From the Peanut Gallery – Page 15

“In the Dark” Power Customers Need Accurate Information, not PR-speak

Last week we lost power. The outage lasted just over four hours and was inconvenient rather than catastrophic, but it reminded me of the multi-day outages resulting from the October snowfall in 2011 and Superstorm Sandy in 2012. While customers must show patience, the frustration might be less if the power companies provided timely, accurate information about the cause of the outage, and, more importantly, the projected repair time.

Once the outage was reported to the power company, I received an e-mail (at 4:46 p.m.) advising that the estimated restoration time for the outage had been updated to 7:30 p.m. The three-hour estimate of time to repair seemed to me a bit arbitrary as the outage had only recently been reported to the company and, according to the e-mail the cause was “pending investigation,” and the crew status was “awaiting dispatch.” Two and one-half hours later, at 7:17 p.m., the estimated repair time was updated to 9:30 p.m. The cause remained “pending investigation,” and the crew was still “awaiting dispatch.” Power was actually restored at 8:00 p.m., and I was notified of that restoration by a final e-mail at 8:26 p.m.

If you’re trying to make a rational decision about what to do in the event of a power outage, you really need to have an idea but how long the outage will last. An hour or so you can ride out; days and days may require giving thought to temporary alternative living arrangements. In my case the question was whether to drag out the generator so the well pump would work and string extension cords to power a refrigerator or two. (I decided to let it go overnight but set an early alarm in case the power was still out in the morning.)

The power company may not have a to-the-minute answer to the question of when the lights will come back on, but I have to believe that it has better information than it was providing. If you call customer service, you are likely to get a person whose answer is scripted to sound sincere but is no more informative. Being told that they are working as fast as they can and that power will be restored “soon” is not helpful in making decisions.

I get that the customer service representatives probably don’t want to have to deal with angry customers who are told that no one will get to their neighborhood for days, but customers need this information.

Jay Bohn

October 13, 2022

Post script

Last night, the same day this post went live, we had another power outage which lasted from (approximately) 7:00 pm to 5:30 am today. Here are the estimated repair times.

e-mail time	estimated repair time	cause	crew status
7:32 p.m.	10:00 p.m.	pending investigation	awaiting dispatch
11:57 p.m.	2: a.m.	equipment damage	additional crews requested
2:06 a.m.	4:00 a.m.	equipment damage	additional crews requested

Again, my issue is not how long it actually took, but the lack of accurate information.

J.B.B.
October 14, 2022

The Supreme Court’s Decision in Pig Welfare Case Should Not be About Pigs

In yesterday’s paper (but not online) the Star-Ledger published an editorial “How much cruelty is a pork chop worth?” by Kathleen Parker of the Washington Post regarding National Pork Producers Council v. Ross, a case to be argued in the United States Supreme Court on Tuesday.

The case involves a challenge to a California law adopted by initiative to prohibit the in-state sale of pork products produced by livestock practices that the proponents of the initiative petition deemed to be inhumane. The challengers basically assert that the law seeks to regulate out-of-state conduct((Almost all pork consumed in California is produced elsewhere.)) and this violates a doctrine known as the “dormant” or “negative” commerce clause.((The “commerce clause” of the United States Constitution authorizes Congress to regulate commerce between the States (“interstate commerce”). The dormant commerce clause is an interpretation of the Constitution that equates lack of Congressional regulation with an affirmative choice by Congress that the area be unregulated. It essentially denied States the power to regulate conduct affecting interstate commerce. It is really more complicated than that, but this explanation provides the essential point.))

The Parker editorial does a good job of engendering ethical sympathy for the pigs, but that should not be the basis of the Court’s ultimate decision in the case. The Court must decide whether, under our Constitution, California and its voters have the power to pass the law, not whether the farm practices mandated by that law should be imposed as an ethical matter. Parker’s result-oriented argument is essentially the same as made by those senators who have urged President Biden to declare an emergency in order to take action on climate change that Congress will not. As I noted last month, “it is increasingly uncommon for those who feel strongly about an issue to separate the merits of a particular policy from the power of a supportive official to implement that policy.”

In closing, I want to note that Parker seems to assume that the liberal justices on the Court will vote the way she advocates when she writes that “the justices who make up the high court’s conservative majority have a rare opportunity to align themselves . . . with their liberal counterparts . . . .” While I am not going to predict how any justice will vote, I do point out that Justice Thomas is no friend of the dormant commerce clause. “The negative Commerce Clause has no basis in the text of the Constitution, makes little sense, and has proved virtually unworkable in application.” Camps Newfound/Owatonna, Inc. v. Town of Harrison, Me., 520 U.S. 564, 610 (1997) (Thomas, J., dissenting).

Jay Bohn

October 10, 2022

Special Treatment for Newspapers Would Impair Their ‘Watchdog’ Role

The Star-Ledger‘s efforts to exempt the newspaper industry from labor laws that apply to everyone else is the gift that just keeps on giving, at least in terms of materials about which to blog. First, I responded to an opinion piece by Richard Vezza (the Star-Ledger‘s retired editor/publisher and current government affairs chairman for the New Jersey Press Association), entitled “Our state newspapers are on the brink,” which was published on September 22, 2022. Then just a few days ago I had this to say about the Star-Ledger Editorial Board’s editorial on NJ.com “This fresh blow to newspapers — and our democracy — must be stopped,” (subscriber exclusive).

For those who need a bit of catch-up, physical newspapers are delivered for the Star-Ledger (and apparently just about every other newspaper in New Jersey) by one company for home delivery and one other for retail. These companies classify the people who do the actual delivery as independent contractors, not as employees, which means that the workers get fewer benefits and they cost the delivery companies less money. Under New Jersey’s version of the ABC test, this classification is incorrect and the employers face the prospect of being forced to reclassify the workers as employees (and presumably pay fines or other penalties). The additional cost, it is said, will lead to the layoff of the few reporters remaining or even the closure of some newspapers.

This is the same issue faced by every other industry, but the Star-Ledger argues that newspapers are special: they are watchdogs, and the strict enforcement of the regulation will damage our democracy. I do in fact agree on the importance of a free press (even one I often criticize) for democracy. And it is precisely for that reason that I oppose special treatment for newspapers. If politicians do this favor for newspapers, they (the politicians) will undoubtedly expect something in return, or perhaps threaten to undo it. Last summer NJ.com called a bill that would have permitted the substitution of the sheriff’s website for a newspaper advertisement as notice for a foreclosure sale a ‘vendetta against newspapers.’ I replied that the proposal to provide notice by means other than newspaper advertising should be evaluated on its effectiveness as a tool for notice, not its economic impact on newspapers.

Assume that NJ.com was right that the purpose of that bill was to punish newspapers. I think that’s all the more reason why newspapers should not seek, or be given, special favors. They must be treated like every other business, so their coverage is not affected (or even seen to be effected) by fear or favor.

Jay Bohn

October 6, 2022

Newspaper Industry Must Find Way to Improve ABC Test For all Industries, Not Just Seek Exemption for Itself

Yesterday the Star-Ledger Editorial Board published an editorial on NJ.com “This fresh blow to newspapers — and our democracy — must be stopped,” (subscriber exclusive) which doubles down on the opinion piece by Richard Vezza (the Star-Ledger‘s retired editor/publisher and current government affairs chairman for the New Jersey Press Association), entitled “Our state newspapers are on the brink,” which was published on September 22, 2022, and was the subject of last Monday’s post “Importance of Newspapers Does Not Justify Special Exemption From Labor Laws.” The recent editorial displays just a bit of discomfort at being a player rather than just an observer, but nonetheless seeks special accommodation to allow the newspaper industry (or the companies it hires to undertake the delivery of newspapers) to classify the delivery persons as “independent contractors” rather than “employees” and thus not have to pay unemployment and disability taxes. At least, as the editorial says, “The solution wouldn’t cost taxpayers a dime.” (Although its impact on the workers, for whom the the Star-Ledger is usually solicitous, would be something else.)

The editorial is on firmer footing in its criticism of some elements of the ABC test used to determine if workers are contractors or employees. The Star-Ledger should editorialize on changes to, or the replacement of, that test, which would apply to all industries and could be judged on their merits, rather than seeking special treatment only for theirs.

Jay Bohn

October 3, 2022

Thoughts on the “Kitchen Appreciation Fee”

Last Sunday the Star-Ledger and NJ.com (as a “subscriber exclusive”) ran an article about a restaurant that had instituted a “kitchen appreciation fee” tacked at the end of every bill. With the fact that sales tax will also be added and the need to tip,((I realize that a ‘gratuity’ is theoretically voluntary, given the very low minimum wage that servers get, it really isn’t. I would prefer that the waitstaff be paid a full wage by management and that cost be reflected in the cost of food and drink with no tipping expected or required to assure that servers are paid fairly.)) the restaurant tab will start to look like a new car sticker or a cell phone bill.

While I would prefer that the restaurant owners adjust menu prices to generate the same revenue,((My aversion to surcharges in the form of mandatory fees, summed up as “the price should be the price,” does not extend to sales taxes, which I believe should be separately stated based upon the countervailing principle that we should know how much we pay in taxes.)) there is noting inherently objectionable about the kitchen appreciation fee so long as it is not misleading. It must be prominently presented so the bill brings no surprises and also be used entirely for the described purpose.

In order to be prominently presented, I think that it would have to be repeated on every page (or at least every two-page spread) of the menu in type of a sufficient size so that it is not likely to be missed by customers in a hurry to order. (Recall how difficult it can be to find the listing of sides from which to choose.) The term “kitchen appreciation” means (to me) that it is benefitting the kitchen staff.

The article also mentions that some restaurants charge an extra fee if the customer pays by credit card in order to cover the processing cost. Again, this fee should be prominently advertised to avoid surprises and it cannot exceed the actual processing cost.

Jay Bohn

September 29, 2022

Importance of Newspapers Does Not Justify Special Exemption From Labor Laws

When I read it, I just knew it was blog fodder. Last Thursday the Star Ledger/NJ.com prominently published an opinion piece by Richard Vezza, its retired editor/publisher (and current government affairs chairman for the New Jersey Press Association), entitled “Our state newspapers are on the brink.” The story asserts an existential threat to many newspapers (and the potential of massive layoffs at others) caused by the enforcement of New Jersey’s law regarding the classification of the people who deliver those newspapers as employees rather than independent contractors and urges the governor and leaders of the senate and assembly to change the law (as California and New York have) so that newspaper delivery people can remain independent contractors.((As the piece explains, many newspapers contract out the delivery of their newspapers to just two companies for delivery to homes and retailers; these companies in turn rely upon individuals who are classified as as independent contractors rather than employees. If they were employees, the companies would have to pay more for their services (the piece estimates the increased cost to be between 86% to 128%), which costs would be passed on to the newspapers. That is the issue.))

Tort law has a doctrine known by the Latin term respondeat superior under which the master (employer in modern terms) is liable for the torts of the servant (employee) based upon the master’s legal authority to control the servant’s conduct. This vicarious liability does not apply to the master’s “independent contractors,” whose moment-by-moment conduct is not subject to the same degree of legal control.

Over time, and with the benevolent government’s increasing altruistic concern for the welfare of workers expressed by the mandating of benefits (for which someone else is paying), the distinction has become significant (and this is the current issue) in terms of whether those benefits must be provided and the liability and payor-identity of certain taxes. Independent contractors are not entitled to the minimum wage, overtime, unemployment compensation or other benefits that the employer or government (at partially or totally the employer’s cost) provides. To the extent a employer’s workers are independent contractors, there will be no obligation on the part of the employer to pay overtime, a share of social security, unemployment and perhaps other taxes or to provide benefits (such as health insurance) which its employees get.((At least some of these taxes are then supposed to be paid by the independent contractor, but collection becomes more questionable if not deducted at the source.)) Thus, in many cases an employer reduces its labor cost significantly by classifying workers as independent contractors rather than employees.((The classification is not always just done for this purpose. If the Star-Ledger calls in an outside IT firm to fix its computer network, that relationship is quite correctly one of an independent contractor rather than employment, but “freelance” journalism is probably an entirely separate question.)) The government does not let the employer’s classification, or even a specific agreement between the employer and the worker, be the last word. Instead, it applies what is typically called the “ABC test.”((For anyone particularly interested on what the ABC test is (and the specifics and desirability of that test is beyond the scope of this post), see how the New Jersey Department of Labor and Workforce Development phrases it.))

Independent contractor status benefits some workers for whom it provides greater flexibility and the opportunity to earn more by working for more than one employer. Vezza claims that newspaper delivery people are among them:

Most independent delivery people in New Jersey work 2-4 hours per day in the mornings and then have the flexibility to seek other work or take time for themselves and/or their families and loved ones. They set their own hours, are not supervised, and they may (and often do) hire others to perform their work. Their only obligation is to deliver the work product for which the company has contracted.))

Although I haven’t talked to any of them, I really doubt such satisfaction with their lot is a widespread view. Their ability to set their own hours is (or better be) fictional, otherwise my week’s worth of morning papers might be delivered Sunday afternoon. I don’t see how the classification impacts the time actually necessary to do the job or any of the other listed advantages.

Thus, we are left with the primary beneficiaries of a special exception to New Jersey’s labor laws being only New Jersey’s newspapers. Why are they deserving of this largesse? Vezza’s answer is: “to preserve the flow of information to the public, save jobs((The piece stresses that union jobs are at stake. I doubt those who are up early in the morning to deliver the papers are unionized; that probably one of the benefits that only employees get.)) and, most importantly, maintain government transparency.” I would imagine that any other industry that sought such an advantage — and to the expense of what must be its least-favored workers — would be editorially accused of padding its pockets on the backs of its workers or some other mixed metaphor.((I cannot actually accuse the Star-Ledger of the same degree of hypocrisy as I did with respect to the $15 minimum wage because I cannot find that it has taken an editorial position on this issue.))

In June 2021 I wrote: “Although I appreciate the importance of old-fashioned printed newspapers to an informed citizenry (and I subscribe to several), I cannot agree with the position that legal advertising should be mandated for the purpose of their economic support.” I feel the same way about giving them a special exception from a generally prevailing labor law.

Jay Bohn

September 26, 2022

Developers’ Escrows and the SEP Problem

During last year’s trek into economics, I posited that demand can be distorted by what I called the “SEP problem,” when someone else is paying. My thesis is that “demand” includes, but means more than, “want” or “desire” for an item; it requires “wherewithal,” the ability to pay, to be effective.((Discussed in a bit more detail in Economics 102: The Law of Supply and Demand.)) I gave as one example the means by which New Jersey municipal land use agencies pay for the services of their attorneys, engineers, planners, and other professionals in reviewing applications for development:

The applicant is required to fund (and replenish when depleted) an escrow account which is used to pay the municipal professionals. The applicant has no control over the selection of these professionals or their hourly rates and little opportunity to challenge their bills. Municipalities, which set the rates and can control the time expended on the review, have little incentive to do so, because “someone else is paying.”

The hourly rates paid to these professionals are not the biggest part of the problem because the law at least imposes some restraint. The professional is not allowed to charge the developer’s escrow at a rate greater than the professional charges the municipality when the town itself is the one paying the bill and municipalities will often pay lower rates than private clients.

The problem will usually arise in the amount of time that the professional devotes to the review and the prolixity of their reports, a long report giving the impression that the time was actually and appropriately spent. The problem becomes more acute when the professional is part of a larger firm that will assign multiple employees to work on the same review.((I have heard more than once that the municipal engineer charged more for the review of plans than the applicant’s engineer charged to prepare them.))

There is a means to dispute a charge, but it involves a challenge brought before the county board of construction appeals (not necessarily expert in this area), and what developer wants to anger the municipal review professional while the project is ongoing, or a future project is contemplated?

These jobs can become very lucrative for the professionals and despite some efforts to prevent it by “pay to play” restrictions, there is undoubtedly some sharing of revenues between some professionals and the politicians who select them. At the least the jobs are regarded in many towns as a political plum to be handed out to supporters. (There is often a wholesale change in professionals following a change in party control.)

This is not only a problem for developers; this system could lead to a tacit understanding between developers and municipal professionals: “I won’t complain about your escrow charges as long as I get my approval.” or “If you want your approval, don’t complain about my charges.”((I am saying there is a potential; I do not have any personal knowledge that this has actually happened.))

There is no structural way to assure good government, but government can be designed so that is more likely. I believe that municipalities should be given a greater incentive to control these charges by “having some skin in the game.” I propose that this be done by requiring some percentage (I don’t know if it should be 10% or 50%) of the cost be paid by the municipality.

Diverting Student Loan Relief to State Schools a Questionable Solution to a Different Problem

Last Thursday the Morning Call (a newspaper published in Allenton, Pennsylvania, for those of you who are not local((Look at me, implying not only that I have readers, but that they are geographically diverse.))) published “Invest in state schools, not in student debt,” an editorial by Eduardo Porter from Bloomberg Opinion.¹

Porter’s thesis is that the federal contribution to the availability of higher education, in the form of student loans and grants, largely resulted in price increases by “[p]retty much the entire educational ecosystem”((Porter spews particular venom at for-profit schools.)) and it would now be better (although not politically palatable) to spend the $500 billion plus that President Biden’s student debt cancellation is going to cost (in the form of foregone revenue) on matching the State appropriations to their public colleges and universities.

While I certainly agree with the premise that the availability of financial aid caused a large part of the increase in college costs (because any broad-based demand-side subsidy will tend to increase the cost of the subsidized commodity), the suggested solution is objectionable for any number of reasons.

Let’s start with the one Porter implicitly recognized when he doubted the political palatability of his proposal, student loan relief seeks to a solve a different problem. It attempts to mitigate perceived financial hardship resulting from the borrowers’ past consumption of higher education, while Porter’s “investment” is aimed at preventing or limiting future price increases, directly benefiting a mostly different set of student-consumers.

Further, even if the President((Technically, the Administration’s argument is that the secretary of education has the authority, but same difference.)) has the authority to cancel student loan debt as he proposes (which is by no means certain–Nancy Pelosi herself denied in the summer of 2021), that is hardly the same thing as sending checks to States or schools.

Finally (for now), the proposal does not really increase the supply of higher education, it just subsidizes demand less directly. No institution ever thinks it has enough revenue as new spending will immediately be seen to be needed. (Look at New Jersey’s 2022-2023 State budget; lots of extra money balanced by lots of new spending (I’m sorry, “investment”).)

Jay Bohn

September 19, 2022

I could not find the editorial on mcall.com, I imagine because it is syndicated, but it appears to be on Bloomberg’s own site (paywall) under the title “Deliver Students From Debt by Investing in State Schools.” [↩]

Border State Busing Exposes “Sanctuary City” Hypocrisy

Immigration is a complicated issue and has been a matter of contention since the founding of the republic.((Remember the Adams-era Alien and Sedition Acts from American history? The Sedition Act got the most attention, but three of the four laws, one of which remains in effect, were aimed at non-citizens.)) We cannot even agree on terminology. The phrase “illegal aliens,” common a few decades ago, is criticized on the ground that “no person is illegal.” (True, but the phrase does emphasize that these people’s entry into, or continued presence in, the United States is contrary to law, whereas the substitute “undocumented aliens” suggests that it is simply a question of lost paperwork, much like not having your car’s registration and insurance card in your glove compartment when stopped by the police.) Now even the word “alien” is unacceptable and being replaced by “non-citizen.”

For years some states, like Texas, have been pushing for the federal government fully to enforce existing immigration laws while presidents (who are constitutionally responsible to enforce those laws) decline to do so because they disagree with them from a policy perspective.((I too would prefer a more open immigration system than current law provides, but as the hypothetical reader of this blog may have gathered, I am always concerned about process issues. Immigration policy is a matter for legislation by Congress, subject to the presidential veto. Picking and choosing what laws to enforce encourages disrespect for all law.)) Many cities have declared themselves sanctuaries and refuse to cooperate in immigration enforcement activities. But these cities do not bear the same burden as do communities along the border. These “sanctuary cities” are able to pretend to the moral high ground because, to put it in economic terms, someone else is paying.

Thousands of migrants cross the border. Once in the country, even if caught by immigration officials, they claim asylum (which will be granted to so very few that the claim itself is essentially a fiction)((Asylum protects those with a well-founded fear of persecution, not the vast majority who simply want the better life they foresee in the United States.)) and are released until they receive a hearing. In the meantime they are, as the Southwest Airlines ad puts it, “free to move about the country.” Texas Governor Greg Abbot has responded in a politically brilliant way by creating “Operation Lone Star” in which willing migrants((See this CNN story: Texas is bussing migrants to New York and DC for free — many want to go .)) are put on busses that take them to Washington, New York, and, more recently, Chicago.

While mouthing platitudes about being welcoming communities, the mayors of these destination cities are seething about having to bear the economic cost of food and shelter for the migrants. The mayor of Washington complains that the federal government will not mobilize the National Guard; the mayor of Chicago created her own bussing program and sent the migrants to a hotel in a Republican suburb.

And what would a blog post be without a complaint about the professional media? It’s hard to find facts as most of the coverage is either partisan (in the sense of pro or anti immigration) or more interested in political conflict.

Jay Bohn

September 15, 2022

The Misuse of Emergency Powers

A while back((I just came across the piece yesterday.)) Tom Moran of the Star-Ledger/NJ.com published an editorial (which in turn relies substantially upon an analysis by Elizabeth Goitein of the Brennan Center for Justice) saying that President Biden should not, as urged by a number of senators, including New Jersey’s Cory Booker, declare an emergency in order to take action on climate change that Congress will not.

Both Moran and Goitein cite President Trump’s misuse of emergency power to reallocate government spending to his border wall as an example not to be followed. Goitein writes:

[The] purpose [of emergency powers] is to give presidents a short-term boost in power in situations that Congress cannot have foreseen (because they arise suddenly and without warning) and that Congress is ill-suited to handle (because they require immediate or highly nimble responses). Emergency powers are not intended to address longstanding problems, no matter how serious. Nor are they meant to authorize permanent or long-term policy solutions that Congress itself could provide but has chosen not to.

This position is consistent with the opinions I have expressed regarding COVID-19 and emergency powers here, here, and here. “Emergency” does not mean the same thing as “urgent.”

From my observation, it is increasingly uncommon for those who feel strongly about an issue to separate the merits of a particular policy from the power of a supportive official to implement that policy.((For example, in the early days of the COVID pandemic, Bergen County Executive James Tedesco ordered all malls in the county to close until further notice in order to prevent the spread of the disease. When asked about his legal authority to shut down private businesses, Tedesco responded: “I have the moral authority.” NJ coronavirus: All Bergen County malls must close (northjersey.com). Because Tedesco’s closure order was quickly subsumed by Governor Murphy’s, the question of legal authority was never authoritatively tested.)) As I wrote a few months ago, in response to the United States Supreme Court’s ruling West Virginia v. EPA that Congress did not grant EPA the authority to devise emissions caps based on the generation shifting approach the Agency took in the Clean Power Plan, two former EPA officials took the editorial position that in lieu of democracy regulatory authority should properly be vested in administrative agencies “staffed by experts.” “In the absence of specific statutory language to the contrary, deference would be given to each agency in defining the scope and limitation of its power, its range of activity, and the interpretation of the statutes it administers.”

Democracy is inefficient and sometimes gets it wrong, but it’s the best form of government we have.((Winston Churchill is often mistakenly quoted as saying: “Democracy is the worst form of government, except for all the others.”))

Jay Bohn

September 12, 2022