Economy

Tesla, Car Dealers, and Anti-Competitive State Laws

Shoppers at a Tesla showroom in Amsterdam, where such things are legal. (Flickr/harry_nl)

You may not realize it, but car dealers wield an unusual amount of political power in this country. That's partly because they're located in or near pretty much every community everywhere, and also because they're highly organized and clever about using their influence. One of the ways they've done so is get laws passed in state after state making sure that the model under which they operate—one in which independent dealers sell cars, but car companies themselves don't—is the only thing allowed by law. In fact, laws making it difficult or downright illegal for car companies to sell their products directly to customers are on the books in 48 states. This absurd state of affairs hasn't gotten much attention until recently, when Tesla decided it wanted to open its own dealerships to sell people cars.

Among the places it has done this is New Jersey, where the company had opened two stores. But earlier this week, the New Jersey Motor Vehicle Commission passed a rule requiring that all auto sales be done through franchises, making Tesla's stores illegal. Their option now is to either test the rule in court, or convert the stores to "showrooms," where you can look at a car but not actually buy one.

You'd think that if conservatives really believed all their rhetoric about the value of unfettered free markets, they would be all over this issue, advocating for Tesla's side of the controversy and campaigning to break up the anti-free-enterprise car dealer oligopolies. But of course, we're talking about Tesla, and liberals like electric cars, and therefore conservatives feel obligated to hate electric cars, so that probably won't happen.

What Is Left?

A response to Harold Meyerson

I was not surprised by the substance of Harold Meyerson’s criticisms of my recent Harper’s essay (“Nothing Left: The Long, Slow Surrender of American Liberals,” March 2014). I have known for some time that he and I disagree fundamentally on the reasonable scope of a political left in the United States and, correspondingly, whether one actually exists and/or how to go about building one as an effective social and political force. I was somewhat disappointed, however, at the tired hook to which he tethered his criticism.

The Inequality Puzzle

A new study shows there's been no decline in intergenerational poverty in the last 30 years, but it doesn't tell the whole story.

Flickr/DonkeyHotey

In January, a team of prestigious economists published an authoritative study showing that there had been no decline in intergenerational mobility during the past three decades. The paper, by Harvard’s Raj Chetty and three colleagues, using some 40 million Internal Revenue Service records, found that if you were born in the bottom fifth of the income distribution in 1980–1982, you had about the same chance of moving to the top quintile (about 1 in 12) as someone born at the bottom 30 years earlier.

Piketty’s Triumph

Three expert takes on Capital in the Twenty-First Century, French economist Thomas Piketty's data-driven magnum opus on inequality.

Courtesy of Fondation Jean Jaurès

In the 1990s, two young French economists then affiliated with the Massachusetts Institute of Technology, Thomas Piketty and Emmanuel Saez, began the first rigorous effort to gather facts on income inequality in developed countries going back decades. In the wake of the 2007 financial crash, fundamental questions about the economy that had long been ignored again garnered attention. Piketty and Saez’s research stood ready with data showing that elites in developed countries had, in recent years, grown far wealthier relative to the general population than most economists had suspected. By the past decade, according to Piketty and Saez, inequality had returned to levels nearing those of the early 20th century.

Paul Ryan: A Poor Man's Savior of the Poor

AP Images/Charlie Neibergall

Wisconsin Republican Paul Ryan, chair of the House of Representatives Budget Committee, spent the fall touring poor neighborhoods in an effort to rebrand the GOP as the true saviors of the poor. It was both an effort to mark the 50th anniversary of Lyndon B. Johnson’s War on Poverty, and to salve the wounds his party felt after its 2012 presidential candidate Mitt Romney put on a monocle and proclaimed the nation to be full of moochers while giggling maniacally over vichyssoise at a fancy dinner party. (Ok, he didn’t do that, but he did do this.)

The Home Mortgage Business, Where Cheaters Always Seem to Prosper

AP Images/Carlos Osorio

Ocwen is a little company with a dream: to become the nation’s largest mortgage servicer. If they weren’t so uniformly terrible at mortgage servicing, they might even achieve that goal. And while state and federal investigations, multi-billion-dollar fines, and legal threats would seemingly throw a wrench in most companies’ high-minded plans for success, Ocwen is different. Because in America, rank incompetence need not impede a corporate quest, at least not in the financial services industry. As cracks in its public image continue to surface, Ocwen is attempting to pull off one of the most brazen schemes in recent memory: getting what amounts to a cash advance for the very work they can’t seem to do properly.

Walking on Ukrainian Eggshells

AP Images/Darko Bandic

At times, you have to wonder where Europe’s strategic and economic sense has gone.

Consider Ukraine, most of whose citizens clearly wish to become Ukrainian-European and have their country join the European Union. Some of whose citizens died for that this week.

How Big Banks Are Cashing In On Food Stamps

AP Images/Rich Pedroncelli

The Agricultural Act of 2014, signed into law by President Obama last Friday, includes $8 billion in cuts to the Supplemental Nutrition Assistance Program (SNAP) over the next decade. One way the bill proposes to accomplish these savings is by reducing food stamp fraud. When the new farm bill is enacted, many of America’s hardest working families will experience cuts in services and have trouble putting food on their family’s table. But there will be major gains for an industry that most Americans might not expect: banking.

Just How Much Do Republicans Hate Unions?

The VW plant in Chattanooga. (Photo courtesy of Volkswagen USA)

If you ask Republicans about their antipathy toward unions, they'll say that letting workers bargain collectively reduces a company's ability to act efficiently in the marketplace. If you knew anything about business, the market advocates will patiently explain, you'd understand that unions, with all their rules and conditions and strike threats, only make it harder for the company to make its products. Let management make decisions about things like wages and working conditions, and the result will be higher profits and more jobs, which will benefit everyone. In almost all cases, the corporation agrees; after all, union workers always earn better wages than their non-union counterparts, and they give power to the employees, which no CEO wants.

What most people probably don't realize is that this inherently hostile relationship between management and unions isn't something that's inherent in capitalism. In fact, in many places where there are capitalists making lots of money, corporations work—now hold on here while I blow your mind—cooperatively with unions. One of those places is Germany, and one of the biggest German companies, Volkswagen, is right now embroiled in a union election in Tennessee that has turned into a bizarre spectacle that is showing the true colors of American conservatism. If you thought conservative were just laissez faire capitalists, seeking freedom for businesses to create prosperity, you're dead wrong. What they actually want is something much uglier.

The Ink-Stained Wretches of Wall Street

AP Images/Richard Drew

Last year, upon the 10th anniversary of the start of the war in Iraq, newspapers and magazines filled with soul-searching essays from journalists rethinking their advocacy of the invasion, documenting lessons learned and errors made. But a few months later, on the 5th anniversary of the fall of Lehman Brothers, the unofficial beginning of the financial crisis, virtually nobody wrestled with their failure to anticipate the Wall Street wrecking ball. Indeed, to date, no major news organization has apologized for missing the biggest economic story of the decade, and most business journalists defend their profession, arguing that they sounded the alarm about financial industry greed and the makings of a catastrophe. “The government, the financial industry and the American consumer—if they had only paid attention—would have gotten ample warning about the crisis from us,” said Diana Henriques of The New York Times in 2008. Neither she nor her colleagues have really looked back since.

Liberals, Conservatives, and the Meaning of Work

Some young Americans getting a good lesson in the dignity of work. (Lewis Hine/Wikimedia Commons)

It isn't often that we spend an entire week talking about a Congressional Budget Office report and its implications, but the one currently occupying Washington's attention—about the effects of the Affordable Care Act on the labor force—is actually pretty revealing. To catch you up, the CBO said that due to the fact that under the ACA people are no longer tied to jobs they'd prefer to leave because they can't get health insurance on the individual market ("job lock"), many will do things like retire early, take time off to stay at home with kids, or quit and start businesses. They projected that these departures will add up to the equivalent of 2 to 2.5 million full-time positions. At first, Republicans cried "Obamacare will kill 2 million jobs!", but when everyone, including the CBO's director, said that was a blatantly misleading reading of what the report actually said, they changed their tune. And here's where it gets interesting, because this debate is getting to the heart of what work means, what freedom is—and for whom—and just what kind of an economy we want to have.

Horrible Bosses

AP Images/John P. Johnson

Do you believe everything your boss tells you? The answer probably depends—if he tells you the Cubs are going to win next year's World Series then maybe not, but if he tells you your benefits are being cut and explains the reason why, you'll probably take him at his word. After all, he's in charge of the business, so he should know.

Pipeline or Pipe Bomb?

AP Images/The Tyler Morning Telegraph/Sarah A. Miller

Chances are that you missed the State Department releasing the final environmental review of the Keystone XL pipeline last week. You were meant to: it came out on 4pm on the Friday before Super Bowl Sunday. The mainstream media only had a few moments to glance at the executive summary—the report itself is an un-skimmable eleven volumes long—before the news cycle moved onto the big game.

Frankly Scarlett, You Should Give a Damn

AP Images/Gali Tibbon

Outside of being celebrities and having Jewish mothers, Benjamin Netanyahu and Scarlett Johansson aren't usually thought of having a lot in common. But they've been displaying another shared quality of late: the ability to act clueless about the suddenly snowballing economic boycott of Israeli settlements.

Could Postal Banking Be the Next Big Thing?

This doesn't actually have anything to do with postal banking. It's just awesome. (Flickr/grilled cheese)

It's often said that being poor is really expensive, and one of the most painful ways is what millions of Americans have to pay in order to make sure their bills are accounted for. If you're poor, time and money and intertwined in ways that people who aren't poor don't have to worry about. When your income and your expenses are right around the same amount, you have to worry about timing constantly. I'm not getting paid for a week, but this utility bill is due in three days, and I have to set aside enough for food and gas—how should I handle that? If I write my rent check on the same day as I get my paycheck, will the former clear before the latter? For many, the only choice to avoid catastrophes like getting evicted or having your power cut off going to one of the payday lenders and check-cashing operations you can find in every poor neighborhood. And since those payday lenders know their customers have no other options, they make them pay through the nose. As an analysis by the Consumer Financial Protection Bureau showed, "Fees at storefront payday lenders generally range from $10 to $20 per $100, though loans with higher fees are possible...A fee of $15 per $100 is quite common for a storefront payday loan, and would yield an APR of 391% on a typical 14-day loan." The median interest rate for the loans they examined was an incredible 322 percent.

If we wanted to do something about this appalling exploitation of the poor, what are our options? One solution is tighter regulation of payday lenders, limiting their usurious interest rates and requiring them to offer reasonable terms to their customers. Colorado passed requirements like that a few years ago, and they've succeeded in reducing the amount of misery payday lenders can pour upon the state's most vulnerable citizens (there are details here). But there's another option. There's an organization that has thousands of locations around the country, already performs some financial transactions (selling money orders), and is eager for new sources of revenue. It's called the Postal Service. If they began offering some limited banking services, it would seem like a win for everyone—poor Americans would get access to banking without crippling interest rates, and the USPS would make money. Who could possibly object?

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