Amazon Out

After much ado, it turned out to be nothing.

Amazon said Thursday it was canceling plans to build a headquarters campus in New York City because of local opposition.

“There are a number of folks on the ground who oppose our presence,” Amazon spokeswoman Jodi Seth said. “We don’t think there’s a path forward in terms of working with them over the long term.”

The company issued a statement shortly before noon saying it did not intend to reopen its search for a second headquarters at this time, but would continue with plans to put at least 25,000 jobs in Arlington in Northern Virginia and 5,000 in Nashville.

Here in the Rochester area, there were months of hype about HQ2, with areas wishing and hoping and praying they’d be chosen, even though it was clear from that start that only a big urban area with a well-developed mass transit system was going to satisfy Amazon.

The Pull Out Method – Will It Be Effective?

Nobody could have predicted this move: is reconsidering its plan to bring 25,000 jobs to a new campus in New York City, according to two people familiar with the company’s thinking, following a wave of political and community opposition.

Hailed as an economic triumph when it was announced by Gov. Andrew M. Cuomo (D) and Mayor Bill de Blasio (D), the project now faces withering criticism from some elected officials and advocacy groups appalled at the prospect of giving giant subsidies to the world’s most valuable company, led by its richest man.

I really can’t hate the player too much here, since they’re just playing the game that every other big corporation plays to get tax cuts with the promise of economic development.  Unfortunately for New York, I have a feeling that Amazon isn’t going anywhere.

Never Gonna Get It

Turn around, bright eyes:

Two days after Foxconn said it no longer planned to build a sprawling new factory in Wisconsin, the Taiwanese technology giant appears to have reversed course, citing a “personal conversation” with President Trump.

In case you aren’t following the story, Foxconn pledged 13,000 jobs and a $10 billion dollar plant in return for $3 billion of state tax incentives.  The only part of the whole thing that was real was the photo opp with Trump, Scott Walker and the Chairman of Foxconn. This is the most telling part of the story:

Foxconn said in 2013 that it would invest $30 million and create 300 jobs at a new high-tech factory in central Pennsylvania. But after the spotlight faded, Foxconn quietly scrapped those plans.

Can any of you give me a good example of an economic development deal like this that’s panned out in your neck of the woods?  Here in Rochester, we have a long track history of the state providing tax breaks and other incentives to companies for them to build new factories and employ scores of new employees, and I can’t remember a single one that overperformed — or even performed according to estimates.  If they do get anywhere near estimates, it’s because the company already planned an expansion and was able to get a tax break for something they would have done anyway.  But both Republican and Democratic politicians love these kinds of deals: the Democrats because of jobs, and the Republicans because they help their buddies. Only the Republicans seem to get much out of them in the end.

Baby Did a Bad Bad Thing

Facebook paid kids as young as 13 to install spyware on their phones to track their every move, and they snuck around behind Apple’s back to do it:

Desperate for data on its competitors, Facebook has been secretly paying people to install a “Facebook Research” VPN that lets the company suck in all of a user’s phone and web activity, similar to Facebook’s Onavo Protect app that Apple banned in June and that was removed in August. Facebook sidesteps the App Store and rewards teenagers and adults to download the Research app and give it root access to network traffic in what may be a violation of Apple policy so the social network can decrypt and analyze their phone activity, a TechCrunch investigation confirms. Facebook admitted to TechCrunch it was running the Research program to gather data on usage habits.

I think a lot of well-meaning and smart legislators are reluctant to regulate social media and tech companies because those companies donate freely to their campaigns have convinced them that the magic pixie fairy dust of techbro innovation doesn’t work if even a whiff of evil government regulation is involved. That’s obviously not true – these companies products are pretty mature and the market is fairly well understood, so it’s more than ready to be regulated.

If some other established entity, like, say, the Roman Catholic Church, paid 13 year olds $20 a month to let a bunch of priests watch them on hidden cameras, we’d be sharpening up the pitchforks. We need to treat Facebook the same way we’d treat any other big corporation that consistently lies and does real societal harm in order to increase their profits. There’s very little special and innovative about them, as far as I’m concerned.

HRAs and downward nominal wage rigidity

Earlier this year, I was talking with a very astute healthy policy observer. They pointed out that the Trump Administration’s push towards much wider use of Health Reimbursement Accounts (HRA) to pay for employer coverage on the individual market is extremely interesting in a wide variety of ways. The basic HRA concept is that the employer would place an age/geography/family size adjusted sum of money into employee accessible accounts. Employees would then use the exchanges to purchase insurance on the individual market. The employer effectively makes explicit healthcare costs and off-loads the expense of administration of healthcare benefits to the exchanges.

This is interesting in a wide variety of ways. We talked about how the current system of requiring the reporting of insurance premiums on income tax W-2s (Box 12-DD) does not make people too sensitive. Right now, at most box 12-DD is an interesting factoid as the sum of money that Duke spends on my health insurance is intermediate through multiple opaque layers of value creation and destruction. I don’t know if other large employers can provide my family with the same or better realized value on health insurance. If I had to shop on the Exchange and Duke offers $12,000 for family coverage and Other Employer offered $10,000 in an HRA for family coverage, I can make a real estimate of the value trade-off. But right now, if Duke holds premiums constant while increasing deductibles, I have a hard time determining if my value proposition and trade-offs have changed.

In 2012, Paul Krugman was banging the drum on downward nominal wage rigidity.


Via Mark Thoma, a new paper from the San Francisco Fed offers stunning evidence on downward nominal wage rigidity, a topic I’ve written about before.

What the paper shows is that many, many workers are getting precisely zero wage growth in dollar terms:

This stuck with me. People don’t like taking nominal pay cuts as their debts are mostly denominated in nominal dollars. Employers don’t want to demoralize their workforce with nominal pay cuts so they cut head count and fringes to reduce costs and then rely on several years of nominal zero percent changes in an inflationary environment to produce real pay cuts.

Health insurance in an employer sponsored world is a major source of potential savings as Box 12-DD numbers aren’t real. Employers could go to a tiered network or higher deductibles or more restrictive plans while still providing something that most of their remaining employees would consider “similiar” enough to a 0% raise. Those moves are invisible or close enough to invisible so that the scream minimization constraint is satisfied. ESI health insurance premiums are very well hidden compensation for employees although it is very clear compensation for employers.

A question that sticks in the back of my policy brain is “What if the 2008/2009 Great Recession happened again?” This question does not dominate my thinking but it gets asked at least a couple of times a year as I think about possibilities.

Moving to an common HRA arrangement for employer sponsored health insurance should make the cost of premiums far more explicit in a repeat version of 2008-2009 employment shocks. An employer who is seeking to cut compensation costs by taking an average of $800 per employee per year out of the health insurance budget can’t do that any more by narrowing the network, restricting the formulary and switching from a PPO to an HMO. Instead it is an explicit cut where the HR rep has to convince the workforce that this year they received on average $10,000 in employer premium support and next year they will receive $9,200 in average premium support and that is still a great deal. And it may be a good deal for individuals who qualify for subsidies as they will get topped up but for folks who don’t qualify for subsidies, this is an explicit wage cut.

The idea of HRA breaking the employer role of selecting health insurance is extremely attractive assuming deep and well functioning individual markets or at least individual markets that are no more dysfunctional than the current large group markets. However, making explicit the cost of health insurance may exacerbate a repeat of 2008-2009.