Relevant and even prescient commentary on news, politics and the economy.

Fast-Food Fight….reader Denis offers some pointers

Reader Denis Drew writes (lifted from comments) :

The bottom 50% of America’s workforce now takes 12% of overall income. If the federal minimum wage is raised to $15/hr that will add 3.6% direct inflation.

$15/hr being today’s median wage, half the workforce, 70 million employees receiving an average $8,000/yr raise would add $560 billion to the cost of $15.8 trillion dollar economic output = only 3.6%.

It is hard to believe that the products and services produced by half of the American workforce (70 million people!) would no longer be in demand over a 3.6% increase in overall prices.

+++++++++++

Reader Denis Drew points us to think about an American institution, food, and wages…maybe much more elastic than we pretend (lifted from comments).  McDo in France via  Slate Magazine shows us some innovation is possible.  Much more after the fold:

It may surprise some, but McDonald’s France—called MacDo by the locals—is the highest-grossing McDonald’s market outside of the United States (despite the fact that worker pay, a recent source of controversy in the United States, starts around $12 an hour—France’s minimum wage) …. If McDonald’s has found success in France, it’s because in many ways it has become the anti-McDonald’s: The service is warm, the interiors thoughtfully designed, and, above all, the food—from the baguette vessels to the pain au chocolat to the camembert-swaddled patties—is made for French palates. (italics are mine)

Before you book a two-top for Friday night, remember that this is still fast-food: The beef, while grass-fed and hormone-free, still comes from an industrial cattle lot, the lettuce still wilts under the glare of a heat lamp, the tomatoes are redolent of, well, nothing in particular. While you’re here, you’re not likely to forget that you’re eating at a multinational chain restaurant, but with enough macaroons and Camembert in your belly, it may just soften your opinion of the golden goliath.

The secret sauce at McDonald’s used to be lockstep consistency, the fact that a meal in Memphis tasted the same as it did in Moscow or Madrid. But the novelty of the American hamburger stand has worn off in the new millennium, and with it McDonald’s ability to export American culture as its staple commodity. A cheeseburger, fries, and Coke don’t register the same level of excitement when the café next door and the bistro down the block are also serving burgers. More and more, the key to McDonald’s future appears to be found in the DNA of the places it inhabits. And with it, suddenly the fast-food giant that to many represents the globalization of taste suddenly finds itself in a very unlikely position: as a defender of local cuisine.

And also from the THE EDITORIAL BOARD New York Times yesterday:

Fast Food Fight

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Part Time Employment and the Sequester

Part of the reason employment and hours worked, in particular, have been so weak in early 2013 is the rapid growth of part-time employment. Part time employment is volatile and subject to many influences.  From December to June part time employment rose 589,000.  That is a 2.2% — almost 5% annualized – growth rate. Part time employment jumped from 18.4 % of total employment in December  to 19.0% in July.

The unusually large increase in part time employment is due  almost exclusively to the sequester.  For example, at the Department of Defense (DOD) some 650,000 civilians must take 11 days off in the second and third quarters. They have 26 weeks, but after adjusting for federal holidays, vacations, sick leave, etc., the effective  time is 22 weeks. This works out that DOD employees must take an involuntary, unpaid day-off every other week. Consequently, on any given week about half of the DOD civilian workers (325,000) became part time employees.  That is 55% of the 589,000 jump in part time employment in the first half of 2013..

But the sequester is impacting all federal employees and is spreading to federal contractors.  Total federal civilian employment is 2,760,000.  If half are now part time workers that would be 1,380,000, or 134% of the 589,000 jump in part time employment. Even if only 25% of non-DOD federal civilian workers are now part time, it would still mean that the sequester is converting over a million jobs into part-time work.

 

 

 

 

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"pensioners: 17 cents on the $; BoA, UBS 75 cents on the $"

Detroit Said to Reduce Swaps Debt by 25% in Deal With Banks . The swaps were a “bet” on the direction of interest rates. With the decline of variable interest rates, Detroit found itself owing to the banks. With the decreased credit rating to B2, the same as AIG, Detroit found itself at the mercy of the banks who demanded their money. Except, there was no President of Congress moving quickly with legislation to establish a fund like TARP did for AIG. Nor did the Fed establish the city as a Bank or buy up its municipals. Even the state of Michigan did little to help the cash strapped city.  When the first Michigan Emergency Manager Act was struck down, the Republican dominated legislature reacted quickly, far quicker than voting on the expansion of Medicaid (one year has passed since SCOTUS ruled on the PPACA); but then, this is TBTF and business we are talking about and not ~ 450,000 constituents living with incomes less than FPL. With little delay, the legislature passed a new Emergency Manager Act, Public Act 436 giving derivatives such as the Interest Rate Swaps top priority similar to what the Federal 2005 Financial Services Modernization Act did. Public Act 436 goes as far as to supersede payments to pensioners and child support payments.

Sec. 11. (1) An emergency manager shall develop and may amend a written financial and operating plan for the local government. The plan shall have the objectives of assuring that the local government is able to provide or cause to be provided governmental services essential to the public health, safety, and welfare and assuring the fiscal accountability of the local government. The financial and operating plan shall provide for all of the following:

(a) Conducting all aspects of the operations of the local government within the resources available according to the emergency manager’s revenue estimate.

(b) The payment in full of the scheduled debt service requirements on all bonds, notes, and municipal securities of the local government, contract obligations in anticipation of which bonds, notes, and municipal securities are issued, and all other uncontested legal obligations. [ As written by a Republican legislature and signed into law by a moderate Republican, Governor Rick Snyder]

Besides awarding derivative holders and bank first in line status, the Republican State Legislature also took it upon themselves to make sure Public Act 436 can not be overturned through voter referendum. Governor Rick Snyder wasted no time in signing the bill.

The winners in the Detroit crisis are the banks who have reaped $millions in fees, avoided property taxes on partially foreclosed properties (the foreclosures were never completed after driving the owners out of the houses and left the uninformed former mortgage holders on the hook for back taxes), and moved to the front of the line of Detroit debt holders. Typically these Interest Rate swaps are of the variable interest rate variety and are often exchanged for fixed rate through the Swaps. When the Fed drove down the variable interest rates, cities found themselves on the hook for the higher fixed rates. Many of the Swaps are also tied to the London Interbank Offered Rate (LIBOR) which was being manipulated by the largest banks. As a result, the banks owe little due to low variable rates and the cities are on the hook for higher fixed rate costs. Just a measly $1.4 billion of the $3.8 billion Interest Swaps tied to Detroit Pension Funds to which pensioners are being asked to accept far less than what banks are being asked to accept.

The losers?  Retirees who have pensions covered by the Interest Swaps. Workers who took and will take wage cuts. Detroit with thousands of partially foreclosed vacant houses which property taxes can not be collected on from the former owners or the banks. The state of Michigan; it will have a black eye for doing little to help the abandoned city over the decades. Without it and its trade with the US largest trading partner Canada, the state would be little more than a large vegetable farm. Banks may take a trim around the ears; but, it will not be anywhere as severe as the haircut the pensioners and workers will have taken when all is sorted out.

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State Run and Free Healthcare Clinics ? ? ?

“For goodness sakes, of course the employees and the retirees like it, it’s free,” says Republican State Sen. Dave Lewis.

11,000 Helena state employees, retirees, and dependents now go to a state run healthcare clinic which is free. No co-pays, no deductibles, doctors are salaried, wait time is a few minutes, and visits are up 75%. Of course, the skepticism is high:

“I thought it was just the goofiest idea”

“If they’re taking money out of the hospital’s pocket, the hospital’s raising the price on other things to offset that,” Lewis suggests . . .

He (Lewis) and others faulted then-Gov. Brian Schweitzer for moving ahead with the clinic last year without approval of the state legislature, although it was not needed.

One year has passed and what about today’s feelings ?

“They’re wonderful people, they do a great job, but as a legislator, I wonder how in the heck we can pay for it very long,” Lewis says. (me)Someone changed his mind.

– division manager Russ Hill says it’s actually costing the state $1,500,000 less for healthcare than before the clinic opened. (me) Sounds like it will fund itself in the end.

“Because there’s no markup, our cost per visit is lower than in a private fee-for-service environment,” Hill says.

Some of this may not sit well with physicians; but, why the big difference ? ? ?

Physicians are paid by the hour, not by the number of procedures they prescribe like many in the private sector. The state is able to buy supplies at lower prices.

Bottom line: a patient’s visit to the employee health clinic costs the state about half what it would cost if that patient went to a private doctor. And because it’s free to patients, hundreds of people have come in who had not seen a doctor for at least two years.

Hill says the facility is catching a lot, including 600 people who have diabetes, 1,300 people with high cholesterol, 1,600 people with high blood pressure and 2,600 patients diagnosed as obese. Treating these conditions early could avoid heart attacks, amputations, or other expensive hospital visits down the line, saving the state more money. and lower costs over all in the end (me).

– That personal attention has proved valuable for library technician Pamela Weitz. A mammogram late last year found a lump. “That doctor called me like three or four times, and I had like three letters from the clinic reminding me, ‘You can’t let this go, you’ve got to follow up on it,’ ” she says.

This is what is meant by improved quality and better outcomes from healthcare as opposed to a services for fees scenario.The patients appear to be happier as well as the doctors employed by the state run clinic.

– Clinic operations director and physician’s assistant Jimmie Barnwell says this model feels more rewarding to him. “Having those barriers of time and money taken out of the way are a big part [of what gets] people to come into the clinic. But then, when they come into the clinic, they get a lot of face time with the nurses and the doctors,” Barnwell says

Maybe it is a fluke; but at least, one state tried it with what appears to be good results. I live in Michigan where the state Repubs have been haggling with the teacher and state employee’s unions over paying for healthcare insurance. I could see this model working here for both groups as well as Detroit workers and retirees where the city is seeking to end it for retirees and cut it for workers. In the end, it appears it could save Michigan and Detroit money which is sorely needed in “some” cases. It is interesting a state which is 50-50 in politics appears to have found a way out of the healthcare cost and insurance quagmire. Montana’s State-Run Free Clinic Sees Early Success

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Watch for testimony on NSA surveillance

Glenn Greenwald offers his thoughts on the issue of NSA surveillance:

On Wednesday morning, I’ll be testifying, by remote video, before an ad hoc committee in the House of Representatives about NSA disclosures. It begins at 9:30 am ET and will, I believe, be broadcast on C-SPAN. Following my testimony will be an excellent panel featuring representatives of the ACLU and the Cato Institute on the dangers and excesses of the NSA.

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Added information to the context for NSA legislation

Wired points to lawsuits fizzling so far, but also more secrecy and claims it is off limits to courts.

The Obama administration for the first time responded to a Spygate lawsuit, telling a federal judge the wholesale vacuuming up of all phone-call metadata in the United States is in the “public interest,” does not breach the constitutional rights of Americans and cannot be challenged in a court of law.

Thursday’s response marks the first time the administration has officially answered one of at least four lawsuits challenging the constitutionality of a secret U.S. snooping program the Guardian newspaper disclosed last month. The administration’s filing sets the stage for what is to be a lengthy legal odyssey — one likely to outlive the Obama presidency — that will define the privacy rights of Americans for years to come.

By the numbers also from Wired.

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National Security at Any Cost

We do have Fourth Amendment Rights. Fourth Amendment Rights are for everyone: Tea Partiers, Republicans, Democrats, Independents…. The Obama administration is moving us step by step towards a totalitarian regime, where the interests of the few over-ride the democracy of the many. Read the Fourth Amendment carefully:

The right of the people to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, or the things to be seized.

Those who plead National Security at all costs are no different and no less dangerous that Joseph McCarthy. He, too, pleaded National Security, as he destroyed countless lives and reputations. Nor are those who plead National Security at all costs any different from J. Edgar Hoover who spied on Martin Luther King in the name of National Security.

Do you really think that the kind of free hand the NSA is asking will protect us from the likes of McCarthy and J. Edgar Hoover? I do not think so.

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Round and around the revolving door does spin…

Lifted from comments from open thread July 23 by reader Jack

Round and around the revolving door does spin. Those who take the ride are 
guaranteed to win, in the game of securities enforcement law. In yet another 
move between public and private practice John Khuzami moves from the SEC to “….a 
job that pays more than $5 million a year at Kirkland & Ellis, one of the 
nation’s biggest corporate law firms. In doing so, he is following the 
quintessential Washington script: an influential government insider becoming a 
paid advocate for industries he once policed.” NY Times, July 23, 2013. 
http://dealbook.nytimes.com/2013/07/22/a-legal-bane-of-wall-street-switches-sides/?hpw

Quote:
    
    “We started out knowing that everybody and anybody wanted him,” said Mark 
Filip, who leads Kirkland’s government and regulatory defense group.”
    Mr. Khuzami’s skills were so sought after that “…Visa and Bridgewater, the 
giant hedge fund, were among the companies that approached Mr. Khuzami for 
in-house counsel jobs. The fervor grew so great that Fox Business declared it 
the “biggest bidding war on Wall Street.”

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Say it like it is?

Via the Washington Post comes some interesting language.

Employers are raising education requirements even for entry-level positions.

Thirty-two percent of hiring managers and human resource professionals said they are hiring more employees with college degrees for positions that were historically held by high school graduates, according to a survey by CareerBuilder.

“While some of this may be attributed to a competitive job market that lends itself to college grads taking lower skill jobs, it also speaks to companies raising performance expectations for roles within their firms to enhance overall productivity, product quality and sales,” said Brent Rasmussen, president of CareerBuilder North America.

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Hunger Games USA

Paul Krugman writes in Hunger Games USA. Facts and figures at his column.

To fully appreciate what just went down, listen to the rhetoric conservatives often use to justify eliminating safety-net programs. It goes something like this: “You’re personally free to help the poor. But the government has no right to take people’s money” — frequently, at this point, they add the words “at the point of a gun” — “and force them to give it to the poor.”

It is, however, apparently perfectly O.K. to take people’s money at the point of a gun and force them to give it to agribusinesses and the wealthy.

Now, some enemies of food stamps don’t quote libertarian philosophy; they quote the Bible instead. Representative Stephen Fincher of Tennessee, for example, cited the New Testament: “The one who is unwilling to work shall not eat.” Sure enough, it turns out that Mr. Fincher has personally received millions in farm subsidies.

Given this awesome double standard — I don’t think the word “hypocrisy” does it justice — it seems almost anti-climactic to talk about facts and figures. But I guess we must.

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