Should we mourn them?
Derek Thompson is a senior editor at The Atlantic, where he oversees business coverage for TheAtlantic.com. More
Thompson has written for Slate, BusinessWeek, and the Daily Beast. He has also appeared as a guest on radio and television networks, including NPR, the BBC, CNBC, and MSNBC.
Should we mourn them?
Americans are laboring less than ever. So why do we feel so busy?
Every few weeks, some tech writer holds up a media analyst report allegedly showing, once and for all, that the cable guys have finally lost, and the
cord-cutters have finally won. One week, that report might come. It will really be something.
This is not that week.
Let's start with news that might appear to be the death throes of cable. Cable companies' TV subscribers collapsed by more than 1.5 million in the last year, according to Leichtman Research Group. (The Big Two, Comcast and Time Warner Cable, have declined by more than 900,000, alone.)
In fact, the trend has been underway for a while. Cable TV customers peaked in the late 1990s and have since fallen to early Clinton-era levels (SNL Kagan data)
But the cable companies aren't exclusively in the business of selling TV. They're really in the business of communications infrastructure, which is TV, phone, and Internet. The Internet business in particular has done very well for them. Since cable video subs peaked in the late 1990s, the industry has added 45 million high-speed Internet customers (SNL Kagan data, again).
The two most important reasons why cable is still making more and more money every year, despite a structural decline in cable TV subs, is that they've successfully gleaned more money per customer: both by charging more for television and by getting households to buy more than just TV. For example, 40 percent of Comcast customers take three products (e.g.: video, phone, and Internet) and 70 percent take two products (e.g.: video and Internet).
Cable ≠ video, and nothing says it more clearly than the latest earnings reports from the Big Two: Comcast, the largest provider of pay-TV in the country; and Time Warner Cable, the second largest cable provider (but behind DirecTV and Dish in total video subs). Comcast's total revenue is almost twice TWC's, but their businesses are remarkably similar.
Upshot: If you equate "cable" with TV, you are literally getting only half the story. Cable providers are in the business of communications transport. They're still in business because selling communications access is still a pretty good business, with high barriers to entry and voracious demand.
A year ago, I would have told you I fall between outraged and proactive. I'm trending rapidly toward indifferent.
'A Bad Boy'
Apple is a multinational company, with 61 percent of its revenue from foreign operations. To (legally) minimize its tax bill, Apple has set up empty subsidiaries in lower-tax countries like Ireland, effectively making them a quasi-stateless corporation with an effective corporate tax rate of about 20 percent.
This might sound devious and and a little bit evil. But we aren't accusing Apple of behaving like a criminal. We are accusing them of behaving like corporation, since it is in the nature of corporations to find ways to save money. Rather than a story about patriotic duty, or funding the social net, or corporate ethics, this is really a story about unrealistic expectations. We wish we could tax American companies on their earnings from all around the world. And we can't. We just can't.
Apple is an American company, in most people's eyes. But it is a global company, insofar as most of its employees and most of its revenue come from outside the country. Since most developed foreign economies have lower statutory rates -- and because there are ways to play national tax laws off each other to further cut taxes -- multinational companies like GE and Google have mastered the global tax labyrinth to save money. Congress operates under the illusion that it can impose U.S. taxes on foreign earnings, but trying to fit a global mesh of far-flung money under Washington's narrow tax purview will always end like all efforts to push toothpaste back into a tube: Messily, somewhat embarrassingly, and thoroughly unsuccessfully.
"The most important takeaway for me from this report how ridiculous the US corporate tax system is," said Gary Hufbauer, an international tax policy expert at the Peterson Institute for International Economics. "We have this illusion of taxing earnings abroad. We think we should be taxing Apple and GM on any income earned anywhere in the world. But we can't, and very few countries even try."
"I would hope this turns out to be a great teaching lesson on how dysfunctional the architecture of our tax system is," he continued. "But it's more likely that we'll learn an easier lesson: That Apple is being a bad boy."
'The Worst of All Possible Worlds'
Tax experts I spoke with called the US corporate tax code "the worst of all possible worlds": a high tax rate, loopholes upon loopholes, billions of dollars falling through the cracks, and trillions stowed away overseas to avoid repatriation.
"When Apple needs money, it's cheaper for the company to borrow from the bond market" than to bring back earnings from overseas, said Howard Gleckman at the Tax Policy Center. "That's just crazy."
But even the simplest solutions to the craziness wouldn't end it. One sensible thing to say, if you're a tax wonk, is that we should "move to a territorial system with a lower statutory rate," which is wonkese for "just tax profits in the U.S., but not so much." It's a fine idea. It might even lead to more revenue, counter-intuitively, since more companies might hire and build here under the lower rate. But it wouldn't stop Apple from employing Apple-y tax schemes, because those tax schemes would save money over basically *any* U.S. statutory rate.
"There is not a simple solution," Gleckman said. "Even with a territorial system, there is no evidence that it would create more jobs here. If you're paying tax in the U.S. on US earnings only at 25 percent, we're still competing with an Irish system at 12 percent. So, [all things equal] if you have a choice of building a factory here or Ireland, you're going to go to Ireland."
The current system of international corporate income taxes is not working. But it might not "work," under certain definitions of the word, no matter what we do. Even as most people publicly agree that the system is "broken," Apple (and GE and Google, etc) aren't terribly enthused about most of the proposed reforms, because their tax departments have already figured out how to exploit the "broken" system to save money.
The Real Problem With Ingenious Tax Schemes
So what's the argument against ignoring this whole thing and directing our finite attention to stuff where reform could really make a difference?
Gleckman responded with a short story: Think of it this way, he said. Apple has got all this money stashed overseas. It wants to make investments in the U.S. But bringing the money back is too expensive because of our tax code. So it sells bonds instead. And then it uses the money from that bond sale to pay tax lawyers to keep its tax burden low. "That's a huge waste of resources."
Even as I've grown cynical about attacking Apple for behaving like a corporation, this argument hits home. In perhaps the most ingenious tax juke reported by the Permanent Subcommittee on Investigations', Apple realizes that the US taxes companies based on where they incorporate, while Ireland taxes companies based on where the subsidiary managers work, so Tim Cook sets up an empty subsidiary in Ireland and manages it in the U.S. to avoid taxes in both countries. Admit it. That's ingenious.
And the fact that it's ingenious is sort of the problem. It would, after all, be nice if America's greatest companies spent more time and resources designing ingenious things than designing ingenious tax schemes.
The rise of women in the workforce has been hailed by The Atlantic as not only the greatest economic development in the last 50 years, but also the most positive overall development in the whole global economy. But a new study suggests that, for working women in the U.S., there is a surprising cost to earning more than your partner. Evidence suggests that couples are less likely to get married if the woman's income exceeds her partner's. Once married, a wife earning more than her husband is more likely to be unhappy in the marriage, more likely to feel pressured to take fewer hours, and more likely to get divorced.
To fully unpack this thing, let's start with a quick and dirty overview of the marriage market, as economist are fond of call it rather un-romantically. In the last 50 years, marriage has been in decline, technically speaking, as the share of adults who are married has fallen from 72 percent to 51 percent of the 18-and-over population. Sounds like one big marriage drought, but in fact, there are two marriage markets (at least). Among the most-educated and highest-earning men and women, marriage rates are generally high and rising, although these couples are also getting hitched a bit later in life than they used to. Meanwhile, the bottom half of female earners have seen their marriage rates decline by 25 percentage points since 1970. Here's the picture from the Hamilton Project:
The classical economic explanation for the decline of marriage among the low-income starts by blaming the guys. Sorry, guys. This theory of marriage starts with "gains from trade" (a wonky term for "what each side brings to the table"). You'll note that declining marriage rates correlate roughly with declining male earnings (see graph below, also from the Hamilton Project). Men simply offer less financial security than they used to -- especially compared with women, who are more financially self-sufficient than ever.
This drop-off is simply too steep to be explained by randomness or classical economics. If men and women were forming marriages without concern for relative incomes, we'd expect a smoother distribution curve, more like this guy ...
If classical economics doesn't do the trick, maybe it's because the dearth of female breadwinners has little to do with classical economics. In a cool new paper, Marianne Bertrand, Jessica Pan, and Emir Kamenica pose a theory that some people might find controversial but others might find intuitive: What if there's a deficit of marriages where the wife is the top earner because -- to put things bluntly -- husbands hate being out-earned by their wives, and wives hate living with husbands who resent them?
were true, we would expect to see at least
three four other things to be
true. First, we'd expect marriages with female breadwinners to be
surprisingly rare. Second, we'd expect them to produce unhappier
marriages. Third, we might expect these women to cut back on hours, do
more household, or make other gestures to make their husbands feel
better. Fourth, we'd expect these marriages to end more in divorce. Lo and behold (as you no doubt guessed), the economists found all of those assumptions borne out by the evidence.
"There simply aren't nearly as many relationships with women
out-earning men as we would expect [through random pairing]," Kamenica told me. "And women who
should out-earn their husbands based on their education and other
demographics are more likely to stay at home [and not work] than the
similar women who don't out-earn the husbands,"
But that's not the most surprising finding from their research, he added. The most surprising thing was that wives who earn more from paid work also report doing significantly more chores around the house. This doesn't make much sense, intuitively. For women and men at all income levels, more work in the office usually leads to less time spent doing chores at home. But suddenly, when a wife earns more than her husband, her hours spent on chores and childcare go up.
"Classical economics can't explain that increase," Kamenica said. "The only
way to make sense of it is compensatory behavior." In English, please? "Maybe the husband
feels threatened, so she does more of the cooking, even though she earns
The economists found the exact same trends living in Canada. Not only did they find a "sharp decrease in the number of couples once the wife's income exceeds the husband's," but also they found no correlation between divorce and income ... except when the wife earned more than her husband.
One hundred years ago, husbands and wives specialized. He worked for pay. She worked at home. But with married women working more and more, this paper suggests gender norms are changing slower than gender economics, and many women still aren't comfortable out-earning their boyfriends -- and many men still aren't comfortable earning less than their wives.
There are a million things to say about this graph, and I'm pretty sure that everybody who sees it will find some way to shoehorn it into their previously held opinions. So bear with me, please, as I do that very thing.
Here's what I consider the most amazing thing about this pretty amazing graph. It's not just that the U.S. had the shallowest recession, or the best recovery, among similar countries in Europe and Japan. It's this. We had the shallowest recession and the best recovery primarily because we (a) control our own currency and (b) used aggressive monetary policy to save the banks and lower interest rates while running high deficits.
And yet! Even as we smoked Europe and Japan in the race back to pre-recession GDP, we have actively debated undoing both of the things that clearly made our recovery superior. Weird conservatives have begged us to return to the gold standard at the very moment that an inflexible currency was dooming Europe. Normal conservatives have begged us to cut deficits even as austerity was dooming Europe.
Economics isn't like a science were you can run simultaneous experiments with control groups. But the last five years have been pretty darn close to a global stimulus experiment. Europe has been dabbling with its own 21st-century version of the gold standard while enforcing continent-wide austerity. Meanwhile, we've mostly done the opposite -- with high (if not high enough) deficits and aggressive (if not aggressive enough) monetary policy. The results speak for themselves.
The Treasury Inspector General issued a report today finding the IRS used "inappropriate criteria" to target conservative groups. Long story very short: In response to a surge in 501(c)(4) applications, some IRS officials took short-cuts to determine if the organizations were acting in an overtly political manner, which would violate their tax-free status. The IRS told the group to use fairer and less politically charged criteria. And they didn't.
Here is the president's response to today's report (via Ryan Lizza)
Here is the summary of the Inspector General report:
And here is the report in full:
Here's the story budget wonks will tell from today's Congressional Budget Office report: The deficit is poised to shrink to its lowest level since 2008. Good news? Yes, if you're a deficit hawk. Bad news? Yes, if you think (as I do) the deficit is falling too quickly, especially at a time of high unemployment and declining household debt.
Here's the story I wish more people would talk about: Our incredible shrinking Medicare projections. Since August, CBO has now revised down its projections of mandatory health care spending by nearly $500 billion, as Michael Linden pointed out. Since the 2010 CBO report, projected Medicare spending between 2013 and 2020 has fallen by just over $1 trillion ... or 16%.
Here's the graph comparing 2010's Medicare projection to 2013's ...
... and here's the graph comparing cumulative Medicare spending over that time. In three years, we've taken projected Medicare spending in the twenty-teens down from about $6.5 trillion to about $5.5 trillion.
So many numbers. Why should you care?
Two reasons. First, the "runaway" growth of health care costs has been a motivating reason for responsible Washingtonians to ignore the unemployment crisis and focus on our deficit. But lo-and-behold, we've cut more than ONE TRILLION DOLLARS from projected Medicare spending -- and much more if you project out for the full decade. Many of the cuts have come from laws, like the Affordable Care act. Others came from lower growth in overall health care spending.
Second -- and this is the really important point I wish I could make more often -- this is an invaluable lesson in the folly of long-term budget projections (yeah, I appreciate the irony that I'm graphing budget projections to make this point). In a world where all predictions about the future of U.S. government spending turn out to be true, it makes a lot of sense to pay rapt attention to 10- and 20-year forecasts of spending and revenue. But in a world where the most exquisitely delicate change in hospital cost inflation suddenly saves hundreds of billions of dollars, it makes projections impressionistic, at best. In the future, there are budget crises that some people think might happen. In the present, there is a long-term unemployment crisis that we know is happening.
Why should impressionistic statistics about the future win that fight for Washington's attention?
The lines at Disney World are awful, we can all agree, but the lengths to which some people will go to bypass them are worse. Wealthy Manhattan parents are reportedly using a service that typically assists disabled children around the theme park to drive their non-disabled families around in a "handicapped" scooter, allowing them to skip lines by up to two hours.
It sounds like something out of a "Modern Seinfeld" episode. But in this case, the horrible people are real. And they're spectacularly crass.
"You can't go to Disney without a tour concierge," one rich mom said, according to the New York Post. "This is how the 1 percent does Disney."
Well, gross. This is, above all, a problem of basic human decency. But it is also a problem of black markets -- or legal markets extended illegally (or extra-legally) to people who shouldn't qualify.
The official Disney VIP Tour includes guides and premium fast passes for between $300 and $400 per hour. That's much more expensive than a $130-per-hour disability service afforded by Dream Tours Florida. There's a very simple explanation for the price difference: The VIP tickets are priced to where the rich will pay (and also to weed out all but the richest families to keep the service exclusive); whereas, the disability tour company sees all families with a disabled person as consumers. So these rich families reportedly using Dream Tours Florida aren't benefiting from a peculiarly effective and peculiarly cheap service, precisely because neither the service nor the price is intended to serve wealthy families. They're benefiting from a service they don't deserve at a price far below where the real luxury market for fast passes has settled.
Markets in everything, you might say. Sure. Regulation (and retribution) in everything would be good, too.
We've reached out to Dream Tours Florida and will report back when we hear.
On April 24, Minnesota Sen. Amy Klobuchar scheduled a hearing. Fun story, right? A hearing in Washington is like a fern in the rainforest. But this hearing was notable for both its subject and its attendance. It was a meeting about the most important economic crisis facing America today: long-term unemployment.
At 10:30am, the hearing began. She was the only attendant.
I have two stories for you about Washington and the economy. Both true. But very different.
The first story is called: How Washington Saved the Economy. You might begin in 2008, when the Federal Reserve went on an unprecedented spree of asset-buying to un-gunk the banks, push down interest rates, and spur investing in mortally weakened economy. This was followed, in 2009, with an equally historic stimulus package aimed at filling holes in state budgets and sending cash back to families and businesses. The government ran steep $1+ trillion deficits to keep as much money in the weak private sector as possible.
There is little question that monetary and fiscal stimulus blunted the recession -- and saved the economy.
The second story is called: How Washington Permanently Scarred the Labor Market. You might begin this story in 2011, when Congress (led by Republican obstructionism) embarked on a historic quest to crush deficit spending by any means necessary. Hold the economy hostage over the debt ceiling? Check. Kill the American Jobs Act while scheduling a too-awful-to-be-a-real-law sequester? Check. Allow the too-awful-to-be-a-real-law sequester to become a real law? Checkmate.
The deficit fell fast. As unemployment ebbed, the ranks of long-term jobless calcified, creating two separate job markets. One broken market for people out of work for more than six months. And another slowly healing market for everybody else. But the combination of a thermostatic recovery and a deep aversion to stimulus crushed any hope that the long-term unemployed would get the help they needed. Long-term unemployment isn't special just because it's longer; it's special because it's self-perpetuating. Skills atrophy, networks dry up, and employers discriminate, creating a vicious cycle of joblessness that can't be cured by normal economic growth.
There is little question that, in the last two years, Washington has essentially left the long-term unemployed to fend for themselves -- and permanently scarred the labor market.
This isn't so much a tale of two cities, but a tale of one city that responded differently to two crises: (1) the collapse of the financial system and (2) the scarring of the labor market. These are both emergencies. So why did we respond to the first emergency like an ambulance siren and the second like a harmless murmur of white noise?
I can think of at least three explanations. The first two are the explanations I've heard, believed, and used. The third I hadn't fully considered until last week. But it might be the most compelling.
(1) It's the basic fact that, without a financial system, there is no economy.
This explanation blames pretty much nobody in Washington.
In 2007 and 2008, the entire economy stood on the brink of collapse, and the only way to save it was by a historic all-hands-on-deck response from the Federal Reserve and Congress. In retrospect, you could say that we went too far to protect the biggest banks (some of which are even bigger, today) without ensuring similar financial protection for homeowners. And yet, while millions of underwater homeowners are an acute tragedy, you might say, they won't guarantee a lasting national depression. Without enough gainfully employed homeowners, you won't have a strong housing market. Without a banking system, you won't have a housing market, period.
(2) It's all the Republicans' fault.
This explanation blames half of Washington.
Let's be crystal-clear about this: There is no doubt that Republican policies are disproportionately to blame for
the shift away from stimulus. That's an easy story to tell, and I don't think Republicans would even dispute it. After all, they've argued that cutting spending would help the economy. The GOP has thoroughly convinced itself that spending-side efforts to fix unemployment are unworkable.
But there's something
In the last year, there has settled, even among the Democrats, a
kind of reserved defeat that shows a stunning lack of urgency toward the crisis of long-term joblessness. From abandoning the
payroll tax cut in late 2012, to quietly acceding to sequester, to going silent on unemployment, nearly all of Washington -- not just the right -- has essentially stopped talking about the most important economic issue of our time.
High-ranking Treasury officials officials I've spoken with on background couldn't name any specific proposals they have to help the long-term unemployed. Instead, they've argued that general economic growth stuff, such as infrastructure spending, should be enough to put these 4 million people back to work. But the economic literature objects: Fighting vast long-term unemployment with general economic growth policies is like fighting pneumonia with Vitamin C.
So, why aren't even Democrats scrambling to fight for the long-term unemployed?
(3) It's the mind-shifting power of money in politics.
This explanation blames everything about Washington. Money might not buy elections. But it does buy the attention of electeds. It subtly but substantially biases them toward the issues that most concern the rich.
Let's begin with a zoom-out: Winning elections is more expensive than ever. Ironically, that makes it harder to "buy" elections, in the conventional sense, because both sides in marquee elections raise so much cash that each marginal dollar becomes less consequential (principles of inflation apply). But it also means that candidates are required to spend an egregious and unprecedented share of their time getting rich people to donate. Having a Rolodex full of wealthy folks is a prerequisite for winning federal representation. It's also a recipe for having your priorities shaped, if not determined, by hours spent going over rich-guy problems.
"Being a candidate means being a telemarketer for 24 months before an election," Connecticut Sen. Chris Murphy said last week at a conference by the Yale Institution for Social and Policy Studies. But not just any telemarketer. A telemarketer for people with lots of money. After all, it doesn't make much sense to spend your limited time asking jobless families to send you their unemployment insurance.
Murphy's remarks were as critical of the corrosive power of money as they were revealing: Even if money doesn't buy legislators outright, it does buy their legislative focus. Political science backs the claim: As Larry Bartels' 2005 paper on "Economic Inequality and Political Representation" found, Democrats and
Republicans are responsive to middle-class and
high-income constituents much more precisely than the low-income ...
Even if money doesn't always change the outcome of political debates, it shapes what debates we have. We didn't have a debate about whether we should extend the payroll tax in December 2012. But we did have a debate about whether we should raise taxes on families making more than $250,000. Congress didn't vote to cancel the sequester when it learned it would cut unemployment benefits and assistance to low-income households. But it did cancel the FAA cuts when frequent flyers complained about security lines and departure times. Nobody on Capitol Hill is talking about long-term joblessness. We're still debating carried interest and the Volcker Rule.
I'm paid to spend my day reading economic papers and asking people to explain their conclusions. Spending my time this way has persuaded me that long-term unemployment is a national emergency that is both devastating millions of families and making the country permanently poorer.
Politicians have a slightly different information diet. They spend more time gleaning information from lobbyists and rich donors whose concerns and opinions graft themselves onto representatives as easily as the pithiest economists' opinions attach themselves to me. If politicians naturally gravitate to the issues rich folks want to talk about, it doesn't make them bad people. It makes them normal people in a broken system that elevates polarization -- both between parties and between the priorities of high-income and low-income families -- while subtly concealing the issues that most affect Americans who cannot afford a lobbyists' luncheon or a number on a congresswoman's speed-dial.
The centrality of big money in politics makes it nearly impossible for
an issue like long-term unemployment to buy a sliver of mindshare. Our priorities are shaped not only by the stories we choose to believe, but also the stories we happen to hear, from the ideas we give a hearing ...
... Sen. Chris Murphy eventually joined the April 24 meeting on long-term unemployment. He was joined by two more Democrats. Sixteen of the 20 members of the Joint Economic Committee never bothered to show up. National Journal wrote a report. Liberals blogs expressed outrage. But the story quickly died, carried out by the effluence of the media cycle and the frenzied schedule of Washington, its writers, and its representatives. There were so many hearings to attend. There were so many calls to make.
... because women, in general, are much more likely to have gone to college. [Pew Social Trends]
Moms are working as hard as ever -- but they're spending more time in offices than at home ... [Pew]
... as a result, moms and dads are more similar now than ever. For most of the 20th century (and before), parents specialized. Dad worked for money. Mom worked at home. But as female education increased -- and mid-century technology made housework less time-intensive -- moms and dads became less specialized. More moms worked more for money. More dads worked more at home.
The more kids you have, the less likely you are to work. Think of it this way. Each additional child reduces a typical mom's likelihood to be in the workforce by about 5 percentage points, according to 2005 data from the Bureau of Labor Statistics. It is also the case that mothers with infant children are the least likely to work, and participation rates rise as children enter their early teen years. So what we're also seeing in this graph is that the more children you have, the more likely you are to have a very young child whose care is more time-intensive. [BLS]
Middle-class moms are the most likely to be in the labor force. This graph, also from 2005 BLS data, shows that women are most likely to work when their husband's wage puts them in the middle quintile of earners. This speaks to the rise of dual earner households, which has helped middle-income families keep up with inflation as mid-skill work for men has suffered with the decline of manufacturing. [BLS]
Birth rates have fallen tremendously for all education levels ... but, somewhat surprisingly, the drop has been steepest among mothers with less education. [Pew Social Trends]
Childless fortysomethings are a growing reality. Not having kids by your 40s is nearly twice as likely as it was 40 years ago. [Pew]
Single moms are a growing reality, too -- at every income level, every education level, among whites, blacks, and Hispanics. As the New York Times showed, the share of households with married parents has declined for each third of earners. The decline has been especially steep among the poorest third. [NYT]
More births are happening outside of marriage at practically every level. The rise of unwed moms is a cultural and economic mystery that we unpacked here and here, but the big story is that the share of births occurring outside of marriage is increasing across demographic groups ... [NYT]
Marriage is in outright decline at every income level *except* the top five percent. If you're wondering why there are so many unwed moms, the answer isn't that there are so many more babies. As you recall from the top of the post, fertility has declined among most groups. Instead, the answer is that there are fewer marriages. Marriage rates dropped more than 20 percent for the bottom half of female earners since 1970. They have only increased among the richest five percent. High earning women are much more likely to be married than they were 40 years ago. [Hamilton Project]
If you love television, you probably hate the television bundle. And if you hate the television bundle, your favorite person in Washington today is Sen. John McCain. His new legislation, introduced this afternoon, would pressure pay TV operators (i.e.: what you'd call "cable companies") to offer channels on an a la carte basis.
What's not to like about this law? You pay for the channels you want. You don't pay for the channels you don't want. Even the name -- "Television Consumer Freedom Act of 2013" -- is full of utterly unobjectionable words and sounds pretty perfect.
McCain's proposal comes at a rocky time for cable companies. Time Warner Cable and Comcast recently announced shrinking subscriber numbers. Their growing revenue comes mostly from higher cable costs among paying households. Meanwhile, Netflix and Hulu are setting new customer records each quarter. Tensions between media companies (who sell their networks in bundles to cable companies) and cable companies (who sell those network bundles in a megabundle to you, the TV-box owner) are boiling over in a lawsuit between Cablevision and Viacom.
This would appear the perfect occasion for Washington to ride in and slash the Gordian Knot of cable once and for all. But there's a catch -- actually, there are three catches.
First catch: Plausibility. McCain has proposed an a la carte TV plan before, and it was rejected even when he had more friends at the FCC who were vocally supportive of choose-your-own TV in 2006. So temper your optimism.
Second catch: Cost. Most independent studies have found that un-bundling the networks would dramatically raise the price of each individual channel because the networks would have to replace the money lost from being a part of the bundle. "A la carte" is not a synonym here for "vastly cheaper."
Why's that? Your bundle pays each channel in two ways. First, it pays directly. For example, ESPN "costs" about $5 a month; that is, about $5 from every cable bill goes to ESPN. Second, the bundle pays indirectly through advertising. If ESPN is in fewer households (i.e.: only the households that pay directly for ESPN), they'll project less ad revenue. As a result, buying ESPN could cost as much as $20 a month as the company seeks to make up revenue in the interim. Even if you don't watch ESPN, you'll still have to pay more per channel that you do today because of the economics of bundling and the dual-revenue model for networks.
On the bright side for consumers, perhaps you could see the dissolution of the cable bundle squeezing networks and programming costs and show budgets, leading to a deceleration of overall TV costs. But if customers had to pay more than expected for individuals channels, it's hard to know if they would view these savings as a bargain or just a less-for-less exchange.
Third catch: Logistics. Let's talk about something really practical. How many times a year could you switch your channel line-up? Once a year? Four times a year? It's a serious question.
Let's say you don't want A&E on its own. Sounds sensible. Then a show like "Duck Dynasty," one of the biggest hits in cable history, debuts and suddenly you want A&E. 'Easy,' you say, 'I'll just subscribe to A&E for a few months and cancel after Duck Dynasty is over.' But that just won't do. Channels like AMC won't survive if a handful of people only sign up for the few weeks that 'Mad Men' is airing. A la carte sounds like a pain-free option, but 100 million households adding and dropping channels mid-year is a recipe for a logistical and strategic disaster for the industry.
The television business is changing already. But the change is mostly additive. SNL Kagan estimated that pay-TV subs grew through 2012, even as Netflix and Hulu had historic years. TV might get smaller and more customizable sometime in the near future. But in the nearest future, the total TV megabundle -- cable + Netflix + Hulu Plus etc. -- is just getting bigger, and McCain's plan, which would introduce headaches for consumers and providers alike, probably isn't going to have a shot at changing anything.
Elevated and lasting unemployment is an awful thing, anywhere, and for anyone. But it is awful in a special way for young people, cutting them off from networks and starting salaries at the moment they need to forge connections and begin to cobble together a career.
A new study from the International Labor Organization takes a global tour of youth joblessness and finds that what's gone up won't come down in the next five years. The youth unemployment rate* among the richest countries is projected to flat-line, rather than fall, before 2018. As a result, the global Millennial generation could be uniquely scarred by the economic downturn. Research by Lisa Kahn has showed that people graduating into a recession have typically faced a lifetime of lower wages.
As Ritchie King from Quartz shows in the graph to the left, it's now "harder for a teenager or young adult to find a job in developed economies than in Sub-Saharan Africa."
Lurking under the rise of youth unemployment among the richest countries is an even scarier trend -- the rise of long-term youth unemployment. Long-term unemployment isn't just a difference in length; it's a difference in kind, because the more time you spend out of a company, the less likely you are to be hired back into one. In many European countries, particularly Spain, the increase in unemployment has come almost exclusively from people being out of work longer than two-years. In advanced economies, "longterm unemployment has arrived as an unexpected tax on the current generation of youth," ILO writes. About half of Europe's unemployed youth have been out of work for more than six months, according to 2011 data.
Three final takeaways:
(1) The lowest youth unemployment rate in ILO's database in 2012 was Switzerland, at 6.2 percent. The highest was Greece, at 54.2 percent.
(2) The worst stat in the report? It might be the youth unemployment rate for Greek women, at an astonishing 62.1 percent. (Given the prevalence of part-time work for women across Europe, the U6-type underemployment rate could be significantly higher.)
(3) The incredibly low unemployment rate in Germany -- just 8.2 percent, half the rate of the United States, and nearly a third the rate of the euro zone (22.6 percent) -- stands as one of any number of statistics that makes a mockery of Europe's economic union project.
* Statistical Wonkery Note: There are different definitions of "youth" and "unemployment" around the world, but the ILO calculates youth unemployment as the share of 15-24-year olds in the labor force (working/looking for work) who do not report to be working at all.
This is not to be confused with the employment-population ratio, which has fallen around the world since 2007 not only because of higher unemployment, but also because of higher school attendance.
Other ILO categories include NEET (Not Employed, or in Education or Training) and "labor underutilization" (a broader definition of underemployment that includes young people with "irregular, poor-quality, low wage jobs").
If you equate great stocks with great companies, then you probably consider AOL one of the great tech companies of the last two years. Named the hottest tech stock of 2012, AOL has in the last year outperformed Google, Microsoft, and (of course) Apple, as you can see in the chart below ... [AOL is blue; Google in green; Microsoft in yellow; Apple in red]
But as AOL's earnings today show, the company remains the most confounding ostensibly "successful" tech firm of our time.
You probably know AOL as a conglomeration of websites that presumably make money by selling advertising next to their articles. But in fact, AOL as a media company is constant money-loser. It lost $17 million advertising on its fleet of sites -- AOL.com, Huffington Post, Moviefone -- in the first quarter of 2012 and another $5 million in the first three months of this year.
So, as a business proposition, AOL is a media company -- an ad company -- with diminishing losses. But as a profit-making business, AOL isn't a media company, or an advertising company, at all. It's a vestigial subscriptions business gleaning cash from people who haven't graduated from the era of pshhhkkkrrrrkakingkakingkakingtshchch*ding*ding*ding".
Earnings filed under the "membership," which includes $168 million in subscriptions plus revenue associated with services like AIM, accounts for more than 100 percent of the company's profit, just as it has for years. As Peter Kafka notes, this is both mind-boggling and not even close to being news.
The financial press often equates short-term stock performance with the quality of a company and its leadership. Facebook was considered a pretty sensational invention led by a tech visionary, until it went public and its stock sank and the argument over its value could be reduced to a stock price figure and its quarterly decline. AOL is perhaps the opposite: a company treated with derision that has, in the past 18 months, outperformed most of its peers. It's done so by limiting losses in a terribly unattractive business (massive digital advertising paired with expensive original journalism) while holding on to inevitable and demographically determined losses in online subscriptions, its only money-making sector.
Great company? I guess. If you own stock.
Remember the sharing economy? Maybe you don't. Or, maybe you're still living in it.
This was the idea that, in the embers of the Great Recession, people were giving up owning things -- spaces to live, cars to drive, clothes to wear, appliances to use, entertainment to consume -- and building better ways to share fewer resources for a cheaper price. This was bigger than hippie-nomics come to life. It was the idea that the Internet had connected us all, creating a world of inventory that could be shared and discounted with greater ease than ever.
In November 2011, five days after Groupon went public in the largest Internet IPO since Google, I profiled a Washington, D.C., investment firm founded by Steve Case called Revolution. Case, the founder of America Online, told me that when he started the new firm in 2003, he wanted to get back to "attacking" legacy industries. When I profiled the company, I found that most of the "attack" strategies fit snugly in the category of "sharing."
One year after he started Revolution, the firm had acquired a vacation-home sharing company. A few years later, it invested in and helped to build Zipcar, the largest car-sharing company in the U.S. It then backed LivingSocial, an online social commerce company whose explosive growth made it something like "the next Groupon."
That was in 2011.
Today, however, something like "the next Groupon" is a curse, not a blessing. A years after being anointed the "fastest growing company of all time," Groupon's stock had fallen 90 percent by the end of 2012, the press regarded the business model like something between an un-scalable proposition and a Ponzi scheme. LivingSocial has followed the daily deals market down the mountain, as well: In February this year, its market cap had reportedly fallen 75 percent from its all-time high.
But not all hallmarks of the sharing economy have collapsed. This year Zipcar reported before it was acquired by Avis. Legacy car companies are publicly spooked by Zipcar, and Airbnb stands to pose a legitimate threat in the travel business.
Today I spoke with Ted Leonsis, the co-CEO of Groupon and a partner at Revolution Growth, and Steve Griffith, the former CEO of Zipcar, at New York Ideas, a conference hosted by The Atlantic and the Aspen Institute. I said that I saw the sharing economy as powered by two engines. The first, mobile access that encourages peer-to-peer sharing, will keep growing. The second, a weak economy that encourages cheap consumer behavior, will (hopefully) keep abating. Caught between both forces, would the sharing economy stall?
Both Leonsis and Griffith expressed optimism for their businesses (predictably), but Griffith had better reasons to be optimistic. Groupon and LivingSocial aren't struggling because they have poor management. They're struggling because the profit margin from the daily discount business appears to be significantly smaller than everybody thought two years ago. There are many possible reasons why: consumers are making more money; the daily deluge of discount emails is annoying; stores have discovered that their miniscule cut of the deal wasn't worth the extra traffic; they're losing old markets faster than they're building markets.
Meanwhile, businesses that share cars and space are playing with a tailwind. Even after Millennials begin to recover, they are still more likely than their parents to live in dense cities. That means that, even if they do buy a housing unit and a car, they're likely to buy a smaller unit and fewer cars. The ideal Zipcar customer isn't just a poor college kid, but rather something far more common: a young urban professional who likes exercising and values flexibility and savings over a vehicle.
Companies that burst into the mainstream together sometimes get lumped together, and I certainly considered the Zipcar and LivingSocial part of the same Web 3.0 revolution. But with time and perspective, the sharing economy hasn't taken over quite the way we thought it would. Instead, its resilience has been spiky.
How is this recovery different from all other recoveries?
every other recession since the early 1970s, government employment grew. In the four years following the end of the Great Recession, government jobs got the guillotine.
You can see the specialness of our recovery in this compelling graph produced by the Hamilton Project, comparing government employment changes in the four years of recovery after the last six recessions. Since 1970, government employment increased by an average of 1.7 million following a recession. After the Great Recession, government employment has fallen by more than 500,000.
"The policy differences
have led to 2.2 million fewer jobs today," Michael Greenstone and Adam Looney write. With 2.2 million more government workers now, assuming the same labor force size, the unemployment rate wouldn't be 7.7 percent. It would be 6.3 percent.
That doesn't mean the "real" unemployment rate is 6.3 percent. It doesn't mean state and local governments should be 2.2 million workers flusher. But it highlights the fact that, in terms of U.S. government responses to recessions, this time is different.
Whatever you think of Rogart, Reinhart, and the art of highlighting Excel boxes, it's intuitive that expansionary public spending (including on people) following a private sector meltdown are useful to help the economy catch up to trend-line growth. But rather than Washington leading the still-weak economy, the cart has led the horse, with the private sector adding roughly 2.2 million jobs over the past year while state, local, and federal governments have shed more than 90,000 jobs.
And that's before the full effects of sequester, which will cut jobs, total spending, and growth from a recovery that needs more jobs, more total spending, and more growth.
The government pull-back is even more striking placed in historical context. The ratio of government jobs to total population has fallen to a 50-year low and will continue to fall throughout the year under current law.
Twitter is making us weird, and gaming is making us anti-social, and Facebook is making us lonely, so it couldn't possibly be the case this ineffable and unwieldy force called Internet could be leading to more marriages. Right?
Actually, that's precisely the conclusion from Andriana Bellou's new paper, "The Impact of Internet Diffusion on Marriage Rates: Evidence from the Broadband Market." Bellou doesn't just find a correlation between broadband adoption and rising marriage rates. She also finds that marriage rates among twentysomethings rose significantly in areas after broadband became available, suggesting a causal link.
Skeptical? So was I. Broadband access has been growing across the country for the last 20 years. Marriages, meanwhile, have been in decline. The century-long story on marriage rates, via Betsey Stevenson and Justin Wolfers, conclusively shows marriage rates (in the light purple) declining since the 1970s.
Bellou herself finds young twentysomethings less likely to marry in 2000 than they were in 1980, or '85, or '90, or '95. Here's that graph:
Furthermore, if high-income areas are more likely to have broadband access anyway, that could skew the results toward their conclusion. High-income women are the *only* group of women likely to be married today than they were in the 1970s, according to the Hamilton Project.
Still, Bellou finds that Internet expansion is clearly associated with increased marriage rates among twentysomething whites and among younger individuals other racial groups. Her graph shows "marriage rates grew on average more in states with greater increases in broadband penetration."
There you have it. Even though there are fewer marriages per thousand and more broadband than ever, it is still somehow possible that expanded broadband could lead to more marriages, presumably by making it easier to find suitable singles on the Internet.
In a footnote, Bellou buries a fascinating thought. Does the Internet make the marriage market better, or just more efficient? There's a big difference!
If targeted search leads to matches of more compatible people, such matches will likely be more stable. However, if meeting people becomes easier at all times and ages so that a divorce seems less costly, then this could imply entering a marriage less thoughtfully to begin with. In the latter case, we might expect higher marriage rates (related to Internet expansion) but also higher incidence of divorce.
We don't yet know if the Internet's effect on marriages is to help us find The One Thing we're looking for (i.e.: the Google Effect) or if its ultimate gift is to make us more fully aware of our universe of options (i.e.: the YouTube Effect). Both could lead to more long-term happiness, I suppose. But the latter would lead to such happiness through an explosion in divorce rates. That alone would reverse a longish-term trend of its own: divorces per thousand people have also been falling for the last 30 years. The Internet might have saved marriage, but the Web has plenty of time to destroy it, too.
In a landmark study of Oregon's Medicaid patients, the results section begins ominously: "We found no significant effect of Medicaid coverage on the prevalence or diagnosis of hypertension or high cholesterol levels or on the use of medication for these conditions."
Uh oh. Does that mean Medicaid doesn't work? Does that mean Obamacare, which expands Medicaid, is doomed? Hold your horses.
A Mixed Finding, in Every Way
The very fact the Oregon study is considered one of the most important public policy studies of the decade is a mixed blessing for Oregon and health care wonks. The bad news (for Oregon) is that the state only had enough money to expand Medicaid coverage to a few needy families, so it did so randomly, by lottery. The good news (for wonks) is that this created the perfect conditions for a random controlled trial to determine whether Medicaid actually improved health outcomes for those lucky few.
And the results? They were mixed blessings, as well. Families randomly-selected for Medicaid spent more on health care, saw more doctors, and received more preventative care. But they weren't measurably healthier judging by blood pressure or blood sugar. Still, they were far less likely to report depression and far more likely to be financially secure.
I'm willing to bet that your reaction to these findings -- and mine -- will be determined by two things: (1) your prior opinions about Obamacare, Medicaid, and the importance of expanding health access; and (2) your deeper views on what health insurance is for. People don't like to change their mind, and based on my reading of WonkWorld's reaction to this study, practically nobody has.
But the more interesting question to me coming out of the report is the most basic one: What the point of government health insurance?
Medicaid and Health
The most obvious answer to the question would be that health insurance is for health -- like car insurance is for cars, or home insurance is for homes. So Oregon's results come as something of a shock.
But there are a few mitigating factors. First, improvements in mental health "are still improvements in health," as Aaron Carroll and Austin Frakt write. One hardly needs to elaborate on the importance of mental health in the wake of Newtown.
Second, among the randomly selected Medicaid population, the researchers actually observed fewer patients with high blood pressure; more patients on hypertension meds; fewer people with diabetes; and fewer people with high total cholesterol. Medicaid improved numbers in all of these categories, but the results were not statistically significant.
I'm not trying to sugar-coat finding that should be disappointing to every health care access advocate. But there is a big difference between (a) a study conclusively showing Medicaid doesn't improve health, and (b) a study showing Medicaid's health improvements aren't statistically significant.
And that's enough on confidence intervals for today.
Medicaid and Poverty
Medicaid didn't conclusively protect people from diabetes. It did conclusively protect people from financial ruin. The most important positive finding from the study was that the share of Oregonians on Medicaid who faced out-of-pocket medical expenses exceeding 30 percent of their income fell from 5.5 percent to 1 percent.
This point can scarcely be understated. Beyond keeping us safe from attack, the primary role of modern government is to keep its citizens safe from poverty -- poverty from circumstance, poverty from retirement, and poverty from medical bankruptcy. Social Security, Medicare, Medicaid, income security, unemployment benefits, and veterans benefits .... these programs, and their close relatives, make up about two-thirds of the federal budget (not to mention a majority of practically every advanced country's budget in the world). All these functions can be seen as insurance. They take money from Americans, pooling risk from 150+ million families, and distributing the funds to protect at-risk families from financial shocks.
Successful government programs successfully fight poverty. Consider Social Security, which smooths consumption and provides a safety net for retired Americans. A paper from Gary Engelhardt and Jonathan Gruber found that Social Security benefits accounted for the entire 17-point decline in elderly poverty between 1967 and 2000.
Health insurance should provide similar protection. "The primary purpose of health insurance is to protect you financially in event of a catastrophic medical shock," Amy Finkelstein, an author of the study, told Jonathan Cohn in an interview, "in the same way that the primary purpose of auto insurance or fire insurance is to provide you money in case you've lost something of value."If we want to improve the way we spend money to improve health outcomes and alleviate poverty, we should compare Medicaid to money rather than compare Medicaid to nothing. As Matt Yglesias writes, the most useful random study would pit $1,000 in Medicaid against $1,000 in cold hard cash and see what happens. I tend to think government's purchasing power in the health care market is not only useful, but essential, since its "consumers" aren't really consumers at all, but rather patients who need protection and bargaining power. But who knows. Just because the U.S. federal government is the best insurance company in the world doesn't make it the perfect insurance company for everything.
May Day means many things is many people. For pagans, it's a day to dress a maypole. For unions, it's a day to reminisce. For Russians, it's complicated. For us, it's an excuse to answer an impossible and important question on International Worker's Day: What policy would do the most to help international workers?Reasonable people can disagree on an answer to this big question, but I don't think it's even close. The most important pro-worker policy in the world is clearly giving women access to better education.
In troubled economies, educated women are still vulnerable (in most Middle Eastern countries, even educated women are more likely to be unemployed than men). In advanced economies, they still struggle for life-balance (a 2007 Korea study found that,
for 60 percent of the women surveyed, "child rearing was the biggest
obstacle to participating in the labor force").
Lapham's Quarterly has a great print-and-paste matrix:
... and a sensationally amusing matrix, it is. ("Banquet attendant" might be the most ingenious vocational euphemism in human history.) But I don't want to leave this alone without pointing out that of course there are more dangerous and disgusting jobs -- such as, for example, gladiators, or even the world's oldest profession -- whose day-to-day is probably worse than hunting through bogs for oil.
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