iRobot Lays Off 350 Employees as Amazon Kills Merger Elizabeth Warren Opposed

“Today, Amazon terminated its planned acquisition of iRobot, manufacturer of Roomba robot vacuums, as the companies saw “no path to regulatory approval.” iRobot then announced that it would be cutting nearly one-third of its work force.
While the companies blamed regulators in the European Union for the termination, meddlesome U.S. lawmakers played their own part in souring the deal.”

“as the companies waited on regulators, iRobot was losing money: The company took out a $200 million bridge loan in July 2023 to tie it over until the deal closed (at which point Amazon lowered its offer to account for the new debt). With the deal scuttled, Amazon will now pay a $94 million termination fee, but iRobot expects to report an operating loss of as much as $285 million for 2023.

It’s worth wondering, then, if this is what lawmakers like Warren had in mind. The FTC letter worried the merger “could harm consumers and reduce competition and innovation in the home robotics market.” But without the merger, iRobot could very well face insolvency, and nearly one-third of its work force will lose their jobs—and considering the company is based in Massachusetts, a substantial number of them may very well be Warren’s constituents.”

https://reason.com/2024/01/29/irobot-lays-off-350-employees-as-amazon-kills-merger-elizabeth-warren-opposed/

The Government Is Better at Picking Losers Than Winners

“All investment is risky. What better way to avoid that risk than to use other people’s money? Federal, state, and local governments dispense gifts, grants, and loans to private companies, generously funded by taxpayers and usually with vague promises of economic development in return. While politicians say they don’t like to pick winners and losers, even the “winners” sometimes turn out to be losers for taxpayers.”

https://reason.com/2024/01/25/picking-winners-and-losers/

The West tried to crush Russia’s economy. Why hasn’t it worked?

“many Russian banks, including some key ones involved in energy transactions, have not been barred from SWIFT. According to the Atlantic Council, “most of Russia’s regional and smaller banks, over 300, still have access to SWIFT, enabling Russia to conduct cross-border payments and transactions for imports and exports.”
“The fact that the shut out was not universal has left ample scope for Russian banks to continue to benefit from SWIFT messaging services,” said Keatinge of RUSI Europe.”

https://www.politico.com/news/2024/02/24/russia-economy-west-sanctions-00142713

Josh Hawley Thinks the White House Can Force an Aluminum Plant To Stay Open

“The modern presidency has tremendous powers, of course, but this is still quite the stretch. Hawley is asking the White House to engage in central planning at an absurdly micro-level—and there is, thankfully, no law that actually allows the president to order a factory to continue producing aluminum if its owners have decided to stop.
Even so, the fact that Hawley is even making this request illustrates something important about how Republicans now view the relationship between government and business. It also says something about how the failures of protectionism will spur calls for more protectionism. And, finally, about how the phrase “national security” has become warped beyond recognition to justify further governmental intrusions into the economy.”

“It might shock Hawley and some of his colleagues to learn that the Defense Production Act is not a set of magic words that allow presidents to do whatever they’d like. In fact, all the law does is require that businesses fulfill orders from the government before other orders from private customers.

That’s because it is a law meant to be used during wartime. Here’s how it works: Let’s say there’s a war going on and the U.S. military desperately needs 10,000 widgets to ensure victory, lasting peace, and blah blah blah. The Pentagon sends a guy to the widget factory in Albuquerque to request those 10,000 widgets, but the owner of the factory says the 10,000 widgets sitting on his lot have already been purchased by his friend Bob and that the government will have to wait until the factory can produce another 10,000 widgets—so come back in two weeks.

Ah, but wait! The president just signed an order invoking the Defense Production Act for widgets, so now the guy from the Pentagon gets to cut the line. He can buy those 10,000 widgets, and Bob has to wait for the next set to come off the assembly line.

That’s what the Defense Production Act allows. It can’t conjure up new solar panels or additional supplies of insulation out of thin air. It doesn’t allow the government to put a gun to anyone’s head and force them to make baby formula or to keep an aluminum smelter running.”

“Remember those 10 percent tariffs on imported aluminum imposed by then-President Donald Trump in 2018? That was naked protectionism, and the announced closure of this Missouri smelter seems like pretty good evidence that it failed. There’s other evidence too: As Hawley points out in his letter, this is the third aluminum smelter in the U.S. to announce plans to downsize in recent months. Unfortunately, the failures of protectionism only ever seem to spur calls for more protectionism.”

https://reason.com/2024/01/26/josh-hawley-thinks-the-white-house-can-force-an-aluminum-plant-to-stay-open/

On Economic Issues, the Populist Right and Left Share a Lot of Common Ground

“Both the populist right and left are protectionist when it comes to trade. While the right advocates for protectionism to support national security, preserve manufacturing, and maintain national sovereignty, the left supports tariffs and other trade restraints to protect workers’ rights, prevent exploitation in developing countries, and reduce environmental impact. Both sides, if for different reasons, favor trade barriers and are skeptical of free-trade agreements. The best evidence is that President Joe Biden has retained most of former President Donald Trump’s tariffs.

Similarly, under the misguided excuse of strengthening our economy, both sides now practice an industrial policy that dispenses massive subsidies, tax credits, and other government-granted corporate privileges. For instance, the Biden administration’s $52 billion in federal tax breaks and subsidies through the CHIPS Act to prop up the semiconductor industry, including reports of $40 billion—77 percent of the funds—benefiting giant companies like Intel, GlobalFoundries, Samsung, and Taiwan Semiconductor Manufacturing Corp., was passed in a bipartisan way.

Utterly inconsistently, both sides also express serious distrust in mega-corporations. The New Right often views large corporations as part of a “global elite” disconnected from the average citizen and influencing government policies for its own benefit. Meanwhile, the left criticizes these entities for their alleged role in increasing income inequality, opposing workers’ rights and degrading the environment.

As a result, despite throwing money at big businesses with one hand, both sides are bogging down corporations—especially the ones that successfully earn a lot of customers—with the other hand, stacking up regulations, or even threatening to break them up with antitrust cases.

Both the New Right and the left reject talks of fiscal discipline. No side wants to reform entitlement programs like Medicare and Social Security even though these programs are becoming insolvent. Both groups support expensive, often excessive, and politically popular redistribution to families, including rich ones, in the form of paid leave programs, child care subsidies, or expanded child tax credits.”

“This shift bodes poorly for the economy, as populism has a track record of producing results opposite what their proponents promise.”

https://reason.com/2024/01/11/on-economic-issues-the-populist-right-and-left-share-a-lot-of-common-ground/

California’s Attack on Gig Work Predictably Drove Workers Out of Jobs

“California’s attempt at forcing gig workers to become traditional employees backfired by driving many of those workers out of their jobs.
In the wake of a new law (Assembly Bill 5) that was intended to reclassify many independent contractors as regular employees, self-employment in California fell by 10.5 percent and overall employment tumbled by 4.4 percent, according to a study released Thursday by the Mercatus Center, a free market think tank housed at George Mason University. In professions where self-employment was more common, the effects were more dramatic, and in some fields employment declined by as much as 28 percent after A.B. 5’s implementation.”

https://reason.com/2024/01/18/californias-attack-on-gig-work-predictably-drove-workers-out-of-jobs/

Biden’s manufacturing boom is underway. But the jobs haven’t followed yet.

“Companies rushed to break ground on new factories in hopes of winning those federal incentives, driving industry spending on construction to record heights. And politically, Democratic advisers said, the building frenzy provides signs of progress that Biden can point to in nearly every state.
“By the end of the election, every voter in battleground states is going to hear this story about what he’s done to invest in America’s economic future,” said John Anzalone, the founder of Impact Research and a longtime Biden pollster. “That is just not a message that Trump has.”

Yet central to Biden’s story of a manufacturing comeback is the prospect of thousands of new jobs spurred by his new laws — and so far, those have been slow to materialize. While Biden often touts the nearly 800,000 manufacturing jobs created during his presidency, the vast majority came prior to passage of the IRA and CHIPS, when Americans’ surging demand for goods during the pandemic drove a rapid industry recovery.

Since then, hiring has stalled as the economy evened out, with manufacturing-centric swing states like Michigan, Wisconsin and Pennsylvania actually losing factory jobs in 2023.

Those conditions have left Biden selling a manufacturing jobs boom that may not arrive in full force until well after November. Most companies that broke ground after Biden’s economic bills became law in August 2022 won’t have their new plants up and running until later this year — at the earliest. In high-profile setbacks for the White House, chipmakers TSMC and Intel have both signaled plans to delay production at their newest U.S. factories until 2025.”

https://www.politico.com/news/2024/01/19/biden-manufacturing-factory-jobs-00136473

Do we really live in an “age of inequality”?

“Piketty, Saez, and Zucman estimate that the top 1 percent earned 9.1 percent of national income in 1960, rising dramatically to 15.1 percent by 2019. Auten and Splinter, by contrast, show a very small increase: 8.1 percent in 1960 to 8.8 in 2019. The share is now actually lower, they find, than it was in the mid-1960s.
Auten and Splinter reach similar conclusions about the top 10 and top 0.1 percent: per their estimates, the former grew from 29.2 to 29.7 percent from 1960 to 2019, the latter from 2.5 to 3 percent.

How can two research teams, both looking directly at US tax data, reach such different conclusions? It’s not that one group are craven “inequality deniers,” to borrow an ugly term that Piketty has slurred Auten and Splinter with, or that the other group is “thoroughly discredited,” as billionaire libertarian economist Cliff Asness has described Piketty, Saez, and Zucman. The disagreement is, at root, about how to deal with the limitations of tax data, by far the best source of information on who earns what in America.

Neither side has a monopoly on truth. On some issues, Auten and Splinter made judgment calls that seem more reasonable to me; on others, Piketty, Saez, and Zucman do; on still more, it’s wildly unclear which assumptions are most appropriate to make.”

“No one factor explains more than 1.6 points of this disagreement, and even those are offset by a couple of areas (like dealing with owner-occupied housing and Social Security) where Auten and Splinter make decisions that show a larger increase in the top 1 percent’s share than PSZ.”

“Both teams show that income inequality has increased in the US in the past half-century. While Auten and Splinter show at most modest increases in the top 1 percent’s share of income after taxes, they do find substantial increases before taxes. Moreover, that’s only one way to measure inequality. The most comprehensive measure is something called the Gini coefficient, which attempts to summarize the whole scale of inequality across the income spectrum, not just at the very top. An increase in the coefficient means that inequality has risen.
Before taxes and government safety net programs, Auten and Splinter estimate that the Gini coefficient for the US grew 25 percent since 1962 and 23 percent since 1979. After taxes and transfer programs, the increases are 10 percent since 1962 and 16 percent since 1979. More progressive tax and spending policy reversed some of the increase, but the increase is real and significant.

To give a sense of the scale here, the after-tax/transfer figure grew from 0.355 in 1979 to 0.417 in 2019, a 0.062 increase. If that number means nothing to you (it means nothing to me!) then consider that this increase is akin to the gap between the US and countries like Australia, Spain, and Switzerland today. That is, if this increase in inequality hadn’t happened, the US would be close to many other rich countries as opposed to the rather unequal outlier it is today.

You can also see signs of a general increase in inequality across some other measures. Take wealth, for instance. A recent rigorous attempt by economists Matt Smith, Owen Zidar, and Eric Zwick to track wealth inequality (that is, the gap in net worth, rather than income, between rich and poor) in the US over recent decades shows a pronounced increase”

https://www.vox.com/future-perfect/2024/1/11/23984135/inequality-auten-splinter-piketty-saez-zucman-tax-data