. and New York State's financial regulator, which includes $150 million to be paid to housing programs and borrowers.

Obama Compared to Prior Presidents On Job Creation, In Graphs (TAP)

Paul Waldman compares President Obama's job creation numbers to other presidents', and his clearest discovery is that Republicans are wrong: tax cuts won't save the economy, and Democratic policies won't kill it.

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Daily Digest - December 19: It's a Whole New Economic Policy-Making World

Dec 18, 2014Rachel Goldfarb

Click here to subscribe to Roosevelt First, our weekday morning email featuring the Daily Digest.

Uncharted Interest Rate Territory (U.S. News & World Report)

Click here to subscribe to Roosevelt First, our weekday morning email featuring the Daily Digest.

Uncharted Interest Rate Territory (U.S. News & World Report)

Jason Gold points out that since interest rates have been declining for 33 years, none of today's lawmakers know quite what they're in for when the Fed begins to raise rates in 2015.

  • Roosevelt Take: Roosevelt Institute Fellow Mike Konczal says that raising interest rates is not the way to fight "financial instability."

The Greatest Tax Story Ever Told (Bloomberg Businessweek)

Zachary R. Mider shares the story of the very first corporate tax inversion, in which a company incorporates abroad to avoid paying U.S. taxes. The idea was invented by a liberal tax lawyer in 1982.

A Big Safety Net and Strong Job Market Can Coexist. Just Ask Scandinavia. (NYT)

The strong safety net programs in Scandinavian countries, which include far more direct aid, might be more effective at getting people to work than the U.S. tax subsidy model, writes Neil Irwin.

How ALEC Helped Undermine Public Unions (WaPo)

Alex Hertel-Fernandez explains that ALEC's attacks on public sector unions aren't new: ALEC-backed anti-union laws were enacted in some states a decade before the Great Recession.

Pro-Warren Protesters Take Their Fight to Wall Street (MSNBC)

Zachary Roth reports on yesterday's protest at Citigroup's New York City headquarters, where protesters denounced the Citigroup-crafted measure weakening Dodd-Frank in the spending bill.

From the E.R. to the Courtroom: How Nonprofit Hospitals Are Seizing Patients’ Wages (ProPublica)

Paul Kiel and Chris Arnold profile the Missouri hospital that sues the most patients in the state. Nonprofit hospitals are required to offer low-cost charity care, but that isn't particularly regulated.

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Ten Years: Students Moving the Country Forward

Dec 18, 2014Taylor Jo Isenberg

After ten years of engaging young people in the political process, the Roosevelt Institute | Campus Network continues to push for a system that works for all of us.

In an email to peers at Stanford University students on November 4, 2004, a student attempted to turn the tide on the malaise setting in after a disappointing election night for progressives. He captured the sentiment of the moment:

After ten years of engaging young people in the political process, the Roosevelt Institute | Campus Network continues to push for a system that works for all of us.

In an email to peers at Stanford University students on November 4, 2004, a student attempted to turn the tide on the malaise setting in after a disappointing election night for progressives. He captured the sentiment of the moment:

Elections are a great time to shape the future of our country, but democracy is not something that happens every four years. We have a lot of work to do … we need to figure out how to explain what we care about in a coherent and convincing way, we need to develop a leadership network to match the conservatives of the next generation, and we need to keep public officials accountable to the issues that brought us all in.

In a follow-up email, he boiled it down to one simple statement: "I'm seeing a student-run think tank that will reinvigorate mainstream politics with a new generation's ideas."

In one of those rare occurrences that indicate that people might be on to something, others were incubating a similar concept. Two friends at Middlebury and Bates also felt compelled to respond to the political moment, and articulated their initial thoughts on a "think tank that unites college students across America under one political agenda aimed at taking back our democracy." Something similar was taking shape at Yale University.

The rest of the story is Roosevelt lore – the late nights, cross-country recruiting trips, the passionate debates about how best to position the organization to effectively elevate young people as a source for powerful ideas capable of policy change.

Yet what makes this particular story potent is that, ten years later, we celebrate not only that vision, but also today's reality. Thousands of students over the past ten years have worked tirelessly to actualize the initial vision that emerged from a bleak moment in our political history. We’ve published 600+ policy solutions that have been read over half a million times; trained thousands on how to challenge the fundamentals of our social, political, and economic systems; and catapulted young people as civic actors into key debates on the policy challenges of our day. Most importantly, the list of student and chapter successes on the ground is staggering in its breadth and depth of examples where young people have taken active ownership of their communities to bring about solutions with meaningful impact.

As a proud Roosevelter, I think we have much to celebrate. We took a few days last week to elevate our work in Washington, DC – a celebration that included a conversation with Representative Rosa DeLauro and members of Congress on how to look to best practices from Roosevelt’s model to effectively engage a new generation in policy and politics, a discussion on the Campus Network’s next ten years, and presentations at the White House featuring our student’s policy work. And of course, we hosted a party for 190+ alumni and supporters (a rockin’ one, according to keynote speaker Jared Bernstein).

Ten years is also a moment to look towards our future. It’s been a common refrain around our office and with our members that there are some unsettling parallels between the post-election reality ten years ago and the one we face today. Distrust of institutions is on the rise, policy priorities with high public support are thwarted by special interests, and our debate is seriously deprived (with a few exceptions) of a vision for what our country can build towards. We’re still in need of a shake up. The upside? Where things are happening, it’s often led or heavily supported by young people – from the ballot initiatives in the 2014 election to the sustained demand for accountability in our justice system.

It’s no secret that the political establishment is perplexed about young people. The media haphazardly jumps between two narratives, unable to decide if we’re self-absorbed, naïve and complacent in the face of our economic future, or the most civically minded quiet do-gooders since the Greatest Generation. Yet many of the major civic and political organizations are struggling with declining membership numbers. It’s not unheard of for organizations to develop “Millennial engagement strategies” to combat this problem.

We think the answer pretty simple: it’s about institutions and systems embracing the shifts instead of fearing them. From the moment they walk through the door, our members are asked to be a part of building something as equals. They’re given the tools to be the architects – and are instantly connected to a network of peers who support them. In a political system more interested in managing young people than tapping into their ingenuity and energy, Roosevelters come to us because they see the limitations of traditional pathways of engagement. As a result, the Roosevelt Institute | Campus Network has remained a network that evolves and shifts as our students lead the way.

We aren’t, of course, the only ones – there is a vibrant ecosystem of organizations and movements that are also innovating and responding to the changing ways people of all ages are expressing their priorities. We could not be more proud of our alumni who have gone on to lead, participate in, and learn from these efforts.

Our successes also beg the question – what does this mean for the next ten years? How do we continue to amplify our strengths and evolve to reflect the moment, opportunities, and risks? That’s the conversation we’re having next – a conversation we want our alumni and supporters to be a part of. In 2015, the Roosevelt Institute will introduce our Alumni Network, which will focus on how to strengthen the Roosevelt community and its potential to influence social and economic priorities. If we are to respond to the call for an economic and democratic system that works for this century, it is going to take all of us.

It is now a Campus Network tradition to close any major convening or retreat with a passage from Jean Edward Smith’s FDR. It narrates President Franklin D. Roosevelt accepting the nomination at the 1936 Democratic National Convention. It’s a famous speech, most notably for his “This generation of Americans has a rendezvous with destiny” quote. We start reading a little earlier – Smith sets the stage, with the country emerging from the worst of the Great Depression. Roosevelt walks to the platform on the arm of his son James. Smith details a powerful moment, where the President sees the poet Edwin Markham, author of Man with a Hoe, reaches out to greet him, and stumbles and falls. People rush to snap his braces back into place. He then proceeds to give the speech, which puts forward uncompromising and substantive statements on political and economic equality. It’s resolute, forceful, and clear – there are wrongs we must right, power that needs to be rebalanced, problems to be solved by the people.

I hope that our members take two things away from the passage. First, that every individual can’t do it alone. Second, that it is possible to stand for something that upsets the current balance of power – and to see the country move forward as a result. It’s a valuable reminder today, when all seems hopeless in the face of stagnation and entrenchment.

As we look to the next ten years, that’s the question Roosevelters will continue to ask, and will eventually answer. What do we stand for, and how will we move this country forward?

Taylor Jo Isenberg is the Vice President of Networks at the Roosevelt Institute.

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Daily Digest - December 18: Can Subprime Lending Really Be Safe?

Dec 18, 2014Rachel Goldfarb

Click here to subscribe to Roosevelt First, our weekday morning email featuring the Daily Digest.

The Return of Subprime Lending (AJAM)

Matt Birkbeck says a new wave of subprime mortgages appear to be following much stricter rules and have far less usurious interest rates, but regulators are still watching closely.

Click here to subscribe to Roosevelt First, our weekday morning email featuring the Daily Digest.

The Return of Subprime Lending (AJAM)

Matt Birkbeck says a new wave of subprime mortgages appear to be following much stricter rules and have far less usurious interest rates, but regulators are still watching closely.

Paid Maternity Leave Is Good for Business (WSJ)

Susan Wojcicki says that the United States is behind the rest of the world in not offering paid maternity leave to all mothers, and that such a policy makes good sense socially and economically.

Federal Reserve Says It Will Be ‘Patient’ on Interest Rate Timing (NYT)

Binyamin Appelbaum reports on the latest comments from Federal Reserve Chair Janet Yellen about when the Fed will start raising interest rates. The process won't begin before April.

Fired Walmart Worker Says She Had to Choose Between a Paycheck and a Child (The Guardian)

Lauren Gambino and Jessica Glenza profile one former Walmart employee who was still asked to work with dangerous chemicals after her doctor said they would endanger her pregnancy.

What Was the Job? (Pacific Standard)

Kyle Chayka says the gig economy brought with it a massive reinterpretation of what it means to have a job, leaving behind a disenfranchised workforce without any of the benefits it once enjoyed.

New on Next New Deal

Ten Years: Students Moving the Country Forward

Roosevelt Institute Vice President of Networks Taylor Jo Isenberg reflects on the Campus Network's tenth anniversary, and how Roosevelters can continuing pushing for a better country for all of us.

Two Contradictory Arguments That Dodd-Frank is Crony Capitalism

Roosevelt Institute Fellow Mike Konczal compares two mutually exclusive conservative analyses of what crony capitalism means and how to fix it, which suggest this isn't a useful concept in policy debates.

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Two Contradictory Arguments That Dodd-Frank is Crony Capitalism

Dec 17, 2014Mike Konczal

I’m pretty convinced that the term “crony capitalism,” as deployed by the right, is useless as a political or analytical tool. I keep a close eye on how conservatives talk about financial reform, and according to the right, Dodd-Frank is crony capitalism. Oh noes! But what does that mean, and how can we stop it? Here’s a fascinating case in point: two AEI scholars with different publications argue that we need to stop Dodd-Frank from enabling crony capitalism, and then proceed to describe two opposite, mutually exclusive sets of problems and solutions.

First, a good test question: The Federal Reserve recently required that the largest firms have a greater capital surcharge than had been originally proposed. Is that cronyism?

Here’s one story, from James Pethokoukis in ”Fighting the Crony Capitalist Alliance”: “our highly concentrated and interconnected, Too Big to Fail financial system [...] gives a competitive edge to megabanks.” How is that? Regulators create incentives for big banks to take on risks “such as investing in mortgage-backed securities and complex derivatives.” Banks are the size they are, and do the activities that they do, because of the actions of regulators.

So how do we combat this problem? According to Pethokoukis, we should “substantially raise the capital requirements for Too Big To Fail banks” to limit risk. Even more, “such capital requirements might well nudge the biggest banks into shrinking themselves or breaking up.”

Here’s another story, from Tim Carney’s “Anti-Cronyism Agenda for the 114th Congress”: Dodd-Frank is cronyism because “[e]xcessive regulation is often the most effective crony capitalism.” What’s worse is that Dodd-Frank designates the biggest firms as Systemically Important Financial Institutions (SIFIs), meaning that they pose a systemic risk to the economy. Those firms are put under more regulation, but it’s obviously a cover for a permanent set of protections.

So what should we do? According to Carney’s agenda, Congress should “open banking up to more competition by repealing regulations that give large incumbent banks advantages over smaller ones.” Well, which regulations are those? “Congress should repeal its authority to designate large financial firms as SIFIs.”

Note that though these are from the same institution and carry the same banner of fighting “cronyism,” these agendas are the exact opposite of each other. For Pethokoukis, the important goal is identifying the largest and riskiest institutions and putting aggressive regulations on them, with capital requirements set high enough that they could fundamentally shrink those banks. For Carney, it’s important that we do not identify any firm as too large that it is risky for the economy, and thus increase their capital requirements, since doing so just encourages cronyism -- indeed, it is the logical conclusion of cronyism. Don’t regulate the largest firms with more attention or care; just don’t do anything to them.

In the Pethokoukis version, the financial sector poses a real threat to the stability of the economy, and as such special efforts should be made to prevent failure and handle failure when it does occur. His answer is, essentially, to do more. In the Carney version, there’s no real danger outside the government’s interference, or at least not a danger that is worth a policy solution. His answer is to do nothing, except repeal what regulation already exists.

And, crucially, for Pethokoukis, the recent increase in capital surcharges for SIFIs are a good idea; for Carney, they enshrine the problem by working through the SIFI framework, and are a bad idea. How can a policy agenda be built around such a “cronyism” framework?

There are other problems with “cronyism” as described here. Pethokoukis blames cronyism for the concentration in the financial sector in the last few decades. However the previous argument had been that the size and geographic restrictions that prevented this concentration before the 1990s are the real cronyism. Dodd-Frank blocks a single financial firm from having liabilities in excess of 10 percent of all liabilities, benefitting smaller firms at the expense of larger ones. Is that cronyism or the opposite? Cronyism can’t just be “things turned out in a terrible way when left to the markets.”

As Rich Yeselson notes in a fantastic essay on New Left historians in the recent issue of Democracy, the Gabriel Kolko-inspired stories about how regulations evolves (stories that influence Carney) are monomaniacally mono-causal. So just quoting CEOs’ statements to the press about Dodd-Frank constitutes analysis, as the regulations must obviously flow from elite desires through their captured lackeys in the state.

But Dodd-Frank is more complicated than that - look at the effort to stop the CFPB from starting, or the epic battles both between and within regulators, the state and consumers over derivatives. Carney’s top-down inescapable vision of how reform works leaves no room for the contingency of actual efforts to fix a broken system. In turn, this leaves us with no way to actually critique what Dodd-Frank does. Worse, it conflates fighting “cronyism” with an agenda of laissez-faire economics, liberty of contract, and hard money, sneaking in a three-legged stool of reactionary thought through our concerns about fairness.

Actual cronyism is a real problem, but I’ve seen no evidence that it adds up to a systemic criticism of our economy as a whole. Instead, we need a language of accountability, benefit and power in how markets are structured. Without this, we’ll have no working compass for reform.

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I’m pretty convinced that the term “crony capitalism,” as deployed by the right, is useless as a political or analytical tool. I keep a close eye on how conservatives talk about financial reform, and according to the right, Dodd-Frank is crony capitalism. Oh noes! But what does that mean, and how can we stop it? Here’s a fascinating case in point: two AEI scholars with different publications argue that we need to stop Dodd-Frank from enabling crony capitalism, and then proceed to describe two opposite, mutually exclusive sets of problems and solutions.

First, a good test question: The Federal Reserve recently required that the largest firms have a greater capital surcharge than had been originally proposed. Is that cronyism?

Here’s one story, from James Pethokoukis in ”Fighting the Crony Capitalist Alliance”: “our highly concentrated and interconnected, Too Big to Fail financial system [...] gives a competitive edge to megabanks.” How is that? Regulators create incentives for big banks to take on risks “such as investing in mortgage-backed securities and complex derivatives.” Banks are the size they are, and do the activities that they do, because of the actions of regulators.

So how do we combat this problem? According to Pethokoukis, we should “substantially raise the capital requirements for Too Big To Fail banks” to limit risk. Even more, “such capital requirements might well nudge the biggest banks into shrinking themselves or breaking up.”

Here’s another story, from Tim Carney’s “Anti-Cronyism Agenda for the 114th Congress”: Dodd-Frank is cronyism because “[e]xcessive regulation is often the most effective crony capitalism.” What’s worse is that Dodd-Frank designates the biggest firms as Systemically Important Financial Institutions (SIFIs), meaning that they pose a systemic risk to the economy. Those firms are put under more regulation, but it’s obviously a cover for a permanent set of protections.

So what should we do? According to Carney’s agenda, Congress should “open banking up to more competition by repealing regulations that give large incumbent banks advantages over smaller ones.” Well, which regulations are those? “Congress should repeal its authority to designate large financial firms as SIFIs.”

Note that though these are from the same institution and carry the same banner of fighting “cronyism,” these agendas are the exact opposite of each other. For Pethokoukis, the important goal is identifying the largest and riskiest institutions and putting aggressive regulations on them, with capital requirements set high enough that they could fundamentally shrink those banks. For Carney, it’s important that we do not identify any firm as too large that it is risky for the economy, and thus increase their capital requirements, since doing so just encourages cronyism -- indeed, it is the logical conclusion of cronyism. Don’t regulate the largest firms with more attention or care; just don’t do anything to them.

In the Pethokoukis version, the financial sector poses a real threat to the stability of the economy, and as such special efforts should be made to prevent failure and handle failure when it does occur. His answer is, essentially, to do more. In the Carney version, there’s no real danger outside the government’s interference, or at least not a danger that is worth a policy solution. His answer is to do nothing, except repeal what regulation already exists.

And, crucially, for Pethokoukis, the recent increase in capital surcharges for SIFIs are a good idea; for Carney, they enshrine the problem by working through the SIFI framework, and are a bad idea. How can a policy agenda be built around such a “cronyism” framework?

There are other problems with “cronyism” as described here. Pethokoukis blames cronyism for the concentration in the financial sector in the last few decades. However the previous argument had been that the size and geographic restrictions that prevented this concentration before the 1990s are the real cronyism. Dodd-Frank blocks a single financial firm from having liabilities in excess of 10 percent of all liabilities, benefitting smaller firms at the expense of larger ones. Is that cronyism or the opposite? Cronyism can’t just be “things turned out in a terrible way when left to the markets.”

As Rich Yeselson notes in a fantastic essay on New Left historians in the recent issue of Democracy, the Gabriel Kolko-inspired stories about how regulations evolves (stories that influence Carney) are monomaniacally mono-causal. So just quoting CEOs’ statements to the press about Dodd-Frank constitutes analysis, as the regulations must obviously flow from elite desires through their captured lackeys in the state.

But Dodd-Frank is more complicated than that - look at the effort to stop the CFPB from starting, or the epic battles both between and within regulators, the state and consumers over derivatives. Carney’s top-down inescapable vision of how reform works leaves no room for the contingency of actual efforts to fix a broken system. In turn, this leaves us with no way to actually critique what Dodd-Frank does. Worse, it conflates fighting “cronyism” with an agenda of laissez-faire economics, liberty of contract, and hard money, sneaking in a three-legged stool of reactionary thought through our concerns about fairness.

Actual cronyism is a real problem, but I’ve seen no evidence that it adds up to a systemic criticism of our economy as a whole. Instead, we need a language of accountability, benefit and power in how markets are structured. Without this, we’ll have no working compass for reform.

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New Score: Socialize Uber

Dec 17, 2014Mike Konczal

I have a new Score column at The Nation: Socialize Uber. It's about Uber and other sharing economy companies as worker cooperatives. Normally I eyeroll when people talk about cooperatives as an economic solution, but I think there's compelling stuff here. Given that the workers already own all the capital in the form of their cars, why aren’t they collecting all the profits? I'm particularly interested in the comparisons to the Populist movement in this new economy, as back then workers also were amazed by new technologies but also wanted fairness on the terms they could access them.

We've also revamped how the Score looks, particularly the online part of it, so I hope you check it out. There's some commentary already from Will Wilkinson and Brian Dominick. It's definitely a moment where people are thinking about this, as columns from Nathan Schneider and Trebor Scholz also came out at the same time making similar arguments about worker cooperatives.

Sure Pricing

Uber is also in the news because they turned on surge pricing during a terrorist hostage situation in Sydney, Australia. This has gotten people talking about surge pricing. I don't mind surge pricing, but the moralizing way journalists talk about it is really off-putting. Matt Bruenig has a good response to an example of this by Olivia Nuzzi ("How does the world owe you a private car, priced as you deem acceptable, that didn't exist five years ago? [...] you might consider meandering over to a country with a different economic system").

To expand on Matt, there's two reasons why people might want to avoid surge pricing that virtually never get discussed.

One is that people care about fairness. As Arin Dube wrote about the minimum wage, "the economists Colin F. Camerer and Ernst Fehr have documented in numerous experimental studies that the preference for fairness in transactions is strong: individuals are often willing to sacrifice their own payoffs to punish those who are seen as acting unfairly, and such punishments activate reward-related neural circuits." This is why you see high support for the minimum wage among people who otherwise support right-wing economic ideas, as we just saw in the 2014 elections.

People care about fairness; it's in their utility function if you prefer. It's a funny economic argument where markets are meant to serve what people want, and producers are meant to meet those needs at the lowest possible cost, but if people want fairness built into the cost model then it's all sneering all the time. It's almost as if the moment is about conditioning people to serve market needs, rather than markets to serve people needs. If people demanded a cola beveridge that, say, was less sweet, would we get Daily Beast articles about "how dare you, the world doesn't owe you a less sweet cola, move to North Korea if you want to see your market demands turn into products." And there's a long history of using moral persuasion to try and limit price-gouging - check out Little House on the Prairie.

But the first issue becomes more relevant with a second concern, however, and that's the increasingly negative view of Uber's tactics. People don't have perfect information, and it's reasonable that they might want to pool the risk that they'll be targeted for price discrimination. The obvious comparison here was that early moment Amazon turned out to be charging higher prices based on your browsing history, which it promptly shut down after public outcry. (Why don't you meander over to a different country if you don't want Amazon data-mining your browser to rip you off?)

Why were people offended? Because in that case the price discimination just transfered the surplus from the customers to the producers - there wasn't any allocative effect. And the same worry can carry over to surge pricing.

Without perfect information, customers don't really know if they are getting price surged based on supply-and-demand fundamentals or on their own individual characteristics. Imagine if the algorithm increased the liklihood of price surging based on people's past willingness to select price surging. Or because a neighborhood is more like to accept price surging. I assume we'd be mad, right? That wouldn't have an allocative effect - it would just be ripping off those people because the code can tell they'd be willing to pay more.

Are they doing this now, or will they do this in the future? Normally trust is what would help mitigate both these worries, but with stories about "God mode" and their take-no-prisoners approach to everything, trust is in increasingly low supply.

Follow or contact the Rortybomb blog:
 
  

 

I have a new Score column at The Nation: Socialize Uber. It's about Uber and other sharing economy companies as worker cooperatives. Normally I eyeroll when people talk about cooperatives as an economic solution, but I think there's compelling stuff here. Given that the workers already own all the capital in the form of their cars, why aren’t they collecting all the profits? I'm particularly interested in the comparisons to the Populist movement in this new economy, as back then workers also were amazed by new technologies but also wanted fairness on the terms they could access them.

We've also revamped how the Score looks, particularly the online part of it, so I hope you check it out. There's some commentary already from Will Wilkinson and Brian Dominick. It's definitely a moment where people are thinking about this, as columns from Nathan Schneider and Trebor Scholz also came out at the same time making similar arguments about worker cooperatives.

Sure Pricing

Uber is also in the news because they turned on surge pricing during a terrorist hostage situation in Sydney, Australia. This has gotten people talking about surge pricing. I don't mind surge pricing, but the moralizing way journalists talk about it is really off-putting. Matt Bruenig has a good response to an example of this by Olivia Nuzzi ("How does the world owe you a private car, priced as you deem acceptable, that didn't exist five years ago? [...] you might consider meandering over to a country with a different economic system").

To expand on Matt, there's two reasons why people might want to avoid surge pricing that virtually never get discussed.

One is that people care about fairness. As Arin Dube wrote about the minimum wage, "the economists Colin F. Camerer and Ernst Fehr have documented in numerous experimental studies that the preference for fairness in transactions is strong: individuals are often willing to sacrifice their own payoffs to punish those who are seen as acting unfairly, and such punishments activate reward-related neural circuits." This is why you see high support for the minimum wage among people who otherwise support right-wing economic ideas, as we just saw in the 2014 elections.

People care about fairness; it's in their utility function if you prefer. It's a funny economic argument where markets are meant to serve what people want, and producers are meant to meet those needs at the lowest possible cost, but if people want fairness built into the cost model then it's all sneering all the time. It's almost as if the moment is about conditioning people to serve market needs, rather than markets to serve people needs. If people demanded a cola beveridge that, say, was less sweet, would we get Daily Beast articles about "how dare you, the world doesn't owe you a less sweet cola, move to North Korea if you want to see your market demands turn into products." And there's a long history of using moral persuasion to try and limit price-gouging - check out Little House on the Prairie.

But the first issue becomes more relevant with a second concern, however, and that's the increasingly negative view of Uber's tactics. People don't have perfect information, and it's reasonable that they might want to pool the risk that they'll be targeted for price discrimination. The obvious comparison here was that early moment Amazon turned out to be charging higher prices based on your browsing history, which it promptly shut down after public outcry. (Why don't you meander over to a different country if you don't want Amazon data-mining your browser to rip you off?)

Why were people offended? Because in that case the price discimination just transfered the surplus from the customers to the producers - there wasn't any allocative effect. And the same worry can carry over to surge pricing.

Without perfect information, customers don't really know if they are getting price surged based on supply-and-demand fundamentals or on their own individual characteristics. Imagine if the algorithm increased the liklihood of price surging based on people's past willingness to select price surging. Or because a neighborhood is more like to accept price surging. I assume we'd be mad, right? That wouldn't have an allocative effect - it would just be ripping off those people because the code can tell they'd be willing to pay more.

Are they doing this now, or will they do this in the future? Normally trust is what would help mitigate both these worries, but with stories about "God mode" and their take-no-prisoners approach to everything, trust is in increasingly low supply.

Follow or contact the Rortybomb blog:
 
  

 

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Daily Digest - December 17: Who Takes the Biggest Share of the Sharing Economy?

Dec 17, 2014Rachel Goldfarb

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The Bloomberg Advantage: Konczal on Uber (Bloomberg)

Click here to subscribe to Roosevelt First, our weekday morning email featuring the Daily Digest.

The Bloomberg Advantage: Konczal on Uber (Bloomberg)

Roosevelt Institute Fellow Mike Konczal says that since most of the capital in Uber is in the cars, it's hard to justify the software developers getting such a large chunk of profits.

Senate Democrats Tell the SEC to Get Moving on CEO Pay Rule (HuffPo)

The public comment period for the CEO pay ratio rule expired a year ago, and some Senate Democrats are tired of waiting for it to be implemented, reports Zach Carter.

  • Roosevelt Take: Roosevelt Institute Fellow Susan Holmberg explains the CEO pay debate in this recent primer.

Unions Sue to Stop Chicago Pension Overhaul (Chicago Sun-Times)

Fran Spielman explains why a dozen retirees and their four unions are suing the city: they say the changes are against the state constitution, which guarantees government pensions.

Some Investors Still Heart Big Banks, No Matter What Elizabeth Warren Says (The Guardian)

Suzanne McGee considers why some investors are putting their money with the big banks, despite the continued question of whether regulators will try to break them up.

Are the Democrats Allowing Social Security to Twist in the Wind? (LA Times)

Failing to vote on a Social Security commissioner is just another examples of Democrats' failure to provide this essential program with strong enough support, writes Michael Hiltzik.

The Great Budget Sellout of 2014: Do We Even Have a Second Party? (TAP)

Robert Kuttner characterizes the new spending bill as proof that our two major parties are fundamentally the same: willing to gut Dodd-Frank, defund the EPA, and cut Pell grants.

The U.S. Middle Class Has Faced a Huge “Inequality Tax” in Recent Decades (EPI)

Josh Bivens shows how U.S. middle-class income could have grown if it had matched the average growth rate over that time, as occurred following World War II.

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