Layoffs are mounting, alternative work is limited, and the unemployment systems in many states are either broken or running out of funding. Add the federal governments indicated desire to let blue states go bankrupt and we are looking at a good combination to enter a depression.
There was an interesting piece in this week's Atlantic on the motivation for having states declare bankruptcy:
"Under the Constitution, bankruptcy is a power entirely reserved to the federal government. An American bankruptcy is overseen in federal court, by a federal judge, according to federal law. That’s why federal law can allow U.S. cities to go bankrupt, as many have done over the years. That’s why the financial restructuring of Puerto Rico can be overseen by a federal control board. Cities and territories are not sovereigns. Under the U.S. Constitution, U.S. states are.
Understand that, and you begin to understand the appeal of state bankruptcy to Republican legislators in the post-2010 era."
His unwillingness to not solve the state's pension problems should be applauded. the amount of unfunded liabilities is in the hundreds of billions of dollars and approaching a trillion if it has not passed that already. This all happened because the number of public servants who are pulling in over 100k has skyrocketed... 100k+ in retirement.. with millions past 50k! Think about that 50k in pay plus medical.
These pensions and their medical side are the reason why the ACA did not touch golden medical plans because the vast majority are in this area along with certain other larger private pension systems. By the way, the House silently dropped that provision entirely from the ACA in 2019 so they any taxation of them is gone.
My favorite story to fall back on is provided below... and there are other states worse off. This type of largess should never have been allowed nor should the tax payer bail them out. People bemoan the pay of executives at private companies, well guess who is right up there in many cases.
To be fair, in SF for example the median income is $96,000. And I think that's take-home salary, so the median cost to the employer with benefits is well over $100k. It doesn't seem at all unreasonable that important city workers should make at least the area median wage. Having all of the local government employees be the lowest paid people in the city doesn't seem like a good thing.
It is also kind of shocking to see how many employees actually work for city and state governments. And of course government workers have a strong reputation for not being incentivized to work very hard or do more than the bare minimum. I would think the bigger opportunity would be to reduce the size of local government payroll rather than lower everyone's salaries.
Related thought - I wonder, why aren't city and state governments more at the forefront of automating menial work away, given the perpetual costs of each worker on the pension system? It seems they'd have a lot to gain from it.
It's great for city workers to make a great wage - just pay for it. Stop pulling shenanigans with pension systems. We just had 11 years of unprecedented growth and pension systems only got worse - expanding benefits and maintaining impossible growth targets.
City and state governments don't pay the bills - that's the problems. Any cuts they make will hurt them in elections, so they just kick the can down the road to the next government.
And another important component is unions. Politician wants to get elected. Unions can help. So politician have to pay back unions later. Can’t break this cycle unless public worker unions are banned.
Texas is a taker state so California has been paying to support texas for a very long time. Why the moral hazard now? I’ll be fine if we distribute federal expenditures based on tax collections by state. Means California could lower taxes.
I don't think you understand that article or how the new tax bill ripped off a million Californians by making them pay tens of thousands extra in taxes. I paid an extra $30k in taxes this year because of that bill. Only being able to deduct $10k taxes made Californias pay more federal taxes. We didn't get anything in return. Thanks for making my point how California pays for everyone else but get nothing in return.
Also for 4 of the 5 top employers in Texas are oil companies. Oil production is subsidized by the feds. Texas is a taker. They also will all go bankrupt unless bailed out with California tax money.
They aren't paying for pensions. They are paying for a massive lack of tax revenue due to COVID.
Funny I never hear the argument from red states "We don't want your federal money for all the poor, sick, disabled, in our state!" considering CA and NY pay WAY WAY more out than they get back in federal money
These red state takers idea has propagated throughout social media, and become a talking point used anytime some fiscal argument breaks out between left and right.
And it's mostly absurd, because it just looks at net transfers between the states and Feds without realizing who is actually benefitting from that money.
How many small family farms do you think are left in much of the Midwest, who are living high on the hog with government subsidies, as the left likes to imagine?
Is it a transfer to Iowa or Nebraska when the federal government pays out a few billion in farm subsidies, which then goes straight into the pocket of fund managers in Manhattan, sovereign wealth funds, or megacorps who actually own the farms
How bout when Wall Street got bailed out in 2009 to the tune of hundreds of billions of dollars? Do we count that as a subsidy to New York, Jersey, and Connecticut?
Even if the money was paid back, there's no way to calculate the trillions of dollars citizens of other states lost due to perpetually low interest rates or propping up houses in coastal areas at the expense of people living in low COL areas.
There's a dozen other ways we can measure these types of back door transfers, and I guarantee you, it ends up that those blue coastal states are getting a lot of extra subsidies that the silly stats that you guys use ignore.
Because they are richer. This is the very same principle employed by both states for their internal taxation - the idea that the more you make, the less you get from your taxes relatively speaking ("the rich" pay higher tax rates in both states).
It's just progressive taxes applied to the entire country, where NY and CA are "the rich" among the states.
But if the Republican approach is a regressive tax (eg the big tax cut favouring the big end of town) then shouldn’t CA/NY also receive similar treatment?
That’s essentially the discrepancy going on here.
I'm just saying that if CA/NY believe in "from each according to its ability, to each according to their needs", as they appear to given their tax laws and public policies, people should be fine with them being donor states.
After all, a staunchly republican poor individual in CA/NY still gets the same benefits as a poor democrat, because need (not opinions) dictates how much you get. Of course, Texas isn't exactly poor, my point is more relevant to states like South Carolina, Louisiana etc.
People need to understand, the value of a 100% of final-salary pension for people earning 100K retiring at 55-60 is likely millions. It's even worse with the games people play with PTO and other benefits (where they bump pay 20-30% in their last year to get that pension benefit for the rest of their lives).
Look at the average retiree's 401(k) balance for comparison and it gets pretty clear how unfair this is. There's a huge political opportunity for someone to tell this story properly and get a restructuring done.
I saw that a hundred times at a small school district in Southern California. As retirement nears (age 55-59), take a promotion from the classroom to the district office, and a $50-75K pay raise. Three years later, that is the salary used to calculate your pension payments... For life.
I live in a neighborhood with two firefighters who were captains, retired at 50, and make over $100K a year. It's totally unsustainable.
It's generational wealth transfer from the young and poor to the old and relatively rich. It should be called fraud and theft, because that's what it is.
While we're throwing rocks at teachers and firefighters, would you consider the trillions of dollars that the GOP made off with during the "Tax Cuts and Jobs Act" smash and grab job fraud and theft?
What about the pensions of workers (many unionized) which were obliterated by corporate restructurings during the financial crisis?
It is absolutely fraud. The whole idea of public service is that you make sacrifices on the front-end, the public takes care of you through benefits and retirement. There were kindergarten teachers making $120K a year for 6.5 hours per day and ~180 days year. True, they had a masters and 15+ years of experience.
Yep. If they paid out the value of those pensions upon retirement at the cost of a similar annuity and an estimate for the health care costs, people would probably be more angry than they are now, as they don't realize just how generous these are.
To buy an annuity at age 55 worth $100k / year with guaranteed health, dental, long term care, etc. for an employee who's estimated to live another 30 years would cost a few million dollars. A quick Google search shows that the media 401k balance at 55 - 65 in the US is under $75k. The amount of non-guaranteed dividends, cap gains, and withdrawals made to ensure it lasts 30 years would probably not even cover the cost of Obamacare from 55 to 65 when they're eligible for Medicare.
It's one thing to "restructure" the comp package for future employees, and something else to change compensation arrangements retroactively after your employers have upheld their end of the deal.
The deal that was struck was between the government workers and the voters at that time. That deal, more or less, said that future tax payers would pay for their pension. As a group, those then future and now present tax payers don't have much of a moral obligation to follow a deal that they never agreed to. And the workers don't get to act indignant that their pensions are in question. Their unions negotiated the agreement and chose to let the buck be passed instead of insisting on pensions being fully funded.
The bargain was, at least in part, corrupt. The various public unions would campaign for and help elect those that would give them more money. An obvious conflict of interest that raises questions on why a shady deal should be upheld.
The pensioners are, in general, gaming the system. They artificially inflate earnings at the end of their career to pump up their pension. Nepotism is rampant and there are plenty of positions with absurd salaries for what they do. They've sold out new entrants in their field to protect their own pensions. In general they're a bag of dicks. Fuck them.
> where they bump pay 20-30% in their last year to get that pension benefit for the rest of their lives
I've heard this claim many times before. Is there data supporting this or did a handful of people do it and word spreads like it is far more common that actual.
What risk is an accountant sitting in SF City Hall taking? High risk positions - sure give them more security. Otherwise, treat them like everyone else. Also, people goto govt jobs because of job security as well - which is also a factor in lower income.
Perhaps not, but I don't think it's unreasonable to ask for a risk premium in your compensation. If you're more likely to die or be critically injured earlier than someone else of the same age solely because of the work you do, and your family depends on your income, it's not unreasonable to expect to be paid more to make up for the lost expected lifetime income.
(This is true for all dangerous professions, BTW - not just law enforcement and medical personnel.)
The days where gov workers traded high private sector income for stability and retirement was finaihed sometime in the late 80s, when offshoring, immigration, and massive amounts of productivity started being squeezed from labor to capital.
I live in DC, and at my age many professionals who don't really have any lucrative skills or degrees are now hitting the 6 figure club in late 30s as GS13s. They'd be making less working at some private company without any pension, longer hours, less vacation, and worse benefits, and no guaranteed promotions.
In this town, a lot of people would be more than happy to get a nice office job working for the Federal Government, but it's not that easy anymore unless you're a certain special minority or other who gets pushed to the head of the line.
Other then police and firepeople... what city jobs are high risk? I think most city jobs are paying in the median and giving well above average benefits. it doesn't make sense.
> This is just crazy to me, this public servants takes unprecedented risks and take lower pays so they can take stable retirement.
I didn't realize I was signing up for an "unstable retirement" by working in the private sector.
Perhaps you mean "stable jobs", which indeed was historically supposed to be biggest selling-point of govt jobs, and the trade-off for lower pay. Though now when you count benefits, apparently they get the best total compensation too.
The whole thing is so nakedly corrupt. In Illinois, where I'm from, guys like JB Pritzker (governor) and Mike Madigan have made whole careers out of getting elected on the back of organized labor (e.g. AFSCME), and once elected, give them sweetheart deals.
On one hand, it's just part and parcel of politics, but there needs to be some kind of counterbalance to this. Maybe a taxpayer revolt would fix it?
> Now it comes time for due, we don't want to fund these anymore.
The people who agreed to this never wanted to fund them in the first place. If they had, they would have increased taxes or reduced benefits. Instead, we are seeing guaranteed 3% pension increases annually when inflation is <2% and rosy projections about 8% stock market returns when in practice it's more like 5%.
Police, Fire Department, transit workers yes but the vast majority of public servants are not taking "unprecedented risks" when they are at work. They're inspectors, judges, teachers, budget analysts etc.
I ran across that Forbes article yesterday as well... amazing data:
"71,000 public employees at every level of Illinois government received six-figure paychecks. Additionally, 23,000 retirees pulled down more than $100,000 in annual pensions."
Consider also that alot of retirees don't stay in Illinois as well. So other states are benefiting from the discretionary spending funded by Illinois taxpayers
Why would that be a problem? The salary & pension are compensation for the career of labor. No part of the pension that person _earned_ is owed back to the original state. That doesn’t make any sense.
When the pension is an unfunded liability, it does change the calculus if everyone receiving it will be spending it off in Florida and not back into the local economy that's paying for it.
Illinois also guarantees a 3% COLA regardless of inflation which leads to a doubling of direct pension benefits within 24 years. Not to mention the pension spiking among many administrators in the last four years of employment. It is criminal.
Unfunded pension obligations have seemed to be a ticking time bomb for quite a long time now. Some of the per household pension debt ranges are really quite spectacular[1]. If you look at the figures for places like Alaska, California and Connecticut it's hard to imagine them getting out from underneath it.
You can easily patch the state revenue holes without fixing the pension obligations. You basically give the states the difference between what they were projecting and what the reality is. By doing this, you fix part of the economy keeping up employment until the private sector can come back online. If you let states fall down right now you are going to turn this into a depression. It just means the beginning of Lyft’s troubles.
There is nothing to applaud with his actions or statements. It’s just malicious and gives the rest of the world a chance to out compete America.
IMO the issue is pensions are worked out by elected officials who will be long out off office when the bill is due. This encourages dishonest accounting wrt needed present day finding levels.
One fix would be to require that all future obligations be funded up front. Make the pension as generous as you like, but deposit the cash now. If you invest the money and do well, the state can just keep that, but don't assume positive returns.
So, I've thought about this a lot and concluded democratic governments (democratic, not Democratic) just can't do this. The incentives to cheat are just too strong. Problem is accounting standards? There's always a legal-by-the-letter-of-the-law way around these rules (loophole) you can find if you work hard enough (just look at Illinois -- "pension ramps", "pension obligation bonds", etc), and even if there's not, most voters won't care enough to dig into the discount rate and other assumptions being used to forecast pension liabilities.
Perhaps our political culture has changed and people used to be more honest, or far-sighted. But, given the world we live in today, especially given the pressure state and local governments are under, I think there really is no other option than a fully-funded 401(k)-style defined contribution plan, to finally force the issue into the open. There are plenty of well-managed 401(k)s and it's the only way to get "cash on the barrelhead" that keeps everyone honest, and doesn't allow the sort of absurd can-kicking so many governments (and their electorates) have favored for the past 30 years.
Seriously? We're going to blame old people for not wanting to live in poverty while the heights of the economy sequester trillions of dollars in a power law curve?
Many pensions are not the "have $27k/yr starting at age 67" kind, but the "have $100k/yr + benefits starting at age 55" kind. Its the latter that people find upsetting - nothing close to poverty level.
Sure, but people took those jobs in large part because of those pensions. It is part of the entire compensation package. They often times took less money up front in return for better pensions.
The problem is that this was not properly budgeted for when funding the pensions.
How is a worker supposed to know if the benefits are properly funded? Even if they can know, some of these used to be funded correctly (when they were hired) but later cuts made them underfunded.
So they should comb through auditor's reports, and recognize when the funding entity has been improperly seconding pension contributions over to the general fund such that it will run dry in 23 years instead of the mandated 42?
If we're lucky, we find out about these things when a government changes hands and an audit is conducted - typically years after the fact. Also, one can start one's career under a sound system that is eroded through mismanagement.
It's in the news all the time - it takes a minute to do a google search. Also, you have a union - if it screws you, well that's on you for being in the union.
When the folks making crazy promises are dead and/or gone by the time their promises are broken when the funds come up short, the workers who took the good deal are left holding the bag.
We must retroactively assign blame to the worker who was lured into accepting obvious false promises. It is perversely the most compassionate thing we can do: blame and shame past workers for making stupid deals. We do this so that future generations will learn the hard lesson that governments cannot be trusted with their investments. There is no power in investment.
Blaming past politicians for their malfeasance is exactly how we enable today's politicians to keep kicking the can down the road.
It's amazing that the US Federal government seems to be able to provide trillions of dollars in liquidity on a moment's notice to anyone and everyone - except the states.
Airlines? Of course. Junk bond investors? Sure, why not? States? "We're not going to bail out Democratic-run states."
Don't forget Carnival Cruise Lines... which doesn't even pay any taxes in the US as a corporation since it flies a flag of convenience and doesn't employ many Americans.
You're right that they did not specifically bail out Carnival. They bailed out the entire junk bond sector, which allowed companies like Carnival to raise money much more easily.
The president and leader of the GOP wanted to give cruise lines, who are NOT paying federal taxes and fly foreign flags to dodge US taxes a giant bailout but give US cities some help? Hell no!
It would be immensely helpful to see uniforms with all of the campaign contributions each has like a race car driver so you know who butters their bread.
I'm down, we need a catchy name to start a movement. I'm totally ready to throw this up on a website, there's got to be a place that shows donors and maybe cross reference which bills they support with some sentiment analysis "68% Favorable to Hollywood" and make it like rotten tomatoes.
In their defense, PR is spectacularly mismanaged. I love the place. I love the food. I love the culture, but there is something really annoying about an island, where everyone is on island time and blackouts are just a part of daily routine.
This is a pretty grim path to follow. If States are to go bankrupt and subject to federal imposition of what debts must be paid, then it may push States to seek further sovereignity. An example being pressure to mint their currency. This is currently banned in the constitution, but if things get dire... they could simply ignore?
The train of thought I'm on now is: why was keeping the Union together back in the civil war such a great thing?
Now we have this bloc of red states in the South who are backward, racist, intolerant science deniers, and they've managed to get just enough on the winning side of the electoral map to make the advanced, multicultural, cosmopolitan science-respecting blue states' lives miserable.
That chunk of states should be a separate country. Then they can go their own way and the rest of us can carry on without them.
The resolution you choose has some stark effects on the narrative that you will allow yourself to be convinced of. The idea of "red state, blue state" is a peculiar consequence of a winner-take-all presidential election system, and does not adequately represent reality. An underlying truth, viewed at another resolution, is that there are red and blue densities moreso than states [0]. The current (and changing) distribution of densities across the states has currently led to what you perceive as the "red state, blue state" situation, when zoomed out and with a blur filter applied
For example, take a useful look at CityLab's Congressional Density Indicator [1]. There are zero "pure urban" districts that are represented by Republicans, regardless of the state (red, blue, purple), and there are nearly none among the "urban-suburban mix" districts (again regardless of state).
Viewed through yet another lens, by percentage of landmass, Alabama is more is more "blue" than Illinois and Oregon [2]. Your characterization could use a little more thought and refinement.
You are right, and I made this simplification with full awareness that I was doing so.
On the other hand, I really like the idea of splitting apart the country in a way that frees most of us from a large enough number of the people who are holding us back. I don't think that's possible to do in a fine-grained way. It only makes sense if done for some large contiguous regions. And the states in the southeast who actually did try to break away a few generations ago seems like an obvious way forward with that.
Here is another look at some of the natural regions within the country: [1]
I'm also aware that changing the voting systems we use holds a lot of promise for some of the same underlying problems we're talking about, and am completely open to that as an alternative to, or in addition to, my suggestion to break up the country. But that too seems very difficult politically.
The challenge is that our founding fathers unwittingly created a gerrymandered situation due to both the electoral college and the senate, where 40% or less of the population is able to control the entire federal government. Now that they're stacking the judiciary with political judges, they control all 3 branches of government, and the only democratic check on their power is 50% of the legislative branch (the house).
I'm not a political scientist, but at some point the increasingly larger 60% of the population is going to take this country back. I hope they're able to do it without a war.
yeah, abolition of slavery is a noble cause, obviously, but the rhetoric at that time put a lot of emphasis on the importance of preserving the union, as if that in and of itself was a valuable thing. I propose that it wasn't, and isn't.
Humans are happier if they're grouped together with their own tribe, and not with other neighboring tribes they don't identify with. In this way it's like some of the problems in Africa and the Middle East where the groups there had borders imposed on them that didn't follow this simple principle.
I would prefer that states have more power and we further decentralize authority away from the federal government. This will limit the see-saw that occurs whenever the president switches parties.
Part of that tension is what's led to the the current situation with COVID— the federal government is where the CDC is, so there's an expectation that they're the ones providing centralized coordination and guidance for a measured, unified, national response.
If each state has its own version of the CDC (and other similar agencies), then that's fine, but they also need to have a lot more sovereignty over things like (in this case) being able to close their borders to neighbouring states whose agencies may have come to differing conclusions about what measures are needed.
> but they also need to have a lot more sovereignty over things like (in this case) being able to close their borders to neighbouring states
Commerce Clause of the US Constitution stands in a way. It (the Commerce Clause) has been a bedrock of the federal government pushing through progressive policies onto the states.
The commerce clause and related federal growth are all a result from FDR. It's why we have a war on drugs, it's why the government can seem to do anything. It once required amendments for the government to do new things - a government of enumerated powers, now it can do anything.
If you live in a house of five and each person buys their own groceries and cooks their own dinner, it does not matter how you scrimp and save. It is still cheaper on the whole to buy raw ingredients for dinner and make it for five people. The cost goes down dramatically>
Yes there is a CDC in every state. It would be utterly ludicrous spend of cash to have an independent, not cooperative CDC in each state attempting to manage and solve the same problems.
> If you live in a house of five and each person buys their own groceries and cooks their own dinner, it does not matter how you scrimp and save. It is still cheaper on the whole to buy raw ingredients for dinner and make it for five people. The cost goes down dramatically>
This makes sense, but what about one level up? I live in an apartment building, and in our building each family buys their own groceries and cooks their own dinner. It does not matter how much you scrimp and save, it is still cheaper on the whole for the building to buy raw ingredients and make dinner for all families. The cost goes down dramatically.
This also makes sense, but what about one level up? If each building buys groceries and cooks dinner for all of their homes, it does not matter how much they scrimp and save. It is still cheaper on the whole for the entire city buy raw ingredients for dinner and make it for all of the buildings and their families. The cost goes down dramatically.
This also makes sense, but what about one level up? If each city buys groceries and cooks dinner for all of their buildings and homes, it does not matter how much they scrimp and save. It is still cheaper on the whole for the entire State to buy raw ingredients for dinner and make it for all of the cities, their buildings and their families. The cost goes down dramatically.
This also makes sense, but what about one level up? If each State buys groceries and cooks dinner for all of their buildings and homes, it does not matter how much they scrimp and save. It is still cheaper on the whole for the entire Union to buy raw ingredients for dinner and make it for all of the States, cities, their buildings and their families. The cost goes down dramatically.
This also makes sense, but what about one level up? If each Union/country buys groceries and cooks dinner for all of their buildings and homes, it does not matter how much they scrimp and save. It is still cheaper on the whole for the entire world to buy raw ingredients for dinner and make it for all of the nations, States, cities, their buildings and their families. The cost goes down dramatically.
We both agree that at some point, this stopped making sense. The question is: is an ideologically divided Union of 330 million people across 50 states with their own Constitutions and governments equivalent to a “house of five”?
Not only that, if you had to buy groceries through a blind auction, and price gougers knew that you needed the exact same items and were willing to pay whatever price it took, rampant profiteering would happen.
The current system is effectively all 50 states in an eBay-style bidding war over the same limited resources.
> I would prefer that states have more power and we further decentralize authority away from the federal government.
No EPA. No DOE. No equality under the law. No EOC. No NLRB. No Amtrak. No federal enforcement of consent decrees. No voting right act. No gay marriage, etc?
Edit: Thanks for downvotes. Every single one of these is enforced by federal and not state courts. It is federal court that gave us Roe v. Wade, for example. It is a federal court that prevents Alabama from running its own little fiefdom. It is a federal courts that gave us Brown v. Board of Education.
Have you ever met a DOE program manager? Have you ever personally dealt with an EOC lawsuit? I've done both, and let me tell you neither of those organizations comes anywhere near what you seem to imply they do. I'm not convinced society wouldn't be better without them.
A major thing the DOE does is keep track of where the world's plutonium is— it's energy-related, but also a national security matter. Michael Lewis's excellent book The Fifth Risk examines some of these agency functions in the context of what was lost when there Trump administration stepped into power with essentially no transition plan or concept of how to run them.
Them having critically important functions that are different from what their names might imply is not at all the same thing as "we'd be better off without them".
Already tried that, the first constitution, the Articles of Confederation. The founders quickly discovered the federal government was too weak.
But alas, one of those founders, Jefferson, argued we should rewrite the constitution every 19 years.
And another founder, Hamilton, argued that ambition must be made to counteract ambition. And that government is a reflection on human nature, most directly its citizens.
https://avalon.law.yale.edu/18th_century/fed51.asp
Personally, it made him cool significantly on France, which is in pretty stark contrast to where he started. He ended up siding with Hamilton on expelling the French diplomat who both threatened American neutrality, and was kind of gearing up to try and overthrow George Washington. And Jefferson hated Hamilton.
Politically, it moderated him significantly. He started off as very pro-revolution, pro “watering the tree of liberty with the blood of tyrants and patriots”, and by the end he ended up regretting France not shifting into a constitutional monarchy. This is after both witnessing The Storming of the Bastille in person (he was an ambassador then), defending the September Massacres[0], and knowing quite a few people who were executed during the terror.
There is a comfort that comes from the instability of party switches. The parties don't cooperate, which means less can get done. Anything that puts anyone in an area where one of the gangs of politicians can actually do something, is to be avoided. We've learned that the hard way in Wisconsin.
As a general rule, it's always best to split up your government as much as you can.
Less gets done means the country gets worse and people get more radicalized trying to improve things. The polarization in the US is likely a direct result of the massive deadlock.
Your strategy is one guaranteed to ruin your country.
Isn't that exactly what we're seeing now? The government has basically been in gridlock since 2010, and voters have increasingly rewarded extreme policians who seek to shift the overton window over compromise politicians who work across party lines to find a middle ground.
The book American Carnage is a fantastic deep dive on this (and extremely fair and even-handed, despite the bombastic title).
If "that" is the cause-effect relationship claimed above, no we are not "seeing" this right now. There is a huge difference between events and the narratives, accurate or otherwise, which some people use to explain those events. The system under consideration is insanely complex, with an immense list of causal factors at play. To me, in my opinion, it's obvious that the causal relationship described above is at best a tiny contributor that is, itself, dependent on other factors also being present. At worst, it's completely wrong and a distraction from understanding the real causes.
There are democratic nations with many more parties than we have, and the quality of governance in many of these nations has proven to be as serviceable as the quality of governance in the US. (Some might even argue that many of these nations have displayed superior governance to the US despite the power being split up among so many parties that they need coalitions to accomplish the little they can get done.) I've never really found myself persuaded by the skepticism against split governments.
Now there may be a point of diminishing returns. As in 5 parties are as good as 10, are as good as 15. But that's an academic question, and we're not even at 5 parties yet.
On the other end, maybe 500 parties is self defeating, as you say. But we're nowhere near that either.
It could be argued that governance is better in other countries at least in part because there are more parties. After all, it enables alternative voices to be represented better, and it reduces the power of centralised party structures.
On the other hand, too many parties becomes unwieldy, and I'd argue that 10 is already going to be too many in practice.
Historical experience in the early 20th century led many countries to develop minimum bars, e.g. parties with fewer than 5% of the vote not getting any seats in parliament.
The government has continued to spend more and more and continue fighting wars around the world; so despite their disagreements in public -- they seem to agree a whole lot.
The problem with less getting done is that it applies to all levels of government. Want to change your yard landscaping? Nope! Not when your neighbors, town, county, and state all have to separately approve it.
Yes but you would also see lots of extremely advanced states like we’ve seen with Germany, France, Denmark, Sweden, Finland, the Netherlands, Austria, Belgium, and Estonia in the EU
It's not legal for a US state to declare bankruptcy. There are three relevant parts in the US Constitution that preclude this action. One says that US states are not allowed to abrogate their contractual obligations (pensions, debts, etc). Another says US states are sovereign in their own right. The Federal government cannot act on them directly. All bankruptcy procedures (personal, corporate, municipal) are dealt with at the federal level. Having a federal court process a state bankruptcy would violate state sovereignty, because the federal government would be acting on a state directly.
A law would have to be passed and there would probably be a challenge to it that would eventually go before the US Supreme Court.
It is a game. The consequences are varied, but for McConnell they are generational wealth, the self-satisfaction of entrenching Republican values in the Federal court system for at least another generation and the destruction of senatorial traditions that were centuries old.
The Atlantic author seems deeply confused. Not unexpected for David Frum. Puerto Rico is a territory, not in any state. A city is under state sovereignty.A state or a city can default. A city can declare bankruptcy under Federal law.
There is no law allowing a state to go bankrupt and be managed by the Feds.
Bankruptcy is an option , not a Federal power. McConnell isn't playing 7 dimensional chess, he just doesn't want to return tax money to Blue states and was just using language loosely when he said "bankrupt".
> he [totally meant some other thing] and was just using language loosely when he said "bankrupt".
If that's so then he's had plenty of opportunity to make that known. Based on the media frenzy around this, it's quite clear that he meant and continues to mean a literal, actual, non-sarcastic bankruptcy.
Pushing people off of unemployment insurance, which it’s generally assumed that some states are doing, all while there is no work to go to isn’t a recipe for a depression, it’s a recipe political catastrophe. In a weaker democracy this stuff would trigger a revolution, and I’m starting to get worried about ours.
this is why a lot of people have raised their eyebrows over the cost of shelter in place vs the risk of Covid19 infection. I'm glad it's becoming more visible, a few weeks ago you'd be shouted down for even suggesting the economic and political consequences of shelter in place could be catastrophic.
Virus going to do what it's going to do. People can choose to stay home but this shelter in place stuff is wrecking the lives of the poor and the people who are most vulnerable.
"The death rate in Sweden has now risen significantly higher than many other countries in Europe, reaching more than 22 per 100,000 people, according to figures from Johns Hopkins University, controlled for population.
By contrast, Denmark has recorded just over seven deaths per 100,000 people, and both Norway and Finland less than four."
We just fired our cleaning crew this morning and cut hours for the entire shop floor. We are a mid-size, midwestern diesel repair shop similar to Western Truck Exchange. I used to just do valve work and major overhauls, now I carry garbage to the dumpster and fix the copiers in the front office too.
>alternative work is limited
non-existant out here really, but the real thing no one seems to be covering is crime seems up. We had two break-ins this month, one stole all our nitrile gloves, another took our air conditioner and a tool box.
>the unemployment systems in many states are either broken or running out of funding.
LOL this is a massive understatement. I applied a month ago for limited unemployment and got a voice message telling me the system was overloaded after I had completed the 40 minute call. the next day the line didnt even answer and the website was still down two weeks later. I finally stood in line for an hour at the unemployment office to be told I had to call the number "when it comes back up." Oh, those Trump Bucks? the $1200? Not me or a single person ive talked to has gotten that money.
>the federal governments indicated desire to let blue states go bankrupt
Just the blue ones? I'm in a red one and so far its starting to feel like we're all up shits creek. The local Sheriff wanted us to do oil changes on their patrol cars because we're part of a city contract for fire truck maintenance and they dont have the budget for regular service anymore. the motor pool for the county just cancelled their snow plow rebuilds, the county schools cancelled their bus maintenance and wanted to know if we would buy about 15 of them. The local water company asked if we could do their pump house generator maintenance on a net 120 or a payment plan.
>a depression.
I remember living out of my truck during the 2008 financial "downturn" and freezing all through November. I think the government may be vastly over-estimating the social credit they have with the people of this great nation if they think another round of "austerity" is going to sit right with us while all the banks get bailouts and the rich get richer.
> Oh, those Trump Bucks? the $1200? Not me or a single person ive talked to has gotten that money.
That's awful. In Canada, most people got their CERB money within a week. It took 2 days if you already had direct deposit info on there. Some people are refusing to go back to work after the relaxed lockdown because the CERB is more than they make working a few shifts a week.
It's a bit frustrating that part-time workers are getting more than if they would work, but I'm happy that everyone is taken care of.
I live in Europe, in a more or less decent country, and thankfully, a fair chunk of us don't have to worry a lot about job security/income.
The Canadian move is, unsurprisingly, more forward-thinking than the usual US sleight of hand thing.
But I wonder, in these conditions, with minimal incentive to come out, isn't the CERB inflating $CAD?
Has there ever been a time in US history that the federal government has been so openly antagonistic and overtly willing to attack opposite-party state governments? If so, what were the outcomes? If not, is there anything even close?
Current question - what is the endgame for those who what blue states to go bankrupt? What do they get if that happens, outside of talking points? I assume they profit off of it (because that's the reason anyone does anything that I can tell), but how?
Well yes - there was a civil war! And more recently, the national guard was used to enforce school integration. Things have been much more antagonistic between the federal government and the states at times in the past.
In the years leading up to the Civil War, the states often passed bills specifically intended to hurt each other, and the Federal government passed laws intended to economically harm the south. It was a complete shitshow.
Today's politics are positively gentrified by comparison.
The thing is, right now there seems to be a disturbing pattern of the world falling apart at the end of every GOP administration. This is problematic, because we still need the GOP so that we can vote out democrats when they mismanage the nation's affairs. We can't have one party, that's not safe for us as the citizenry for obvious reasons.
At the same time, we can't have this, "the world ends", at the end of every GOP administration either. So we really do need to fix this.
The alternative is we get some different parties, and I've seen little to no indication of that happening. The other parties have neither shown an ability to evoke a response large enough to get elected. Nor have they shown an ability to govern even in the extremely unlikely event that they were elected.
For the foreseeable future, we are stuck with the dem-rep dichotomy. Which can work. We just need for the reps to stop running the nation into the ground when it's their turn. Other nations have shown us that reasonable and effective responses to the pandemic were possible. Why are we here? What is the set of missteps or issues that got us here? We have to identify those issues, and fix them.
Single party rule in California has been an improvement. We have a functioning government. Kinda helps in a pandemic. When we got rid of our last Republican governor we paid down our debt and California entered this dire period with a big reserve. The notion that some sort of optimal condition is reached by trashing government is just a clueless and stupid idea.
"Single party rule in California has been an improvement."
I just moved to California so I don't have too much of a personal opinion yet but that sounds like a bold claim. From what I've seen, people over the age of 30 seem split on whether or not it's an improvement. You look at mismanaged cities like SF where there's insane homeless budgets but very little action and results and wonder if the monopoly on political power has made politicians here complacent.
Then there's the whole NIMBY thing. There's a whole lot of Democrats (arguably DINO's) that are very anti-building. They run under the Democrat banner so they'll probably keep getting re-elected. Obviously a solution here is people getting involved in local party politics to primary these candidates out, but that sounds like a miracle that'll happen as soon as we get nuclear fusion power plants.
The whole thing makes me wish 3rd party candidates were more viable in the US. This flip-flopping really sucks and creates a lot of chaos but political monopolies, from what I've seen, are able to hide mismanagement and bad policies really well. (Texas is probably a similar example from the other spectrum.)
You are choosing really bad examples, because Republicans are even more extreme than the Democrats on them.
Homelessness is an infinite money sink coupled with very problematic civil rights issues. It takes a unified effort at the federal level when states are willing to just ship their problems to other states. It also requires a unified effort at healthcare--both physical and mental. Nobody has come up with a good solution to homelessness yet--anywhere. If you have one, put it out there as lots of governments are desperate for a fix.
While NIMBY is bad irrespective of party, the YIMBY movement only started gaining traction once the Republicans were purged as the NIMBY movement could COUNT on them as a unified bloc of obstruction. And, as for NIMBY, renters outnumber property owners, yet don't show up to vote. Well, then what results do you think you're going to get?
As for Texas, it isn't as uniformly Republican as you think. The major cities are gaining significant Democratic representation (the Republicans just banned straight ticket voting because it destroyed them in Houston last cycle). You can also see this in the Covid-19 response--the mayors for big Texas cities almost uniformly shut down--Austin declared very early in order to avoid the disaster that would have been SXSW.
Yes, the gerrymandering in Texas is horrific, and the areas outside the cities are as stupid red as it gets. However, Texas isn't as unified as you think--in spite of the human-shaped Senator known as Ted Cruz.
The homeless coming in from out of state turns out not to actually be that prevalent in practice. In LA, for instance, only 18% of currently homeless residents became homeless while living out of state [0]. So if you could magically get everyone from out of state off the streets, you'd still be left with 82% of the homeless population, i.e. there'd still be a big homeless problem.
To a first order approximation, the majority of homeless are simply residents who lose a job or can't earn enough money, can't afford their rent, and end up on the street. Making a lot more housing available so it's not so impossible to afford is clearly an important part of the solution, which we seemingly can't do as long as progressive democrats are in charge.
Homelessness is, unfortunately, not a uniform block.
Some chunk are from out of state. Some chunk are mentally ill. Some chunk are addicted to drugs. Some chunk have physical ailments. Some chunk are fleeing abuse.
This is what makes homelessness so intractable. Even if you fix a chunk, that's probably less that 20% of the problem. Now, you've spent a lot of money, made no visible progress on the problem, and have a bunch of people clamoring about how you wasted money.
> "As for Texas, it isn't as uniformly Republican as you think. The major cities are gaining significant Democratic representation"
This is because of Democrat-voting people leaving Democrat-led states and cities that are no longer functioning well. If their policies worked, why would they leave (for example) CA in record numbers to move to TX?
I left California long ago because it’s so polarized towards blue. I share different ideals and tend to get ostracized for them - not a community I want to be part of.
California has gotten significantly worse over the last 10 years or so for residents though, even if some debt has been paid off.
Rent control, nimbyism, etc all backed by the current government have made the housing market a hellscape. Nothing has been done to address the education system and huge pension liabilities either.
The issue with Democrats in charge without any meaningful opposition is that none of the Democratic radioactive stuff gets touched (excessive regulation, entitlements, etc).
> California has gotten significantly worse over the last 10 years or so for residents though, even if some debt has been paid off.
> Rent control, nimbyism, etc all backed by the current government have made the housing market a hellscape. Nothing has been done to address the education system and huge pension liabilities either.
Rent control and Nimbyism is not new in the last 10 years in CA. In fact, rent control in the state is less strong than it was in the past.
So you can't directly blame those for changes in the last 10 years.
What's changed in the last 10 years? A lot of incoming migration into high-paying jobs. And it largely sucks for everyone but those new residents who are making more than the existing residents. People who make less are increasingly starting to leave, but not enough to make a dent compared to the influx of newcomers with money. If you have money, you're still more likely to move to CA than away from it.
You think if all those people were wealthy Republicans instead of Democrats they'd be less-NIMBY? Right-wing suburbs in the rest of the country are NIMBY-central.
> Rent control, nimbyism, etc all backed by the current government have made the housing market a hellscape.
The question is if California is soooo bad. Why are smart, intelligent people coming here? Why does capital still invest here?
Part of the answer is other places in the US are slowly failing. So many of the problems have to due with California serving as a refuge from failed economic and social policy in other states and countries.
If California is so great, why are so many people moving away? [1]
California is being propped up by the tech industry because historically the biggest tech companies are headquartered here, which caused all the talent to be clustered here, and then new tech companies were forced to be here to attract that talent. Obviously, smart, intelligent people move here because jobs are here, and capital invests here because talent is here -- but things are changing quickly and other cities are becoming tech hubs.
If these other states have such "failed economic and social policies", why are so many people moving there?
The worst will be when Californians move to other states and then vote for policies that ruined the place they just fled.
Anecdote: Friend manages a call center in California. Couple of years ago Texas using a bunch of sleazy tax incentives tried to get the center moved from California to Texas. Friend said none of the gay boys wanted to move. And parents were horrified by the idea sending their kids to public school in Texas. Move never happened as a result.
Data [1] vs. anecdote: Austin is one of top same sex metros in the United States and San Antonio is one of the top places for same sex couples to raise children (in Texas public schools).
They're not. California has a net egress of people with about 200k more leaving the state last year, along with lots of businesses.
The state is bankrupt. It funds healthcare for illegal immigrants while being the only state that forces a fee for lack of health insurance for US citizens. It has the highest homeless population and wealth inequality with declining economic mobility, ballooning cost of living, and generally worse overall quality of life compared to other major metros.
We don't need the GOP for that. Both the RNC and DNC have dramatically changed their positions over the past 30-40 years. That could happen again (and probably will) if either party suffers a life-threatening loss in elections.
Or another party will rise to power, and one of the current powerhouses will fade away.
Just as our legal system is adversarial, where two "teams" enter a court to at least attempt justice, it seems crucial to a successful political system that there be a dialectic between opposing views, hoping compromise benefits the whole.
Comments such as this, dismissing a huge portion of fellow citizens out of hand, without so much as recognizing that "they" might be trying to do what's best in their eyes is so far from a democratic ideal...
> Comments such as this, dismissing a huge portion of fellow citizens out of hand, without so much as recognizing that "they" might be trying to do what's best in their eyes is so far from a democratic ideal...
Explain to me what I'm supposed to do with people who wear "Better Russian than Democrat" t-shirts or my father-in-law who literally said "Her views are everything I want, but I can't vote for her because she's with the Democrats."
That kind of stuff is not anti-Democratic party--it is anti-Democracy.
> Just wow. Hope your dictators benevolent.
Sorry, I'm pretty comfortable burying a party that is anti-Democracy.
However, it turns out that the California jungle primary gives the opposing party more power because it often gets to be the king-maker between the two Democratic candidates rather than simply getting ignored because one candidate won the primary and now can roll over the general election.
So, that actually approximates your dialectic as opposed to mouthing it and never compromising. Unlike the Republicans, Democrats don't seek to silence the opposing party. But, yeah, the jungle primary is going to do a good job of removing the wing nuts from both parties from the conversation.
Just because you have a crazy father-in-law doesn't mean that all, or even most Republicans think that way. If you believe it, then you live in a bubble. Also, if you are so right, and your point of view is so correct, I'm curious why you haven't been able to convince your father-in-law and show him the error of his ways. Actually, I'm not curious--it's probably because you think everyone else in the other party is wrong and has nothing constructive to add, which causes other people to not listen to you. This otherism is tiring.
you know, there are plenty of batshit insane Democrats out there too. I don't see how you can put all republicans in the same basket (nor can you Democrats). Turn off the TV and avoid the toxicity of the Internet, you'll be much happier and realize that 99% of all humans are plain old every day decent individuals.
How are the dems attempting to sabotage the current presidency? Holding someone accountable =/= sabotage. Seems like Trump is sabotaging his own presidency more than any one else.
> overtly willing to attack opposite-party state governments
It might be straight-up politics. But there is a real situation where state governments have been financially mismanaged. Should the "working class" person in Alabama without any retirement prospects be forced to bail out (via the Federal Gov't) the state of California's very generous pensions that were not fiscally sustainable in the first place?
Alabama gets ~$3.50 form the federal government for every $1 it contributes in federal taxes. California gets ~$0.97 for every dollar it gives. So the real question is should Californians be bailing out Alabama all the time. Should states like South Carolina, Alabama and North Dakota just be left to die? I mean they are takers in even the best economic situation.
The answer is of course not, they are states populated by real people who live under the laws and economic system of the United States Federal government. The government should ensure that all people are entitled to enough funding to provide opportunity, health and justice. We don't just leave people to suffer regardless of who they vote for. At least we didn't used too.
I always find those numbers interesting. IIRC, they come from the Taxpayer foundation and generally stop at “zip code where the Feds send the check”.
Hypothetical example: The DoE wants to build a supercomputer from XBox 360s (ASCI RRoD). They select UNM as the lead contractor and write a check for $101M. UNM buys $50M in XBoxes from MSFT in Seattle, and another $50M for compilers and professional services from IBM in Armonk, NY. Did NM get $101M for their taxes, or $1M?
That might be meaningful if you could show that most of the federal money going to New Mexico was used for R&D as opposed to, say, social support programs. And then you could try to show that the money going to all of the other "taker" states was similarly being used on developmental projects as opposed to social support.
I'd bet on it not being used on R&D. In fact, I'm betting most of that money never even leaves the state of New Mexico. Those contractors building roads aren't being paid with monopoly money.
I could be wrong, but I doubt it.
That's one of the reasons I'm such a big proponent of lower taxes. The tax resource allocation scheme is fundamentally unfair as currently structured. There are other reasons I support lower taxes, but you don't want to get me started.
Note that often the ZIP code that is chosen is a result of senators pulling strings to get it awarded to their constituents, even for R&D–that's often new jobs.
>Should the "working class" person in Alabama without any retirement prospects be forced to bail out (via the Federal Gov't) the state of California's very generous pensions that were not fiscally sustainable in the first place?
Multiple citations needed. Alabama takes back a lot more than they pay into the federal government (CA not so much). It's easy to appeal to the "working class" people, but those people have been getting much more federal support relative to what they pay in, while states like NY pay in substantially more than they get back.
The state of California is actually in a pretty decent financial position. In fact, the blue states are net contributors to the federal budget while red states are net negative (they take more resources than they provide back in federal taxes)
If there weren’t any blue states around to sign the red state welfare checks, they’d be in a pretty poor position.
According to Mercatus Center fiscal rankings, 4 out of 5 of the bottom 5 fiscal performers are run by democrats: illinois, new jersey, conneticut and massachusets. Kansas, a red state, is the outlier.
Its easier to be in better financial shape if you are taking in more federal funding than you are contributing via federal taxes. 8 of the top 10 states that take more funds than they contribute are red. Exceptions are Hawaii and New Mexico.
This spending constitutes things like social security checks and the upkeep of military bases and other facilities. It is not relevant to state budgets. And even if all the money went to a state general fund, the worst performers would not be significantly different.
In 2014 the federal government provided 40.9% of Mississippi's state budget. How is that not relevant to the state budget? As a percentage of state budget being provided by the federal government, 13 of the top 15 recipients are red states.
Very simple answer: blue states have bigger budgets so the % of aid they receive from the government seems smaller.
The Federalist has done an analysis of federal aid per resident:
>Against a national average of $1,935 in intergovernmental spending per American, red states receive just $1,879. Blue states get considerably more, at $2,124 per resident. Purple states see the least of their money returned to them per capita, at just $1,770. Measured in this way, the blue states are getting quite a bit more than the red or purple.
It's hard to have much ability to impart good faith when you intentionally exclude the amount of money paid in by blue states. The money the federal government is paying to red states is (...mostly) coming from somewhere.
The article states that no state receives more than its residents and corporations pays in federal taxes. People pay money to the federal government and the government pays back some fraction of the money per state. So any notion that blue states are subsidizing red states is ridiculous. What's happening is that the wealthy blue states pay a lot under our progressive tax system and receive a lot in return on a per capita basis.
Was it intentional that you left out the parts of the article that show blue states pay more in, and receive less per resident relative to what they paid in? Because you completely misrepresented what is claimed by only highlighting the outlay per resident
Your source has Massachusetts in the bottom 5, which lets you know right there it's laughable.
Never lived there myself, but I know for a fact they're consistently in the top 5 of contributors to the federal kitty of all states both nominally, and per-capita. They get almost nothing back compared to what they put in. They are, arguably, the largest contributor to the nation if we're considering individual burdens. And a top 5 contributor by outright total aggregate tax contribution.
Illinois and New Jersey, by total outright tax contribution, are also consistently in the top 5 of states that contribute to the federal government. (And I'm from Wisconsin. I hate Illinois. But facts are facts man.)
Hate to tell you, but your source is bogus as far as analyzing the biggest contributors to the national kitty.
You seem to think that Illinois, New Jersey and the lot must be in a great fiscal situation because they are "net contributors". As I explained in another comment, the money these states "receive" is mostly payments to individuals and has little meaning to their state budgets.
Paying out a lot more to the federal government than they receive back does not mean these states are doing well and others poorly. It really just a natural consequence of having a lot of high earners in a progressive tax system. The states in question have been racking up huge amounts of debt and/or have underfunded pensions funds, which is why they are consistently ranked lowly in terms of fiscal health. I am a little surprised you had you not heard of the financial problems coming out of Illinois, New Jersey and the like? There's even a dedicated Wikipedia article:
>Paying out a lot more to the federal government than they receive back does not mean these states are doing well and others poorly.
Sigh.
Even if we look at a list of states by GDP, Illinois, New Jersey, and Massachusetts would still be perennial top 10 states. Even a list of states by GDP per capita, they all still are perennial top 10s. Per capita, I would bet that Massachusetts is number 1? (Maybe NY might edge them out? But I'd definitely bet they're number 1 or 2.)
Listen man, I don't even like Illinois. I hate Chicago. But facts are facts. They make a $#!t ton of money. And not the easy way doing financial engineering like New York. They do it the hard way with a huge diversified economy. Few states are like that. It's just a fact man.
Are you going to say that GDP is not a good indication of what a state produces?
Their high GDP per capita is not going to fix their insolvent pensions or runaway spending. Illinois has a BBB credit rating (just above junk!). Are you really just going to ignore that because of high GDP?
https://en.wikipedia.org/wiki/List_of_U.S._states_by_credit_...
It would be better if you countered the statistical method used in the analysis. Otherwise your point is no better than someone saying "Soros donated to this think tank, therefore invalid".
Their "list" is basically just a list of states with debt, that completely ignores their ability to issue new debt and generate revenue (i.e. that people actually want to live in California and not Kansas), while ignoring the fact that many of these states with "balanced budgets" provide basically no services and are liable to getting wrecked in times of crisis. I mean, the fact that Kansas is so high on this list should tell you all you need to know.
>Their "list" is basically just a list of states with debt, that completely ignores their ability to issue new debt and generate revenue (i.e. that people actually want to live in California and not Kansas)
Do they? I'll grant you that nobody wants to live in Kansas. It had a net migration of −4.32% between 2017-2018. But California doesn't fair much better at −3.95%. People are also fleeing Illinois, Connecticut and Massachusetts (all in the bottom 5 as give by Mercatus) in record numbers.
As people leave these state, it certainly does impact their ability to raise revenue, and this is compounded by how many blue states rely on progressive taxation.
>I mean, the fact that Kansas is so high on this list should tell you all you need to know.
But Kansas is a special case. Their pension funds were crippled by particularly bad mismanagement and corruption. The question you should be asking is why are the other bottom 5 blue states?
People are leaving California because of the housing crisis, which is undoubtedly a huge issue, but is an indicator of massive demand to live in California, not that people are fleeing the state due to fiscal mismanagement
Late reply, but the housing crisis is actually a major problem of supply, not demand. It's very time-consuming and costly to get anything built in California. Texas is experiencing positive net migration, and presumably those migrants demand Texan homes, yet Texan housing is much more affordable than California. Ditto for Florida.
As a mathematician I can tell you that game theoretically, Alabama is not able to bail out anyone. They use more money than they contribute to the country. I think a better example would be should Texas or Massachusetts be obliged to bail out California.
This kind of thinking leads down a sad, unproductive, and dangerous "me first" path. Let's avoid falling back into tribal thinking. This applies to states as much as countries (as seen in Europe right now).
If pensions or any other specific things are mismanaged - which IMHO is in fact the case in California - let's fix them together.
Sure, but look at the recent protests. Armed men protesting state level governments openly egged on by the whitehouse and organized by rich political dark money.
Small arms and asymmetrical tactics have quite substantive results in places like Afghanistan, Yemen, and Iraq. Let's not write off potential danger because of lopsided resourcing.
There was a distinct period before the armed attack of hostilities between the federal government and the southern states, e.g. Nullification crisis and the “tariff of abominations”.
I’m not sure it particularly matters which side started it, you still had basically open violent conflict between democrats and republicans for decades, before and after the war.
One side was fundamentally built upon slavery (and for the "but but but" kid in the back you will notice that the Union did not exempt their slave states from the Thirteenth Amendment) and attacked the other out of fear that their slaves would be taken away.
I can try to give you the most "good faith" argument in favor of allowing Blue States to go bankrupt.
There's a caveat here that the Federal laws will need to change a bit to allow States to go into packaged restructuring. And to ensure that we are bailing out specific individuals to ensure that they are not too negatively affected.
One of the strongest arguments against "bailouts" of large corporations is that it negatively impacts price discovery. More specifically, it removes a company's ability to thrive in certain extreme conditions from the pricing equation entirely. An example: Amazon is at all-time-highs right now, and it's because it's proven itself to be a hugely important institution, both during wartime and peacetime. Its market price should reflect this value. Airlines, OTOH, are an institution that can be prone to failure when some things go wrong (exogenous or otherwise), and the price should reflect that. A theoretical airline doing $1B in revenue should be worth less than a theoretical Amazon doing $1B in revenue, even if both have identical profits, growth, balance sheets, etc. The net effect of this is inefficient and poor capital allocation, where more capital would be allocated towards airlines than warranted, and that capital could be allocated elsewhere in more productive / less risky endeavors.
This may come across as overly fundamentalist about the market, but where this really manifests is in the Fed's bailout of junk bonds, which is absolutely nuts. The whole point of junk bonds (I.e. the type of a loan that WeWork would have to take) is that it's default risk is high, but the yield is also high. If junk bonds are bailed out, then that means that we all ought to go and buy junk bonds. High yields for everyone! The Fed is going to bail you out no matter what. This, then, overly inflates the demand (and price) for junk bonds, and you now have a total capital mis-allocation, with a lot of capital going into AirBNBs and WeWorks of the world, rather than the Amazons of the world.
How does this relate to States? Taxation is the price we pay to live in a society, and States are a really underrated way we can accurately come up with the correct "price" for the correct basket of services society might offer. This is the Charles Tiebout school of thought. Bailing out states with shitty fiscal policies is 1) a moral hazard and 2) messes with the long run calculation of the optimal level of taxation.
Okay great, so then what happens if we just let States "fail", like we might let Corporations fail? If we allowed States to declare bankruptcy, the bond-holders won't get paid, and the State credit ratings will shift to reflect their true creditworthiness. In this regard, bailing out bad States is no different from bailing out junk bonds — the only difference is that today State bond-holders don't know that they're holding onto junk bonds — most States have a generally high credit rating (except Illinois, because, well lol)[1]. The only mechanism we know of for the system to correct the ratings of these bonds is to 1) let States relieve themselves of their debt obligations, and 2) organically allow the bonds for those States to become more high-yield.
You might argue that this makes it difficult for States to fund infrastructure projects and safety nets. Yes, it makes it difficult to finance projects in the short run, because the bond failures are reflective of the quality of the current governance. Who comprises the government, who is running things can change democratically — if citizens want more infrastructure projects / better development, they will have to vote for better policies and better representatives. It's the democratic equivalent of swapping out the entire executive team at WeWork with the executive team at Amazon. The alternative is that you never see these governance changes at the State and local levels, and you have the same problems in perpetuity because the same people are always in power, and we never learn from mistakes — institutional rot. Better governance might be to restructure bad pension systems, or raise their own State taxes (IMO State taxes are far too low).
TL;DR — the best argument for letting States go bankrupt is that it's an effective way to weed out institutional rot in the long run, and come up with the optimal level of taxation for the optimal basket of State provided services. Such a scheme can only work if individuals continue to be bailed out so that they are not caught in the onslaught.
The artificial safety net provided to states as opposed to corporations is for the fact that it is important for all states, even the most underperforming to have a standard level of infrastructure and overall competitiveness. The whole concept of republic like the US is partly based on bringing up the rear. This is why poorer states have less leverage and must offer more incentives to businesses to induce economic activity. Richer states already have advantages of being the incumbent including various resources to draw and keep businesses. These same states (often blue) have higher taxes to fund their barriers to entry with surpluses that give them the capital to weather aberrant situations like these. In addition, it is difficult to argue that constituents will vote for their economic best interests if social issues are more top of mind in redder states. This will only exacerbate the problems without a federal solution in place.
> The artificial safety net provided to states as opposed to corporations is for the fact that it is important for all states, even the most underperforming to have a standard level of infrastructure and overall competitiveness. The whole concept of republic like the US is partly based on bringing up the rear. This is why poorer states have less leverage and must offer more incentives to businesses to induce economic activity. Richer states already have advantages of being the incumbent including various resources to draw and keep businesses.
This is a great ideal, in theory, but the flip-side of it is that in reality if we don't have any sort of negative consequence for unsustainable policy-making, you have a moral hazard, and institutional corruption and rot. Heaven knows there is a lot of that at the State and local level. You ultimately need some creative destruction in the long-run to ensure that we have the best possible governments. I heavily caveated that we must make sure that, in the short run, the poorest are taken care of. Insofar as one would be in support of allowing States to fail in a "good faith" way, it would be if the Federal policy ensured that the poorest among us are bailed out and taken care of in the short run.
> These same states (often blue) have higher taxes to fund their barriers to entry with surpluses that give them the capital to weather aberrant situations like these.
Sure, and a lot of Blue states will be fine and not have to go into packaged restructuring / bankruptcy. For a lot of States (both Red and Blue), the most worrisome line item is the defined-benefit pensions — they promise a certain return that has never happened and will never happen. These pensions will _never_ be solvent. Most people in Illinois under the age of 50 know that they will probably never see a dime of these pensions, and that's terrible. You would want to push States to more sustainable pension systems, maybe a Sovereign Wealth Fund like Singapore / Scandinavian countries, or just raw publicly funded 401(k)s. If those same pension plans instead put the annual contributions into the S&P500, they would have been more solvent than they are today.
> In addition, it is difficult to argue that constituents will vote for their economic best interests if social issues are more top of mind in redder states.
I mean, you have to let constituents look out for themselves in a democracy. If they don't vote in their economic best interests, then that means those societies favor different outcomes. All of these states have republican forms of government with checks and balances to ensure that democracy doesn't turn into mob rule. Letting Blue states go into bankruptcy might even be better off for Blue states and worse off for Red states, but the underlying idea is that we need to let States test out different approaches to welfare and infrastructure and prevent long-term institutional rot.
> This will only exacerbate the problems without a federal solution in place.
I think you've missed the point behind why bankruptcy is bad. It's bad because it directly harms the people living in that state, which is something you didn't addressed at all in your post. It's hyper-focused on taxation and economic performance. It's callous.
States pay first responders - medics, firefighters, police, teachers - fund projects, and invest in their communities. State governments themselves employ huge amounts of people. They fund homeless shelters and food banks and all sorts of public services. It would be incredibly harmful to these communities to have their support systems that they depend on removed. Not to mention not being able to pay first responders during a crisis. Hows that for a moral hazard?
I also do not see how your post addresses the fact that blue states are overwhelmingly net contributors in federal taxes, and how red states are overwhelmingly net takers. It seems like it warps your view of price discovery, since the government has for decades guaranteed the bond prices of red states. The consistent federal allocation of tax money towards the everday failure of red states totally discredits your theory weeding out "institutional rot" during a crisis, and of optimal taxation.
> I think you've missed the point behind why bankruptcy is bad. It's bad because it directly harms the people living in that state, which is something you didn't addressed at all in your post. It's hyper-focused on taxation and economic performance. It's callous.
Taxation and economic performance are essentially the 2 core predictors for any political entity's prosperity. This is true of any nation in the world, from Germany, Denmark, Belgium, France, the Netherlands, Sweden, Finland, Estonia, etc. The core thesis is that we want States to be as prosperous, if not more prosperous than those countries. There's no way to get there without digging ourselves out of the fiscal hole — or if you believe in it, MMT. And unless we totally swap out the governing decision-makers responsible for digging States into the fiscal hole in the first place, this will keep happening again and again. It's the same reason bailing out big banks and corporations is also bad.
> States pay first responders - medics, firefighters, police, teachers - fund projects, and invest in their communities. State governments themselves employ huge amounts of people. They fund homeless shelters and food banks and all sorts of public services. It would be incredibly harmful to these communities to have their support systems that they depend on removed. Not to mention not being able to pay first responders during a crisis. Hows that for a moral hazard?
Going into bankruptcy doesn't change any of this, it just means that they get to keep the funds that they borrowed in order to pay for all of those things without having to pay back bond-holders. The bond-holders lose. Then the next thing that happens is that the credit rating falls, and they would have to pay higher interest rates on future bonds. This is definitely painful in the short-term, but institutional investors will continue to have some appetite for higher-yield bonds for near-term projects. In the long-term, credit ratings can change if the people of a State elect better leaders, and the State can take out lower interest-rate bonds. California had a BBB credit rating in 2003, and through strong leadership and good policy, raised their credit rating up to an A+ rating in 2006.
Additionally, States can also raise revenue by raising taxes. State taxes are awfully low. Those services, while good and important, aren't free — and their societies need to pay for them through sustainable taxation. The marginal income tax rate in the US is lower than it was in a lot of the 20th century — Illinois, California, New York, etc can all raise taxes to fill in that void. In most European countries, the middle class income tax rate is what pays for most programs, and is far higher than the middle class tax rate in the US. Another avenue that States can look into.
> I also do not see how your post addresses the fact that blue states are overwhelmingly net contributors in federal taxes, and how red states are overwhelmingly net takers. It seems like it warps your view of price discovery, since the government has for decades guaranteed the bond prices of red states. The consistent federal allocation of tax money towards the everyday failure of red states totally discredits your theory weeding out "institutional rot" during a crisis, and of optimal taxation.
Yes, fiscally irresponsible Red states should also declare bankruptcy, and all of this applies to them as well. 2 things can be true at the same time: we should ensure that there is a mechanism to weed out long-run institutional corruption/rot in both Red and Blue states, and we should also reduce transfer payments from net contributors to net takers. If there is a net contributor that ends up having to go through bankruptcy restructuring they should be able to use their surplus to weather the short-run fallout.
Ehh, I think the fact that one industry is doing well vs another is dependent on the crisis itself. If this was a localized natural disaster type of issue or something like the berlin airlift, the travel industry would become ascendant and the retail sector (online or otherwise) would be hurt.
Sure, airlines was just an example to drive home the more fundamental point.
There are a bajillion different variables that go into how we price corporations / assets in a decentralized way. This includes basic stuff like revenue, margins, balance sheets, growth, but can also include macro risk, which political party is in power, the current weather, etc. Apple isn't worth $1T because some schmuck decided it was worth that much, it's worth that much because we all play some part in the price discovery. When you remove some of the variables from this equation, the price becomes less reliable (mis-priced assets).
You might argue that it doesn't matter for most assets like airlines, and you'd probably be right about that, but there are certain types of assets like junk bonds where this has more negative consequences in the long run. We've been mis-pricing junk bonds to the degree that, at a macro level, there is way more capital being allocated to bad companies with poor fundamentals than there should be. We want more Amazons, Stripes, and Shopify's, and fewer WeWorks and SoftBanks.
States are similar, you have some States that are incredibly well run (Massachusetts, Washington) and some that are very poorly run (eg Illinois). We need some mechanism to nudge poorly run states in the right direction, and encourage well run States to keep doing what they're doing, and more.
End game for people like McConnell is that it puts downwards pressure on unions. A bankruptcy if a law is passed actually allowing states to go bankrupt would be a process overseen by federal courts, many of which are chaired by Trump appointed judges now. The judge gets to decide which debts are paid, meaning that pensions are very likely going to be chopped, hurting union members. There are other reasons.
Bottom line is that they want rich people (their primary donors) to get richer and don't care about poor or middle class. They are very open about it now and still somehow supported.
Could the union strike (after the bankruptcy proceedings are complete) and force the state to take on new debt?
Can states (or municipalities) not declare bankruptcy, and instead default on only the obligations they don't want to pay? That would be similar to how I as an individual can just stop paying one credit card but not the other. Or are those left holding the bag able to sue and force bankruptcy proceedings?
Those with pensions tend to be union members; the pension being a benefit insisted upon in negotiations between unions and their (government) employers. If a state declares bankruptcy, lists pensions as a debt, and the federal discharges the pension debt, the GOP can thumb their noses at unions in a very big way.
When talking about pensions in the USA, people are usually referring to retirement plans where the employer says something roughly like "when you retire, we will pay 80% of your salary". or "when you retire, we will pay you X/month". The responsibility is on the employer to ensure that money is around when you retire.
Companies used to have things like this - when my dad retired he had several pensions from multiple companies that worked like this. Nowadays government usually uses them to put off paying the full cost of employees.
Very few people in the United States have pensions.
Mainly pensions are available for state employees, or union members. And for that matter, state employees tend to be part of a union.
Unions are responsible for pensions, and the only people who have held onto them as the 401k has taken over.
Edit: Because I apparently can't reply to chriseaton below - 401k is defined contribution, you contribute $x which is a set amount and non-taxable. Pension is defined benefit; you receive $x, guaranteed, after x,y,z parameters are met (age, years experience, etc). They are not even slightly the same thing. Not even close.
That's not the case. Pensions are not always funded entirely by employer. In quite a few cases the salary of a worker is reduced by a certain amount that is added to what is contributed towards a pension by an employer.
The difference between a pension and 401(k) type plan is that pension is a defined benefit plan and 401(k) type plan is a defined contribution plan.
Yes, you're right that a pension often involves a reduced salary for the promise of a pension at retirement age. That's a huge part of the appeal of a public sector job that pays significantly less than its counter parts in the private sector. And that's why public sector employees get extremely angry and litigious when governments try to reduce their obligations, even as agencies face dire financial straits.
Which 401(k) plans are you thinking of require paying out to a retired employee if that employee has contributed 0%?
Because language is imprecise and depends on context - you and the GP are talking past each other. They are using the word in a conversational context and you are using it in an academic/technical sense.
"A pension is a fund into which a sum of money is added during an employee's employment years and from which payments are drawn to support the person's retirement from work in the form of periodic payments. A pension may be a "defined benefit plan", where a fixed sum is paid regularly to a person, or a "defined contribution plan", under which a fixed sum is invested that then becomes available at retirement age.
The common use of the term pension is to describe the payments a person receives upon retirement, usually under pre-determined legal or contractual terms. A recipient of a retirement pension is known as a pensioner or retiree."
A 401k is a savings account, not a contractual obligation, so that's why it's not a pension in common usage.
There are very few companies that offer pensions. A 401k is not a pension. A pension is recurring money that is given to you upon retirement in perpetuity. A 401k is just a means of investing your salary into the stock market pre-tax. Your employer does not even have to contribute to it although many if they offer a 401k plan offer some form of match up to x%. My last employer offered to match my contributions up to 6% my current employer offers no match. 401k and pension are very different.
It is not. In America, if someone refers to a pension they are usually referring to defined benefit retirement plans, where you work X years and get $Y as a result of some formula and $Y is not related to market performance or how much money is in the pot.
This is significant because the risk is on the employer to make up any short falls if the pension fund is not able to pay $Y because of market performance or underfunding. A 401K shifts the risk to the employee. If it's not enough to provide $Y per year, that's the former employee's problem to deal with.
Well I went to look it up on Wikipedia and that's what I read. Not sure why there's such a big disconnect between what people expect you to think it means and what references tell you it means!
Not really sure why you're so worked up about this? I thought a 401(k) was a pension, since it pays you money when you retire, which is what a pension is to me. I went looking it up on Wikipedia which said it was as well. Can you see how I'd think it was a pension?
> If you need help defining the words in that section let me know
Well I must not understand the word 'pension' then, because it says multiple times that it's a 'pension'!
If you don't to explain it to me you're not obligated to.
> Chris Seaton, Senior Staff Engineer at Shopify...
Not sure why you keep repeating my name and job like you're trying to dox me for asking a question about pensions... and it's in my HN Profile and my name is my username, you're not a genius for finding it out.
How am I doxing you if it's in your profile? People use names and titles in conversations the same way a 401k is a pension. I'm not sure you're qualified to judge genius. None of this is because you asked a question about pensions, is that honestly what you believe? Just in case it is: this is because you continue to insist that a 401k is a pension when it is not in this context.
Pension is broadly understood to be a defined benefit. Workers contribute to the pool a certain amount every months, government/company contributes a certain amount every months for every worker and when a worker retires the worker draws a specific amount until he or she dies or in some cases until his or her heirs die. The government (via PBGC) is on the hook for the amount until the time of death. The issue with defined benefit plans is that they are as they are being "negotiated" not self-sustainable with the unrealistic return expectations and having costs not adjusted for the reality of increased life expactancy.
Currently most of non-union ( and mostly non-government union ) employees have a defined contribution plan. A worker contributes a specific amount every year, a company matches some amount of workers' contribution. At the retirement worker's draw down is limited to the amount in that account. If the account did well. the maximum amount is that can be drawn is large and if it has not done well, it is not large.
Historically, pension benefits were one of the main benefits unions fought for (and won) so that their members could have an income in their old age and retire.
Today, very few workers still have pensions, but the few that do tend to be those represented by a union. In many states, this includes government employees: teachers, firefighters, police, etc.
And everyone else has 401ks which also suffer in a crisis, but the federal government can't bail out red state 401ks without also helping blue state 401ks, so in that sense 401ks are safer than pensions.
I don't even know what it would mean to "bail out" a 401(k). By definition you, the employee, are exposed to all the market risk. If you happen to reach retirement age in a down market, you're kinda just screwed. Should've made better investment choices 15 years ago.
This is why traditional pensions were usually a better deal for most employees.
Pensions are defined benefit. That is, it is specified exactly how much money you will receive in retirement.
A 401K retirement plan is not a pension. You save your own money and possibly an employer contribution, and you make your own investment decisions. The value goes up and down in accordance with what you invested in.
Why are you going all up and down this thread trying to pedantically show that people are using the term "pension" slightly differently to Wikipedia's definition? It's not contributing anything to the discussion.
Well I just don’t get it. People say ‘nobody gets a pension anymore’ but a 401(k) is just a different type of pension. My defines benefit savings plans literally say ‘pension’ in the product names.
The state pensions have no risk. They get a guaranteed payout regardless of stock market performance. The difference comes out of taxpayer pockets. With a 401k if the stock market crashes you are out of lock. The taxpayers won’t chip in the difference
> The media's job is not to fawn over the president
I wonder if you felt the same way from 2008 to 2016 when they were fawning over the previous president. It's interesting that they do a great job only when a certain political party happens to be in power.
It's easy to be the most watched cable news when every other mainstream channel is carrying water for the opposition party.
This comment is just more of the hate-mongering. "I saw an article I didn't agree with: I'm being attacked!" In the same threads, we hear of the bubbles people build by reading only agreeable news. How can all that be true at the same time? It cannot.
Voting predilections in the US are strongly correlated with the highest attained educational level of the voter. "The Media" as a monolithic structure has a higher average attained educational level than the country at large.
The "why" is obvious; I find a better question would be, are they wrong?
I don't think that's the case at all. If there's any problem with the media, it has been overly deferential to power.
That's always been the case. But whatever one thinks of Trump, it's pretty obvious that his campaign and post-election behavior is fundamentally different than presidents in living memory. He has rewritten the rules. The media just hasn't been able to adapt successfully to that, and still often writes about him and his administration as if they're covering things in a different era.
If you were a member of the media and the President of the United States - of any party - suggested people try injecting bleach as a cure (for anything), what would you do?
What would you say about other politicians who implicitly supported such irresponsible behavior.
This isn't even a political question - I mean it's basic science. Bleach.
In the interest of complete clarity and understanding I went and found the exact transcript and this was exactly what was stated:
“I see disinfectant, where it knocks it out in a minute, one minute, and is there a way we can do something like that by injection inside, or almost a cleaning. "
I have no dog in this fight, but totally natural and edible things like lemon juice and vinegar are also used as a disinfectant.
Sure bleach can be considered a disinfectant, but not all disinfectants are bleach. I do find it fun to extrapolate that Trump was telling people to go drink bleach and die though. Very entertaining during these lockdown times.
As sad as it is, I hope all those who voted for this are willing to accept the fate bestowed upon us from our 2016 election and the political stonewalling from both parties.
No you didn't. Though there appears to be some ignorance in your question regarding the handling of the situation by the current administration. Misleading the public, making false claims, punting all decisions to states, all will be used as a scapegoat to not assume any responsibility for the state of things today. Claiming your inauguration was the biggest ever is funny, misleading the public during a pandemic is unacceptable.
The list goes on and on, people need to hold our elected officials accountable for their decisions. That includes our whitehouse and as important is Congress. This includes both parties.
Perhaps its time to go back to basics. A focus on health, store-able foods, alternative investments which might survive bond/stock market issues, and family would be imperative in such a "new normal."
Vaccination certificates and debt forgiveness incoming? Who knows anymore - what harm is there in being ready?
Meanwhile I'm trying to get my "first" job as SE or backend/fullstack web developer. It's been so hard to meet the requirements (3-5+ years of previous professional experience) that now I'm thinking it might be just as hard to start a company (copying proven business model employed elsewhere, with necessary modifications), only you get a chance to at least try.
You should ignore those requirements and just apply anyway. The requirements are written by HR, but if you pass the tech call, no one will care.
It's all about the numbers. The first time I went looking for work, I literally sent out 500 resumes. ...had 10 call screens, 4 in-person interviews, and 1 job offer. And that was 1 month after 9-11.
McConnell is a shrewd negotiator so I assume he is using the bankruptcy position to win concessions on rescuing the oil and energy industry. Otherwise there will be a handful of Republican states facing their own bankruptcies.
Trump is just a spiteful moron but not even he would let New Mexico, Wyoming, North Dakota, Alaska, Louisiana, Oklahoma, and Kansas all fail.
No, but he'd let New Mexico fail (it's blue) and ram through a bailout for the rest out of political patronage, and the legislature would go along with it, since the Democrats seem to be allergic to actually opposing Trump policies.
That death rate would be significantly higher if hospitals didn't have the capacity to treat patients. Mortality rates for non COVID19 related cases would also go way up.
It maybe true, anyway, those young people, full of energy and party-lover is virus's best carrier though, locking in help prevents the spread to others whose vulnerable.
Ultimately, no one knows what the best strategy is, maybe the 'Swedish approach' maybe right, or not...,time will tell.
This seems like a great time for Amazon or Google to buy Lyft.
Amazon could bundle rides with package deliveries and get the pre-existing driver and passenger network from Lyft. Lyft was actually telling drivers to work with Amazon when the pandemic started (1).
Waymo could take Lyft’s aggregated rider demand. They already have a partnership to transfer autonomous rides from Waymo to Lyft during bad weather situations and refer Lyft riders to Waymo vehicles (2).
...What would they do with it? The business model (also uber) as-is makes a loss.
Uber/Lyft's initial proposition was that once ride sharing incumbents were established, they'd have a software-ish monopoly and margins. This did not work out. Now the proposition is "When driverless cars get invented..."
If google had a car that can drive itself, they can figure out an app. They can get to a customer base. The driverless car is the important part.
Amazon otoh... deliveries maybe? If they could figure out a way to do deliveries in a lyft/uber model... that's valuable to amazon.
Yes, this exists today, but what Amazon would be buying is faster time to expansion. If they need drivers now (which is an assumption, I don't know this to be a fact) Lyft gives them an established network incredibly fast.
So obviously the price would have to be right and of course Amazon wouldn't be paying a large premium.
There are wild differences between flex and ride sharing.
Amazon already had an internal project that was going to compete with Lyft and Uber. It was called Rides and it was abandoned. Rex Tibbens headed that project and subsequently left Amazon and went to join Lyft as their COO.
Sure, I'll switch between ride sharing apps based on cost alone. But I'll still want available drivers near me. I'm not willing to try multiple apps just to see if it's usable.
I think Uber/Lyft's customer bases are definitely valuable. There's a real business there post Covid-19. I'm not sure what the margins would look like though. I think an acquisition might be a good idea if it was cheap enough and it looked like competitors wouldn't be able to use vc money to offer rides below cost.
Exactly. Lyft doesn't have anything they can't create for a lot less money. And if they buy it, they get a lot of headaches: legacy code, legacy staff, legacy relationships to partner and drivers.
I could see value for self-driving/ride-sharing data collection for Google. Google wants to make a ride-sharing program, well has one now I guess, having all that data seems like a boon if Lyft is a cheap buy. They could also collect a lot of data for use with their self-driving research as well.
I really don't think Waymo needs Lyft or Uber to dominate the ride hailing market in the future.
If they can make a better self-driving car than anyone else, they will win the ride-hailing market. People have no loyalty to Lyft or Uber. They will use whatever is the cheapest/most convenient.
This seems like a great time for Amazon or Google to buy Lyft
Or maybe Apple.
Apple has been pouring millions into improving its street views in Apple Maps. It should buy Lyft. Pay the drivers an extra $x/mile to clamp the Apple Maps image gathering device to the roofs of their cars.
The drivers win because they get a bump in income in an industry that's already hurting.
Apple wins because it gets up-to-date information about the places where people go most.
Even better: Apple could pay them $x/mile to drive to specific areas where the data is stale or missing.
As a former Uber/Lyft driver, I'd be all over this like Oprah on a baked ham.
> Pay the drivers an extra $x/mile to clamp the Apple Maps image gathering device to the roofs of their cars.
Scenario 1 (buy Lyft): So if Lyft has around 1 million drivers in USA [1], and Apple will pay them an average of $50/month to use the device + the cost of the device/installation (around $100) that would cost around $150,000,000 on top of the acquisition price. And you cant really be sure that they covered all roads.
Scenario 2 (hire drivers): US total road length is about 4 million miles, average driver can cover about 160 miles a day (8 hours * 20Mph). If you want to drive through all of the US in 30 days you would need around 800 drivers. If you pay them $5000/month to do that, that would cost you "just" $4 million.
Presumably there's more valuable data than just maps. I would imagine that Lyft could give valuable real-time data like areas of the city where there's traffic congestion and slower drive times. It's unclear how you'd value that, but it seems like an acquiring company would get more than just raw map data for all available streets.
This gives you high frequency data of common roads at an incredible cost. Street views only need very low frequency data of all roads, so you'd be paying a premium for data that isn't needed while still having a gap.
Apple would only buy Lyft if they could control the brand experience to a level that just isn't possible at scale with humans as the primary service delivery (cough) vehicle.
Consider the Apple retail experience. Retail is relatively easy to train for, there's a big labor pool to pick from, and with Apple's revenue/sq.ft. they can afford to compete for good staff.
Now consider the sum of your Uber/Lyft experiences and the scale of the problem. Is it reasonable to expect an Apple retail level experience in the ride app space? Even with a tolerable up-charge?
Retail experiences have always varied with some brands able to offer consistently stellar experiences. Tiffany comes to mind. In all my adult years hailing a car has always been a total shit show except at the most extreme price points. I won't speculate as to why, I'm just saying, the quality problem of mass small auto ride hailing has yet to be fixed by anyone.
>Is it reasonable to expect an Apple retail level experience in the ride app space? Even with a tolerable up-charge?
They're called limos. And Uber already does them. Most people won't pay the premium though and that means, in part, that I imagine they have a fairly limited network outside of some dense metros.
Of course black cars are available for many companies if you pre-book. It's what I use for my home airport--or at least did when I was flying.
> Apple wins because it gets up-to-date information about the places where people go most.
Apple is already doing this - my iOS Maps has real time traffic in areas where I know that they're only getting this information from other iOS users, not from reporting devices.
And because the drivers own their cars, and will want to be compensated for any alteration to the car. Just like they get compensated for hanging ads of their headrests.
I work for Lyft and was part of this cut. I truly worked toward fixing things, and I don't want to sound salty here even though will, there's not much going on with Lyft or Uber to save in terms of tech. It's shoddy and useless. For the most part if Amazon got into the game now, and with their flywheel, they could eat Lyft alive and wait for Uber to bleed dry.
I'm sorry for it. Just wondering and want to know your perspective, if teams like ML and Data Science are more of a luxury than a necessity? They're mostly not a revenue generating team and I constantly see them being part of such layoffs.
They are at Lyft which tries to solve hard problems like Pricing and Dispatch optimization.
For other, perhaps smaller, companies you still need a Data Analyst or someone who can read data and make sense of it, but not a Data Scientist who works in a silo and has a sexy job title.
Both Uber and Lyft have self-driving initiatives. Perhaps their regular ride-hailing business doesn't have much tech but they hired some famous people to do their self-driving tech.
That's because there is at least 17% less share dilution than there was a day before, let alone the runway being marginally extended.
So speculators don't get dumped on by employees with RSUs all day every day, and the business prospects are not adversely impacted any more than they already were. Thats when you pay more for shares.
Layoffs are proactive for investors, not an omen for investors, don't get that confused.
The distribution of RSUs at all major tech companies is very uneven. Most job titles don't get any, or just a token amount. Only executives and software engineers can negotiate for the large grants.
I'd guess less than 10% of employees probably hold more than 90% of RSUs everywhere (not that different from the stock market as a whole, where 10% of Americans own over 80% of the market).
So a 17% layoff might not touch the RSU-rich employees very much at all.
If this is really a factor in the stock price, then that company is toast.
When an employee is hired, the assumption is that that employee's all-in hiring cost is less than the increase in value for all shareholders. That means if you pay an employee $250K a year, including stock, the shareholders better be getting more than $250K back in value.
By your reasoning, the shareholders are losing more by dilution than they gain back by enterprise value. If that's the case they should fire everyone and close their doors, since there's no RSU dilution at all with zero employees.
On the other hand, if employees were hired with the assumption that they were worth the price, then any layoffs should rationally reduce the stock value - because even though you get the RSUs back, the employees must have been worth more than those RSUs or it was a mistake to hire them in the first place.
Nice logic, the only reality is that wall street tolerated being dumped on by employees in the theoretically high growth tech sector.
no voting rights, no dividends, create shares, dump on investors
the limits of this tolerance was pushed and pushed in the macro environment of there being nothing else to invest in
if share price goes up, profitability "just a few quarters away", the employee value proposition or executive handcuffs are not factored in
for a long time the "share price" trend of tech companies has not been important because a steady share price means that it is amazing that wall street tolerates being dumped on and keeps placing large enough bids to absorb the constant sell pressure from an open spigot of unlimited authorized shares to create. even a moderate down trend is okay since the employees are dumping shares monthly instead of stuck a long for the ride for at least a year. rising share prices just being icing on the cake.
That still means the company is toast. You're basically arguing that companies were way overpaying for their employees, and their stock price was inflated to begin with. The stock should still go down in that case.
I'm not arguing that at all. I am recognizing the psychology in the macroeconomic environment and helping you understand why you are on the wrong side of the market today.
LYFT and many recently IPO'd tech companies have been doing monthly vesting, with no cliff. So basically with all their massive hiring, employees have already been dumping shares.
The conditions on the unvested portions typically are destroyed. With options are available to purchase for exercise. That's pretty exclusive to startup life, but the same concept in RSUs at big tech where only the vested portion is sellable and the rest is destroyed.
The other thing I would add is that new employees usually get some cash value for their level divided by the current stock price. Many laid off employees were hired when the stock price was higher. If they have to replace these employees with new ones in a timeframe before the stock price has recovered then they suffer more dilution.
I've also heard that large investors are much more cautious about doing large deals right now. I think with all the uncertainty with Covid-19 would mean a major acquisition would be unpredictable.
> This seems like a great time for Amazon or Google to buy Lyft.
and buy what exactly? Uber and Lyft aren't very valuable businesses, especially as their mythical ability to corner the supply (drivers) hasn't materialized at all.
IMHO both of those companies are destined to shut down or survive in a much more limited fashion, as unicorns they make no sense.
love that this is the top comment on HN and not the fact that 1k people just lost their ability to pay their rent/mortgages, take care of their families, deal with medical costs.
Business value (or lack thereof) of Lyft now is an unknown, worthy of discussion. The things you mentioned are basic facts everyone is acutely aware about, hard to see what does it help restating them.
I was just laid off so I can appreciate both sides. On one side I like to discuss tech-business topics, on the other I really feel like the crowd here is a little more callous than it should be. I don't have solutions, just offering an observation.
In fact the top comment is now some partisan bickering! All these smart people and not 10% of them enough foresight to think beyond "the enemy of my enemy is my friend".
Not in the US, but I'm not sure someone unemployed and out of medical insurance can tell much of a difference between "red" and "blue" right now.
I am (for a few more weeks) a PM at a fairly popular applicant tracker company. I was just laid off. While recruiting is the first to get affected, you're underestimating how much of a bellwether HR tech truly is. If we're suffering this much, it's pretty clear what's about to happen. I've seen our internal data, things will be bad for a while.
The tech companies you identified are getting hit 1st. I expect to eventually see fallout in Fintech, Realestate, Advertising, anyone selling B2B SaaS (particularly to marketing/HR/ sales departments, SMB), etc. It will take time to feel the 2nd and 3rd order impacts. Hopefully, we bounce back quickly, but it's hard to not be a little concerned.
Unless their investors believe in a V-shaped recovery afterwards, and are willing to spend money now to gain market space from competitors who would die in the meantime.
I mostly agree at this point but wonder if covid's economic impact is just getting started and there's gonna be massive unforeseen 2nd and 3rd order effects.
Hospitality/transportation and startups that were already in trouble (e.g. WeWork) might just be the tip of the iceberg.
Conversely, it's helped some tech companies (Amazon and Zoom) so who knows how this all shakes out.
My thoughts are that amidst the fear, the thing is, this economy was slowed solely due to the lockdown. If there was a bubble, it hasn't popped yet. There really is no reason for the economy being in the position its in except for the virus. I doubt there will be 3rd order effects that are too devastating. The lockdown will end soon enough and the economy will thaw and start moving again, maybe even to the roaring pace it was at before all this happened ... and after all that is when we will likely see the actual once-a-decade market-correction/recession/depression.
Maybe we should consider a higher level? For example, with our interconnected highly computerized trading systems and with every megacorp these days heavily invested in financials (think stock buy-backs) who knows? Definitely not the FED Reserve.
Also: "Lyft's other cost-cutting measures include furloughing 288 employees and base pay reductions of 30% for executive leadership, 20% for VPs, and 10% for all other exempt employees. Board directors will give up 30% of their cash compensation during Q2."
Paying people in stock and performance bonuses is ideal during a downturn. It doesn't cost the company anything to pay people in stock, since it just siphons off value from all existing stock, and nobody's getting their performance bonus!
With GAAP reporting, stock comp goes on the income statement and affects the bottom line. So it has a visible effect for investors, but no one cares about P/E anymore so...
Can someone explain to me how stock comp costs the company money, if it does? AFAICT it just creates equity dilution, but I might be missing something.
There are two ways to compensate with stock: purchasing stock on the open market with cash, or, hand out stock from a pool of withheld shares. The pool of shares might be periodically increased through creating new shares (and diluting) but this must be reported to the SEC and is only done infrequently.
GAAP reporting requires that stock compensation is written off as an expense. It does not reduce the company’s cash, but it does reduce the company’s earnings. Hence it changes the price to earnings figure.
Its from Accounting assets = liabilities + equity. So equity = a-l. If you pay cash your assets go down so your equity goes down. If you give away equity your equity goes down. In either case you equity goes down.
Let’s say I have 1000 outstanding shares all worth $10. I need to pay someone a $5000 bonus. I’ll just issue 500 shares of stock to them instead because, well, that’s about $5000.
Hypothetically the per share price goes down by 1/3 here and is now worth $6.67 (but the company’s still worth $10,000 total it’s just 1500 * $6.67 instead of $1000 * $10).
Generally though bonuses like this come out of a pool that’s already been allocated years ago and there’s no change to stock price
Even if the pool is allocated years ago, it's still effectively dilution (as before shareholders effectively owned a fraction of the unallocated sharepool).
"Dilutes" stock value (per share) would possibly be more accurate? Keep throwing shares at execs; if the company is successfully, it's a dilution. If it fails, then at least they didn't waste real money.
There really is a cost to paying people in stock. That's why SBC is on the income statement. Additionally, analysts will often not add SBC back to cash flows.
There was a person in the Uber thread yesterday who predicted this. I wonder if they’ll go back to hiring if this is over or they’re using as an opportunity to get rid of people they shouldn’t have hired in the first place.
Possible. I remember going a Lyft event in mid-2018 and they were telling me that they had just doubled their team size and were looking to double again by the end of the year, so they were certainly hiring fairly quickly then.
Some companies should be billion dollar companies with 30 employees, like when Instagram was bought out in 2012. Headcount is mutually exclusive from how much the enterprise makes and can return to shareholders.
If headcount is not directly helping that then it should not be an indefinite relationship.
Also, I'm available for hire as a CFO or board member if you think your company has challenges with adopting this market-relevant predilection and needs to make "the hard decisions".
> Lyft is laying off 17 percent of its workforce and furloughing 5 percent. This is after an employment lawyer at the company accidentally invited much of the workforce to a weekend meeting called "Jetty" in what workers took to be a reference to jettisoning jobs.
I'm sure the current economic situation plays a role in the decision to layoff.
But, i wonder, in general, if all these layoffs are to some degree something overdue that companies wanted to do anyways and are now just taking the opportunity to do it whilst still saving face.
This entire situation is going to allow for a lot of, arguably, necessary house cleaning.
I think you're also going to see management at surviving businesses exploit the downturn to their advantage. Lots of rationalization as to why you won't see raises, why you'll need to work more to pick up the slack, lots of "be greatful" (there's some validity here), lots of pay/hour cuts, etc. that will likely perpetuate long after the crisis has rebounded and balance sheets are in the green again. Its funny how quickly businesses react to cut costs but are slow to react to shore up their current employees.
You're also going to see employers who lay-off yet justify continual hiring in this marketplace. Businesses will try to capture high quality labor talent at reduced costs (due to competition) and lock in those rates for awhile (hoping some will stay and be happy with modest raises on their significantly reduced labor rates).
One place I work with, management claims everything is fine and they've locked down all non-essential hiring, but I keep active monitoring on popular labor marketplaces for them and see continual updated advertising, even after they've claimed to stop hiring. Some of it's automated but I know for a fact a few places manually renewed listings intentionally. They're not locking hiring, they're looking for discounts right now because they know they're financially solid and will weather this storm just fine.
I love many aspects of technology but am really growing to hate industry practices to the point of looking at career changes.
There are also hiring ads run just to convince potential customers that you are not dieing. I know a few people who saw a job ad seeming to target them, with no response to their resume despite having a very unique skill set. Only by talking to insiders did the truth come out : they have enough people with the unique skill set but they need to appear to be growing even when it obviously is a dieing area. (mainframes in this case, they still exist and sell well but everybody has known they are on the way out)
> I love many aspects of technology but am really growing to hate industry practices to the point of looking at career changes.
Agree with your post (and upvoted) but wanted to point out that these labor practices common to capitalism and so you're likely to find it just as bad outside of tech. In some industries, worse than others, for sure. But this is the Faustian bargain that we signed up.
(Personally, having worked some really terrible jobs outside of tech, I wouldn't leave it.)
Isn't a "jetty" a defensive barrier to protect a harbor against storm tides? Dumb move to accidentally invite everyone to a meeting with a codename, but not a dumb codename as you protect a company from a storm.
IIRC this is why the U.S. military (in certain cases?) uses a pre-generated list of code names. If you let humans do the code names, they'll choose names that leak info.
You know, my 'white privilege' have me SOOOO much more opportunities than my black afro-russian compatriots ever had in Russia. :-/
Jokes aside, I believe my parents income in 1993 was less than 10% of the poorest non-white guy in the US. So your 'white guy' accusation kinda lands flat.
There's always some related piece of news about the way the company went about the layoffs. This one seems especially reaching. Really, a meeting invite?!
If I found out that a bunch of my coworkers had been laid off in a video meeting, I’d be bummed because they got laid off, but I’d understand that companies have to make hard decisions sometimes.
If I learned that the accidentally visible filename of the PowerPoint in that meeting was “EjectorSeat.pptx”, I’d be some combination of angry and alarmed about management’s attitude. That would be a definite “update my resume and call up some former colleagues for lunch” kind of moment at the very least.
I think people reasonably expect that when a company makes a serious decision that affects hundreds of people’s livelihoods, that they effect a pretty somber tone.
>I think people reasonably expect that when a company makes a serious decision that affects hundreds of people’s livelihoods, that they effect a pretty somber tone.
This case sounds like an unfortunate mistake, I’m sure they intended to present the material in a somber manner. That said, it begs the question on if what should be expected behind closed doors.
> This case sounds like an unfortunate mistake, I’m sure they intended to present the material in a somber manner.
The tone of the presentation is far less important than the tone in the minds of the people doing the presenting. You can present as somberly as you want, but if a laugh track is secretly playing inside their heads, they can fuck all the way off. Workers deserve actual compassion, not the facade of it.
>>This case sounds like an unfortunate mistake, I’m sure they intended to present the material in a somber manner. That said, it begs the question on if what should be expected behind closed doors.
Which OP sort of implied the sentence right after.
I'm pretty sure if most people heard the discussions that go on in management meetings, especially at high levels, they'd be pretty irate. I've been in a few at different organizations and I don't have the moral flexibility to treat people like disposable garbage our sociopathic business 'leaders' have. Most people suspect this is the case but are satisfied to hear PR lies--as long as the message isn't offensive (which I don't understand why, I prefer direct messaging so we can cut the BS).
We need a serious social revolution in labor rights and expectations in this country. Not sure if its a really bad or good time for it but I think its one of the two.
Is this based on actual experience or are you just imagining villains here?
I don't have that experience, but my suspicion is that the cartoon bosses in peoples' heads might not be an accurate picture of actual bosses? Laying people off doesn't seem to be easy for most managers, or at least those who talk about it.
Sort of OT but "integrity" is one of my favorite words. Imagine everyone you interact with has a small, slightly different picture of who you are. If those pieces could all be combined, they should form a consistent, accurate and (mostly) complete picture of the real you.
And even then, the only person who fully knows the real you... is yourself.
According to SlateStarCodex, Triplebyte (YC '15) ignored the stay-at-home warnings about the virus and had employees come in to the office to get their notice of layoffs:
"Last links post I included tech company Triplebyte in the shame list for refusing to let employees switch to work-from-home, then firing them. A representative of Triplebyte contacted me and asked me to explain their perspective, which is that they took the pandemic seriously and went all-remote around the same time as everyone else. The reluctance to let employees switch to work-from-home applied only to a few employees in early March, before the scale of the crisis was widely appreciated, and they say that they would have tried to make accommodations if they had understood the seriousness of the requests. They had been planning the downsizing for a while, it was really unlucky that it ended up in the middle of a pandemic, and they tried to make it as painless as possible by offering good severance pay, etc. I’m relaying their statement because I’m realizing it was probably unfair of me to single them out in particular – my hearing a lot about this was downstream of my having a lot of friends who work(ed) for Triplebyte, and my having a lot of friends who work(ed) for Triplebyte was downstream of them being a great company doing important work which all my friends wanted to work for. I continue to generally respect them and their vision (see here for more), and you don’t need to give them any more grief over it than they’re already getting."
>The rumor is that it had planned the downsizing for a while, wanted the employees to be in the office to hear about it in person, and didn’t care how much risk it had to expose the soon-to-be-ex-employees to in order to make it happen.
i.e. making them come in to the office for the layoff notice, after it was known the public needs to social-distance and minimize gatherings.
That part is still bad, and it's not retracted, nor does Triplebyte dispute making them come in to the office to be informed of the layoffs.
In any case, it would be nice if he updated the original post with a link to the retraction, otherwise people won't see any unringing of the bell when they go back to that link.
A phone call? Ending the employment relationship isn’t all too different from ending a romantic relationship. How would you feel if your significant other called and dumped you? Not good. How would you feel if your SO notified you of your new relationship status via text? Probably worse. Now how would you feel if your SO sent a mass text message dumping you and several other people at once? Probably a lot worse.
Sometimes difficult decisions have to be made but a one-on-one conversation with the person is always preferable to a (mass) notification, in my opinion.
Not when it's 22% of the company. After about 30 minutes in EVERYONE is aware people are getting calls about losing their job and spend their day hearing a trickle of rumors on who just got the call and wondering if their phone is going to be the one to ring next. I've yet to see something like this go down better than making it clear up front (e.g. mass meeting) and come out all at once then having the managers follow up after.
If my SO had elected to break up with me while she had a super-contagious disease with high mortality rate that could be transferred to me by being in her presence, I would definitely prefer that she do it by phone or vidchat, yes!
As the parent (tomp) noted, the risk profile is basically that with the SIP situation, so this is an exception to the general rule.
I was once shadow banned because I had submitted a link incorrectly (switched the link & the title which apparently many bots do). I emailed dang and he sorted it out in a matter of minutes.
In my experience the mods are super responsive and more than willing to look into things & hear you out. If this person cares enough to reach out about it they should have the opportunity. And if they’ve been shadow banned for a good reason I imagine they would be told as much.
Thanks. I keep [dead] comments turned on and I thought that one was pretty reasonable so I was going to vouch for it but wasn't sure if there was some context I was missing. Your comment provides it.
Note that [dead] itself is not necessarily a shadowban: an unpopular comment will show up like that too. To figure out if the user is shadownbanned you want to go to their profile and check if the account is new or has multiple [dead] but reasonable-looking comments.
Comments can be downvoted to death without being flagged. [dead] by itself does not imply its a shadowban. It's super easy to tell though, because if someone is banned, you can look at their history and see all their posts besides a few that get vouched are dead.
It's really comforting to hear this explained. In the past, when I saw a username with several reasonable comments showing as dead, I was worried it was the work of bots or some conspiracy flagging things unfairly. I'm glad that's not the case.
In the long term I think this will be a solid move for both Uber & Lyft. The apparent economics of both businesses are relatively dire but the long term value prop is still as important as ever: they are generating the consumer data that will ultimately be used for self driving vehicles.
This will allow both companies to trim the fat and (hopefully) regain the move fast mentality that is necessary for a startup. This can be Uber and Lyfts time to shine.
No, but they have a good understanding on routes and areas with high traffic. That data is going to be worth a fortune for the first fully autonomous taxi service.
All that routing data (and much more) is also funnelled to Google via Maps/Waze and, to a lesser extent, Apple or other companies with map apps. So I don't think Lyft or Uber have a competitive advantage here, even if the routing data is useful absent full instrumentation. Plus, full self driving seems a bit like a nuclear bomb, by which I mean second place in that race might be worth nothing.
Uber/airbnb/lyft were considered in the same tier as facebook/google before corona. With google also slowing hiring, are the engineers laid off all going to be absorbed by facebook?
This will play our more like the dotcom burst than the 2008 crisis.
For most younger people here this may come as a shock but tech jobs can disappear, for years.
The job market in 2019 felt a lot like the job market in 1999, people rushing to get upskilled so that they could get into software and make ridiculous money. After the dotcom burst huge number of people left tech, or at least left the world of software development. Salaries also went way down for nearly a decade.
A common comment here on HN with layoffs is "well they're just getting rid of superfluous employees, so this is no big deal". This assumption is both ridiculously callous about real people losing job, it also underestimates how much work is superfluous in SV.
It is very possible that tech will take a serious hit this time, and that the total number of software engineers, data scientists, dev ops people etc will go do... for years. And likewise salaries will also drop (TC automatically does this thanks to the magic of RSUs).
Certainly people will need software and software engineers, just likely not nearly as much as they do now. Once FAANG realizes there's no longer a need to keep talent off the market, expect salaries to take a dive.
People have been calling software engineering wages a bubble for 20 years, and trying to call “the end of tech”. I just don’t see it, highly proficient software engineers are more valuable than ever. The wages are higher than ever. Going forwards, tech is really the only engine of growth in the American economy. Trying to say tech will be under for years is like saying the USA will be in a massive recession for years. I just don’t believe it.
What’s happening now is very analogous to the 2000 dot.com crash. The economy overall will recover, albeit slowly. However companies are questioning why they need 100 engineers instead of 50. That doesn’t just reverse itself overnight. As the OP said those that weren’t around the last time might find it hard to believe that tech jobs really just disappear for years.
No it’s not. The fed printed so much money and dropped rates so low, there’s a massive excess of capital looking for business opportunities. Monetary policy is what is driving the economy, and it’s making this bubble bigger than ever. You can’t ignore economics and cheap money. We will have ten more we work like companies.
Rates are low now but it will take time for this to get reflected in VC/PE/corporate dollars to invest. The addressable market of consumers/enterprises that are willing to spend money on non-essential products/services is down and will drop further since budgets are being tightened and fat is being cut. The 2008 unicorns that were born out of the last recession had to provide oversized returns to investors based on them addressing needs well beyond what cash-strapped consumers/enterprises were willing to spend on. We're in for a ride.
You aren't wrong. Most of the central banks loans went into inflating the price of stocks, bonds, and real estate. Inflation in those assets has been running over 10% a year. While goods, services, and wages has been running 2% per year. That's all due to central bank operations.
When you've got 100s of thousands of unemployed talented engineers on the market, you're not going ot be able to sustain $200k salaries for people who know how to write a yaml file for long.
I should point out, as I have no attachment to my karma, that the schadenfreude comes from the fact that those inflated asset prices were used to justify and fund gentrification and displacement. If a crash ruins a few of the entities profiting off that, well, chef's kiss.
- before Coronavirus, there was a shortage of people to work in software (if you believe BLS)
- software employment represents a very small portion of the labor force
- there are many problems that have just happened that will require software to solve
- while there are undoubtedly industries that will be hard hit, there are many software-intensive sectors that will see growth as a result of the crisis (ecommerce for one)
- the world in 1999 was much different. the internet was a curiosity, now it's essential.
- and finally, companies that are looking to implement efficiencies (read: lay people off) turn to .. software
edit, one more:
- many software positions over the past decade+ have been filled by immigrants. Going forward the US is going to be much less friendly to immigration, so competition for jobs will go down for US workers
Would this be a bad time to be in a job hunt to change companies? Anticipating that there may be a cohort of newly laid off SWEs from prestigious brand-name companies (Uber, Lyft, potentially others) flooding the market?
I'm guessing I, as a lowly, humble, SWE from an investment bank, would be easily looked over in favor of those aforementioned veterans/alumni of highly regarded Silicon Valley companies. Unless if I make a lateral jump to another bank or hedge fund, which I have no desire to do so.
You're making a sweeping assertion with zero evidence to back it up.
One obvious counterpoint to this argument is that this recession was not caused by markets realizing that many publicly listed tech companies actually had no market and no path to profitability.
Also, non-tech companies took on a large number of engineers in the late 90s to address Y2K - many of whom got laid off afterwards. Not an issue here.
> Uber/airbnb/lyft were considered in the same tier as facebook/google before corona
So was wework by many. Facebook/google cannot be more different from uber/airbnb/lyft.
FB/G are in high margin business, operating largely in virtual space, where scaling to new markets has low marginal costs.
Uber/airbnb/lyft are in historically low margin, capital intensive space, where scaling to new markets has very high marginal costs. Same as wework is an office rental with an app, so is uber, a taxi with an app. App part is cool, and gives them meaningful advantage, but it's still a taxi business, and they were not able to change that.
Odd that you say that. I got an offer from WeWork, which I declined because of weird cult-y vibes I was getting during the interview. A few months later they blew up.
I got rejected by Uber, was too scared of rejection to try Airbnb or Lyft. But I considered all three a tier (or more) above WW.
I'd have hands down, without hesitation, accepted a job from Uber even if I would have been laid off at some point down the road. Having Uber (or Lyft, or Airbnb) on the resume would open doors I imagine having WeWork (even disregarding the whole scandal) would not.
Based on what we've heard from Google yesterday, and FB's Q1 results just now, it looks like the much heralded ad crunch is turning into not much more than a speed bump.
I mean record traffic means record server usage with record low ad spend from their customers.
However, that's just a short-term hit. FB and Google may very well increase their own spending so they can capture the huge amount of people who are now using their platforms.
I'm pretty sure it was stock based. For one, Netflix is like, completely different than the rest. They only hire senior engineers and basically substitute a talent pipeline with giant wages.
Ok, I seriously don't get this. How is the stock market doing so well? This article about Lyft is just but one glimpse of what's happening to the economy. And it ain't going to get better any time soon. I've been waiting to invest in the stock market, but am totally whiplashed by the rise of stock market. It's completely disconnected from the real economy.
As a result of the 2008 crisis, the US Government / Fed started pumping money. The market bottomed out just before they started pumping money in March of 2009 and then started recovering.
Someone in June of 2009 would have experienced the same emotions that you're experiencing now because foreclosures continued to mount, maxing out in the second half of 2009 with a significant number of foreclosures occurring in 2010 as well.
I read somewhere that the economy didn't fully recover until 2015. By then, stocks were already quite expensive.
This is probably what has been driving many people to buy stocks now. That and being bored at home.
There is someone more informed to comment on this but the reason is the Fed. They are buying corporate debt. That’s a pretty drastic thing to be doing. This recent commentary by the Fed chairman describes the scene, the money tap is wide open. https://www.bloomberg.com/news/articles/2020-04-29/powell-vo...
What I don't understand is, what are the consequences are? If there is no, why didn't this just always happen and we'd all be rich?
I've read other articles which say that essentially we're losing the ability to really valuate equities because of all this free money being injected into junk bonds etc hides the true valuation.
As far as I can tell, stocks are more valuable, but only numerically, they're actually more worthless than before because the company and the economy as a whole has stopped.
The real value of the currency is supposed to (at least theoretically) be hurt by this. Printing money to solve problems either leads to hyperinflation in the extreme, a deflationary trap that Japan has been in or some new thing we are creating. Maybe because the whole world is doing it all at once it’ll be ok?
Maybe most equities are so hopelessly valuated and there is just so much funny money in the stock market that it hasn't made sense for a long time and this just demonstrates how useless it is except for those who know how to game it?
I'm not saying I believe this entirely, but there needs to be some better explanation for Lyft is up > 2% today after that news?
> What I don't understand is, what are the consequences are?
The consequences of the 2008-2009 financial crisis were the defacto nationalization of large US banks as Systemically Important Financial Institutions (SIFIs). Basically in exchange for taking on more stringent regulation and capital controls, and the separation of prop trading and deposit banking through Dodd-Frank's Volcker Rule, large US banks were declared too big to fail and would be backstopped by the Fed going forward.
I think what you're seeing now is perhaps something similar for all large US corporations. The Fed is essentially declaring the S&P500 as TBTF by opening the trough to all of them. The Fed maybe doesn't want to do this (they are economists after all, and they know this isn't a good path to start heading down), but they're also the only governmental entity capable of direct action without political blowback in this crisis.
I think the market sees this as the Fed setting a floor for equity prices, and maybe it's right?
In the end, the music can only keep playing for so long while chairs are slowly removed from the room. The market can stay irrational for a long time, but it must eventually face reality. The Fed can print money so that companies have working capital (which they will hoard) but can't print a vaccine or your mortgage payment or the customers your neighbourhood restaurant needs.
I quit a job in defense software in October, took a couple months off, and now this shit. Many companies took down their job boards entirely and some don't even render correctly with no items listed. Many in-progress interviews I had got put on hold, and now the job market is about to be flooded with out of work talent, raising competition and lowering the salary I'd probably get. Many places I've applied to have since announced massive layoffs (Toast, TripAdvisor, etc), some mere days after I've applied.
I'm fortunate to have a lot of liquid saved but I'm feeling for engineers with families and not as much saved.
I would reach out to them to verify, and simultaneously begin looking for a backup (which will be difficult in the current market, but there definitely are still companies hiring).
I feel for you. Back in '08, I did my summer internship at a big energy company that had massive exposure to Lehman Bros' coal + gas trading arm. Job offer was rescinded the day AIG collapsed, and about 24 hours before Lehman went down.
They likely have so much going on they have forgotten about the people they are bringing on board. Reach out with the expectation that you'll get a response along the lines of, 'let me check what's going on' followed by 'due to this unprecedented time we are unfortunately ...'
If they are really letting go of their hard found engineering talent its a serious signal that they don't believe this to be a short term issue. Assuming the highly paid engineers around the bay took a good deal of effort, and significant cost to hire.
Do note that laid off engineers are typically from teams that have overhired and where we don't have plans to grow, as well as engineers who did not get a good rating and are less promising. It is sad nevertheless.
Both uber and lyft are flying today. Most people see cutting jobs as a bad thing, market probably sees it as a cost savings and great business decision.
Lyft and Uber are disproportionately impacted by coronavirus news, and the remdesivir drug trial seems to have been a success, so Lyft and Uber are up more than the rest of the market.
So many companies are disproportionately affected to varying degrees. Not all up. If you are referring to this news (1), take it with a grain of salt. Look at the % recovery, look at those N's, look at those p values. Gilead is pumping today, but imo this isn't a smoking gun study. The drug needs to be administered to more patients to get more statistical power and draw meaningful conclusions on efficacy.
Then again, wall street doesn't know their N's and p's. Gilead could have put out anything today and the stock would be flying on speculation due to none of the hungover 24 year olds moving millions at goldman sachs actually reading the study, much less interpreting it. Of course, this is just my take. Maybe you are right and this does explain the pump, I guess we will read about it this evening.
Anyone long on Uber? I bought Uber at $23, only cause it was cheap. I can't justify owning it and now I'm thinking of selling it off. I do wonder though, is anyone long on Uber?
I don't see them winning the self driving car battle. Tesla / Google have better brands and better salaries, that probably would keep the best talent away from Uber.
It's not a secret to any investor that Lyft's business has gone way down. These sorts of layoffs tend to only spark panic selling when they are not expected.
Does anyone else find the headline really weird? Having "17%" next to "hundreds more" makes the "hundreds more" look like the important figure, whereas in actuality the "17%" is really the important figure.
Lyft is in a much more worse position than Uber. Since Uber is in more locations than Lyft and Uber has Uber Eats and other services, I don't know how Lyft can justify its value.
One thing that's common is that they're both unprofitable and have both been racing to burn cash for years and unfortunately they are now making difficult cuts to save themselves. But the true picture will be revealed on May 6th in their Q1 earnings call.
I would interpret the evidence 180 degrees in the opposite direction. Wouldn't the increased footprint mean that Uber has more costs in less profitable areas? (It seems logical that Lyft would have pretty equal coverage in the profitable areas). And Uber Eats + other services hemorrhage money -- I read that Eats has something like a $1b/year burn rate, even leveraging much of Uber's other infra.
Uber used to have higher prices (in my area) and a lower-quality UI. That's changed in the last year or so, especially now that Uber has all of the "ride safety" features that Lyft lacks.
Nah, that’s not it. I drove for both in a major city in the months before the virus and outside of peak hours Lyft always has substantially longer pickup times. This is based on a few hundred rides for each company. This means that they have fewer passenger per driver, so the biggest delta is a smaller user base. Once the lockdown began Lyft rides basically evaporated overnight, while Uber was still going strong at certain times and certain places, catering to essential workers. But both are worthless as a way to make money right now.
I believe Lyft generally has a slightly wealthier clientele: more middle-class people choosing not to drive. Uber has more reach in the lower ends of the market. So when the stay-at-home orders flooded in, these middle-class people all stayed at home, while Uber was still serving essential workers.
UberEats is up — higher than Rides even. They can raise prices to turn a profit if they really need (Instacart turned its first profit).
Uber operates globally (and owns minority stake wherever it doesn't operate), so as the world begins to gradually re-open, Uber will capture that revenue even if the US is still fucked.
Uber has $8B cash.
Uber rides were "adjusted EBITDA" profitable for 2 straight quarters before this — take "adjusted EBITDA" with a grain of salt, but it's also not "nothing".
Uber is in a much better position to capitalize on Eats as well as non US recovery (given that it seems the US is on one of the worst paths of most developed economies). Hell if anything I can see some Western European countries finally unbanning Uber just to stimulate some more economic activity. Italy/Spain/Germany can't afford to be as protectionist moving forward.
While the short to medium-term impact of this is terrible, I am optimistic that a few of these individuals (not the usual high profile stars) will kick start the next big idea.
Do we have a list of affected individuals listed to work on interesting projects?
Wish HN can curate a Database of individuals open to working on special projects that could lead to a YC submission
Lyft SWE here. Can confirm. My Lyft offer was significantly greater than Google, Uber etc. That said, with 20/20 hindsight, Google would have been a safer choice.
I like working at Lyft, and if not for the stock more than halving since the IPO and now the Covid storm, I wouldn't question my decision. There are a ton of interesting problems to solve and lots of smart people (ex-fb, google etc if that is a measure). The leadership is ethical and supportive. We're generally not coasting and it is easier to advance your career faster than Google, while not having the threat of a PIP all the time like Facebook and Amazon (apparently). We don't work on fluff or building tech in house just for the heck of it because we've historically been conservative in entering businesses and focused on rideshare, and we've not been as awash with $ and people to spend on experimental projects. Prioritization is key here.
At what level? Oracle OCI was paying the most in average to new devs a few short months ago according to levels.fyi so maybe you mean at the senior level or higher?
Its a pretty sobering time.