July 31, 2013 4:38 PM
Today, U.S. District Judge Richard Leon ruled that the Federal Reserve's implementation of the Durbin Amendment of the Dodd-Frank financial overhaul, which sets price controls on what banks and credit unions can charge retailers to process debit card purchases, was not draconian enough. Though I am no fan of either Dodd-Frank or the Durbin Amendment, this is a severely flawed reading of the law based on a false definition of "legislative intent."
Should the Fed adopt Leon's interpretation, it will almost certainly result in more bank and credit union fees for consumers. The Fed would also open itself up to even more litigation on the price controls, including constitutional issues involving the property right to seek a return on capital invested guaranteed by Due Process and Takings clauses of the 5th Amendment.
In 2011, the Fed set price caps on debit card interchange fees at 21-26 cents per transaction. Although this was higher than the 7-12 cents the Fed had initially proposed in late 2010, and let banks and credit unions cover somewhat more of the costs of the debit card network infrastructure, it still slashed average fees to retailers by more than half and did not allow any profit to be made on the retailer side of the transaction. So finanical institutions made up this loss, as free-market scholars predicted they would, by shifting costs to debit card consumers.
In 2009, the year before Dodd-Frank and its Durbin Amendment became law, 76 percent of banks offered free checking with no minimum balance. According to a survey by Bankrate.com, by 2011 just 45 percent offered this service, and this figure dropped to 39 percent in 2012. Bankrate fingered the Durbin price controls as a big factor, pointing to “new rules capping the cost of debit card swipe fees for U.S. retailers.”
July 31, 2013 4:05 PM
For people watching it from afar, the bankruptcy of Detroit -- the biggest municipal bankruptcy in American history -- may have brought a sense of relief in the fact that they live somewhere else. But it's also brought needed public attention to the state of city finances around the nation. While Detroit is an egregious case of municipal incompetence, corruption, and mismanagement, its problems are not unique.
In fact, one of the drivers of debt that brought the Motor City to its knees is common among states and cities: defined benefit pension plans, which guarantee payments independently of the level of the plan's funding. This week's cover story in The Economist brings some needed attention to the problem:
Most public-sector workers can expect a pension linked to their final salary. Only 20% of private-sector workers benefit from such a promise. Companies have almost entirely stopped offering such benefits, because they have proved too expensive. In the public sector, however, the full cost of final-salary pensions has been disguised by iffy accounting.
Pension accounting is complicated. What is the cost today of a promise to pay a benefit in 2020 or 2030? The states have been allowed to discount that future liability at an annual rate of 7.5%-8% on the assumption that they can earn such returns on their investment portfolios. The higher the discount rate, the lower the liability appears to be and the less the states have to contribute upfront.
Even when this dubious approach is used, the Centre for Retirement Research (CRR) at Boston College reckons that states’ pensions are 27% underfunded. That adds up to a shortfall of $1 trillion. What is more, they are paying only about four-fifths of their required annual contribution.
July 31, 2013 3:47 PM
The USDA is temporarily suspending its magician's rabbit-license regulations "in order that we may undertake a review of their requirements."
July 31, 2013 2:39 PM
Vice President for Policy Wayne Crews talks about the Regulations from the Executive In Need of Scrutiny (REINS) Act, which is expected to pass the House of Representatives tomorrow.
July 31, 2013 1:17 PM
Well, it's official: We finally have a fully staffed National Labor Relations Board.
On July 30 the Senate, as part of a deal worked out weeks ago, confirmed the entire slate of the Obama Administration's nominees to the NLRB. In return, the Persistent withdrew the two controversial "recess" appointments that were causing the Courts so much constitutional heartburn.
July 31, 2013 11:56 AM
The bill would add some oversight to a regulatory process that has far too little of it.
House National ID E-Verify Bill: 6 Dangerous Provisions it Includes (And 5 Worker Protections it Excludes)July 31, 2013 11:04 AM
The House of Representatives has passed out of committee a bill (H.R. 1772) to mandate E-Verify electronic employment verification for all employers. This bill differs from the E-Verify proposal in the Senate immigration bill, so here’s the breakdown of what it’s in it:
1) Huge fines for employers: The bill cranks up the civil and criminal penalties both for employers who hire “unauthorized” workers and those who fail paperwork or technical requirements, such as E-Verify checks within a 3 day window or correct form filing. For technical errors, the bill increases fines tenfold—increasing the minimum fine to $1,000 per mistake and up to $25,000 per mistake (p. 50). Given the fact that this law can already cost employers up to $1 million for systematic “technical deficiencies,” the new law could result in tens of million in fines for some businesses. At the same time, the bill creates prison sentences for those who refuse to use E-Verify of up to a decade—hard time for a nonviolent offense.
House National ID E-Verify Bill: 5 Worker Protections it Excludes (And 6 Dangerous Provisions it Includes)July 31, 2013 11:01 AM
The House of Representatives has passed out of committee a bill (H.R. 1772) to mandate E-Verify electronic employment verification for all employers. This bill differs from the E-Verify proposal in the Senate immigration bill, so here’s the breakdown of what the bill lacks:
1) No limitation on how the system can be used: The House bill opens the door for E-Verify’s national ID system to be used almost anywhere to demonstrate identity. Once the system is in place and every American is part of it, it will be very easy for a federal or state agency to determine to use the system as a form of identification to get into buildings, to apply for a home loan, to rent an apartment, to purchase a gun, or to access health care. As the system expands, E-Verify will create not just a digital profile on everyone, but a digital history of their movements and their life.
2) No limit on errors for legal workers: Sen. Al Franken (D-Minn.) and Sen. Mike Lee (R-Utah) teamed up on the Senate Judiciary committee to propose an amendment to the Senate immigration bill to make penalties under E-Verify not mandatory for small employers unless DHS kept the error rate low for small employers. Senate Democrats replaced it with a version that halved the penalties for small employers in any year in which DHS failed to keep the error rate for legal workers at or below its currently-reported rate. The House bill, on the other hand, has no requirement or incentives for DHS to keep the error rate low.
July 31, 2013 10:59 AM
Americans generally think of subsidies to audiovisual industries like film and television as a foreign phenomenon. Yet that is hardly the case. In fact, one common argument for cultural exceptions made in other countries is that they are the best way to counter massive U.S. subsidies.
European film producers have a point, but they’re pursuing a wrongheaded approach. Rather, they have much to gain from negotiations, as U.S. subsidies would be on the table as well. As I noted in a previous post, the outdated policies actually harm the industries they’re meant to protect. And efforts to keep them in place help keep other distortionary policies in place. In the case of U.S. film subsidies, they could be said to be protected by the European exception.
There’s a reason Hollywood is king. At the federal level, the first $15 million spent on a film or television production can be deducted from taxes. And, as the map below shows, state-level incentives are growing every day. Needless to say, a lot of this could be easily reduced—and by greater levels than on the European side, since American negotiators have other priorities.
[caption id="attachment_70067" align="aligncenter" width="492"] Source[/caption]
July 30, 2013 5:07 PM
"Hold the burgers, hold the fries, make our wages supersize!"
This is one of the many chants shouted by the thousands of fast food workers who began a wave of strikes and walk-outs across seven American cities on Monday July 29. Strikers walked off the job in a protest against restaurant chains, including McDonald’s, Burger King, KFC, and Wendy’s, demanding their right to form a union and that their base wage be doubled from $7.35 to $15 an hour.