Monday, July 29, 2013

WNYC covers rent regulations

Adam Davidson, appearing on WNYC's morning "Brian Lehrer Show" discussion program, gave his strongest argument for rent deregulation without any analysis at all. Instead, he appeals to authority: economists on all sides agree that rent regulations are bad for the housing market and harm the middle class. 

True, economists agree on across-the-board rent regulations, but that's not New York's model. New units in NYC are not required to be regulated, so rent regulations here incentivize new construction. Deregulation would remove that incentive since raising rents and evicting tenants are cheaper and easier than construction. The New York model is actually healthy for the market.

Davidson refers to one economist, Christopher Mayer, but Mayer completely forgets that deregulated tenants don't simply disappear from the rental pool. If they have to vacate, they move from upscale neighborhoods into middle class neighborhoods and create a tighter market, raising rents there. So deregulation will hurt the middle class especially. In aggregate: 
deregulation = same # of units, same # of renters, just more wages going into rent, a windfall for landlords and no incentive to construct or ever ease the market. 

A land tax would help, tagged to upzonings in selected neighborhoods that can withstand increased development. 

Wednesday, July 24, 2013

The Times at it again

Rent regs in the Times again. Amazing to me that they can print baldfaced lies. 

This was empirically studied in Boston:  when rents were deregulated, all rents rose. 

Mayer's key assumption is false. When the deregulated renters vacate, they don't disappear -- they have jobs and family in the city. They move to cheaper neighborhoods where their numbers create a much tighter market in those lower-income neighborhoods, raising rents, displacing more renters who in turn move down the ladder creating a tighter market down the line.

So deregulation would raise rents steeply for the middle class and those below. The highest renters alone might get a break. Deregulation is a win for landlords and maybe the wealthiest renters, a lose for everyone else. 

Building new units will increase supply and ease market rates. Since new units are not required to be regulated in New York, our rent regulations incentivize new unit construction. Deregulation would end that incentive: raising rents and evicting tenants are cheaper than building new housing. Deregulation will likely raise rents steeply across the board while tightening the market even more, driving the middle class out to the further reaches of the metro area. Deregulation is a gift to landlords at the expense of nearly everyone else.

NYC's rent regulations are healthy for its housing market except it's deeply unfair for new arrivals. The state should really get back into housing of all kinds -- upscale to low -- using the upscale housing to finance the rest.

Thursday, July 11, 2013

The future of government policy-making and the danger of giant global capital mobility

Walmart threatened to leave DC if their mayor signs the council's living wage bill. 

Chain store influencing public policy -- when does a chain store become too big to displease? It's the neoliberal dreamstate -- government of, by and for the corporate person. In the piece, Marion Barry called it "a stick-up." 

Walmart argues that raising the minimum wage will drive employers away, causing unemployment. But raising wages also boosts demand, creating more employment. Card and Kreuger's classic survey showed that minimum wage raises actually increased employment. Even more interesting, Neumark and Wascher showed disemployment effects only in large fast food stores, with a rise in employment among small restaurants.  

You can see what's going on. The large corporations disinvest because they are more mobile. They can leave a state with higher wages for a state with lower wages. Small owners are not as mobile, so they are stuck with the higher wages, but eventually reap the benefits of greater demand! 

And you can see where this is going. Walmart has already stated that it will disinvest, regardless of greater demand. After all, Walmart depends on low-wage bargain hunters. If wages rise significantly, the higher demand might not be good for their bottom-end offerings. Walmart has an interest not only in low wages to keep their pricing down, but also to maintain its low-income market demand. They promote themselves as offering low prices, but actually they are in the business of creating low incomes to feed their own market. And its model doesn't move upward as it grows. It grows by spreading the bottom. It's an impoverishment model. Their corporate goal is to vastly increase the bottom.

The DC living wage might have been a test case to see the efffects of demand vs employment cost-cutting, but by stating its intention to leave, Walmart shows up front that it will bias the results. So if employment declines, everyone can blame it on Walmart's political ploy.

Capital mobility is another reason to be wary of the neoliberal giant global corporation. Small businesses have to take the pain. Ironically, they also reap the benefit. 

But what's more shocking than the impoverishment model that Walmart is admitting to here, is Walmart's threat to public policy-making. When will corporations become so big that we can't say 'no' to them ever again? Think of the consequences for food (Monsanto), the environment, fracking -- it's not just about wages. It's the entire fabric of life. 

Tuesday, July 09, 2013

Reading incomprehension

Apparently 7-Eleven Corporation worries that its foreign ownership will impair its public image among Americans, according to unhappyfranchisee, a website that monitors franchises. I had to laugh.

The corporation is Japanese-owned, but here it promotes its national corporate headquarters in Texas. Now, given a choice between Japanese ownership and Texan, any New Yorker would choose Japan over Texas, unhesitatingly. New Yorkers, cosmopolitan to the core, all seem to partake of some Nipponophilia. We admire Japanese art, respect its religion, envy its corporate management style and we can't seem to get enough of its cuisine. Texas, with its gun culture, executions, religious fundamentalism, its flag-waving, anti-Darwinist textbook industry, its wealth, growth and political influence, inspires us with something between dread and terror. We even deplore its unhealthy cuisine. Texas is the anti-New York. Texas art?

It's a measure of just how distant 7-Eleven is from New York that it plays down its Japanese ownership. Not that it matters: even if it promoted itself as an efficient, streamlined, innovative minimalist Zen-like Japanese import, it wouldn't make their corporate packaged foodstuffs more palatable.

Saturday, July 06, 2013

The role of the Fed

At a recent Occupy Alt Bank (Occupy's Alternative Banking think tank) there was this exchange. 

'Banks find ways to skirt any regulation whatsoever," said one member.

"Jailing the CEOs will curtail their risk behavior," replied another.

I wondered: "They can't be jailed for skirting the law unless they break it. But there is a way to curtail risk outside regulation and law entirely -- the Fed." 

Both Barry Eichengreen and George Cooper, independently and from different political perspectives, came to the same conclusion, and even Greenspan in effect admited this: the Fed encourages risk through stabilizing the economy, broadcasting its intentions to keep the money flowing. If the Fed (I know, I know, it's counterintuitive and sounds just awful) were less transparent, played its cards closer to its chest, and threatened to tighten money suddenly and by surprise, letting a few excessively risky institutions fall off the cliff, the banks would learn a piece of Old Testament Fear of the Fed. The threat itself might suffice after one example. It'd have an effect similar to jailing CEO's, but without the need for a law, a court, prosecution, evidence or lawyers. Of course, you wouldn't want the Fed to try this now in the midst of a recession, but during flush times. 

Stiglitz has complained about this as well -- the Fed used interest rates to prevent business cycle downturns, encouraging risk.

The Fed has no oversight, so you can't even effectively lobby them. But it might help for the public to know this stuff and for Occupy to stake out a position.

Alt Bank is producing a book on breaking up the banks. I'm disappointed that they're not including a chapter on the Fed. Including a brief history of its failure in the Great Depression, Volcker's success stemming inflation, and Greenspan's questionable use of rates (in light of the flagging US export economy and the Fed's encouragement to shift to a financial economy -- another issue that should be addressed) would lead to a couple of recommendations: less Fed transparency and yet more oversight and accountability. Difficult to juggle those two...

Yet another chain store scam

Chains like McDonalds and Walgreen's have replaced their employees' paycheck with a prepaid ATM/debit card, generating fees that eat up the already close-to-minimum-wages.

Chain stores screw their employees again. This time it's a collusion with banks. It's as if the corporate headquarters have no conception at all of a low wage or ATM/Credit card abuse. Just disgusting.