“Forced Extortion”: Cable Television Is Just A Cartel
Today’s cable television model forces consumers to pay for dozens of channels they don’t want in order to get the handful of channels that they do want. It is ostensibly a cartel, with industry profits built entirely on the consumer’s back. If you don’t like the model, too bad. There is no alternative. What’s worse, this arrangement is “blessed” by government regulations.
If given a choice, most parents would choose not to subsidize the sexually-charged content on MTV. Some people might not want ESPN. Others may only want news or movie channels. Cable choice, where consumers decide for themselves which channels they want to purchase, is a realistic solution for all of us who face sharply higher costs every year without fail.
The Federal Communications Commission just released new data showing that the average monthly price increase for expanded basic cable service continues to far outpace inflation, just as it has done for more than a decade. Choosing video content has become a lot easier, except for cable. One reason for this anomaly is an outdated and arcane federal regulation such as the 1992 Cable Act.
The Cable Act requires cable companies to offer a “basic tier” that consumers must buy before they can purchase other services. Other programming is only provided in bundles of additional networks – a forced-extortion scheme that causes us to pay for more than we need or want. For instance, more than $100 of our annual cable bill goes to the ESPN networks, regardless of whether we are sports fans. Media outlets have reported that the ESPN networks, owned by ABC/Disney and forced onto every cable subscriber, reflects nearly 20 percent of the wholesale cost of cable programming, yet it reflects only 2 percent of viewership.
Such a model clearly lacks a demand curve. And whether you get your video via cable, satellite or Telco-delivered video service, the package and price are about the same.
In a true free market, prices reflect what the marketplace dictates. If consumers knew what they were paying for each cable network in their bundle, they could make an informed decision about which networks they actually wanted to buy. And the cable networks would be forced to compete for the consumers’ business, instead of perpetuating the near-monopoly powers they currently hold.
It’s time for the cable industry either to voluntarily join the free marketplace for its products and services, or it must be forced to do so through the same regulatory means that allow it to operate like a cartel in the first place. In the meantime, consumers will continue to be fleeced by exorbitant cable price increases, mostly for networks they don’t even want.
By: Timothy F. Winter, The Debate Club, U. S. News and World Report, September 17, 2013
“Hoping To Cash In”: The GOP Versus Hillary Clinton’s Celebrity
I’m not sure whether to file this under “pointless” or just “dumb,” but the Republican National Committee is threatening to boycott NBC and CNN if they go forward with, respectively, a mini-series and a documentary about former Secretary of State Hillary Clinton. I guess you could file it under “oblivious”?
Here’s why: The last time I checked, Republicans were supposed to be fierce defenders of the free market. And to the extent that these companies are trying to catch the Hillary ’16 presidential wave, it’s more likely that they’re hoping to cash in on it rather than promote it.
Earlier today, the Republican National Committee issued a release saying that if NBC and CNN go ahead with their plans, Chairman Reince Priebus “will seek a binding vote of the RNC to prevent the committee from partnering with these networks in 2016 primary debates or sanctioning debates they sponsor.”
It goes without saying that media companies shouldn’t let political parties dictate their programming choices. But honestly, this is silly. Yes, Hillary Clinton is widely expected to run for president in three years. So are a lot of people, but she’s also the biggest celebrity in the potential presidential field, and by a long shot (sorry, Donald Trump, I’m only referring to serious potential candidates).
Does it make good business sense for these companies to try to capitalize on that celebrity? Yes. So much so that you’d think there would be a Hillary Clinton move in the works … which, it turns out, there is. NBC announcing a miniseries about Kirsten Gillibrand or Peter King would raise eyebrows. About Hillary Clinton? Come on.
Occam’s Razor (the maxim that the simplest explanation is usually the correct one) applies here: The simpler explanation – that two media conglomerates think there’s a market for Hillary-related programming – is more plausible than the idea that they are engaged in a vast, collusive media conspiracy to promote the candidacy of someone who has universal name recognition and is already widely seen as the most likely person to become the next president.
Were I conspiratorially minded, I might suggest that the GOP really doesn’t want CNN and NBC to broadcast its presidential debates in 2016. There’s fairly wide agreement that the party did itself no favors with the traveling circus that was the 2012 primary debates. So limiting both the number and the reach of its 2016 tilts in one fell swoop? Well that would be a win-win. Could that be what this is all about? Alas, probably not.
So what are Republicans up to? Part of this is probably working the ref: They likely hope that whoever writes the scripts for these shows will bend over backward to make them – to borrow a phrase – fair and balanced, putting extra emphasis on her shortcomings in order to stay the braying on the right. (And if any conservatives want to argue that content is beside the point because any exposure is good exposure, please explain to me what exactly is the problem with Jane Fonda playing Nancy Reagan.) And probably the RNC is itself trying to capitalize on Hillary Clinton’s celebrity by issuing a press release about her.
By: Robert Schlesinger, U. S. News and World Report, August 5, 2013
“Money Talks”: A Climate Change Argument That May Even Work On Conservatives
We may find out if Republicans actually do trust the free market.
For years, activists have been touting the fact that 97 percent of climate scientists agree that climate change is manmade, hoping that would inspire Republicans — who first advanced the idea of a cap-and-trade system to slow carbon emissions — to break their pledge to the Koch brothers and do something about the coming climate crisis.
It didn’t work.
A recent poll found a majority of Republicans — 58 percent — believe that climate change is a hoax. This explains why the right-wing media regularly laughs at the idea of doing anything to slow carbon emissions.
But there’s one group that seems to believe 100 percent that climate change is real and a serious threat to their existence. It’s the group that has the most to lose if we do nothing: the insurance industry.
The Weekly Standard‘s Eli Lehrer explains:
Indeed, if free-market conservatives really want evidence of climate change, they ought to look towards the insurance markets that would bear much of the cost of catastrophic climate change. All three of the major insurance modeling firms and every global insurance company incorporate human-caused climate change into their projections of current and future weather patterns. The big business that has the most to lose from climate change, and that would reap the biggest rewards if it were somehow solved tomorrow, has universally decided that climate change is a real problem. An insurance company that ignored climate change predictions could, in the short term, make a lot of money by underpricing its competition on a wide range of products. Not a single firm has done this.
In fact, a recent report from the Geneva Association, “Warming of the Oceans and Implication for the (Re)insurance Industry,” suggests that climate change is making certain regions — including Florida and the United Kingdom — uninsurable.
Lehrer argues that the free market way to deal with a free market problem is the same solution offered by pioneering climate scientist James Hansen — a carbon tax:
Since carbon emissions do present a real problem, simply repealing the current regulations without replacing them would be both unwise and politically impossible. The least-intrusive and most economically beneficial way to deal with the problem appears to be a carbon tax, particularly a revenue-neutral carbon tax that could be used to offset and/or replace other taxes.
According to that Koch pledge, which has been signed by a majority of Republicans in Congress, any carbon tax would have to be matched by an “equivalent amount of tax cuts,” which would likely violate Grover Norquist’s tax pledge. It’s a predicament that typifies the structural obstruction that binds the modern GOP.
But money talks. Perhaps when they can’t insure their Palm Beach homes, the cost of inaction will be too much for even this Republican Party.
By: Jason Sattler, The National Memo, July 8, 2013
“Greed Has Not Been So Good”: The Private Sector Does Not Produce Public Virtue
Ever since he first proposed it in the same year Thomas Jefferson declared all men to be created equal, people have been delighted and beguiled by the hidden workings of Adam Smith’s famous “invisible hand.”
For a millennia or more, humans who marveled at the orderly movements of the heavens sought to invent some system to explain and predict the comings and goings of the planets. And so, it was entirely inevitable that in the fullness of time people would seek to impose the cosmic reliability of celestial mechanics onto more terrestrial phenomenon as well, like economics.
“Let the market decide!” That has been the battle cry of free market aficionados from the day Adam Smith first suggested that private avarice might transubstantiate into public virtue right through to the unspoken suppositions buried deep within Congressman Paul Ryan’s god-awful budget that tax cuts pay for themselves and the whole point of national fiscal policy is to lift from the minds of America’s job-producing investor class the dark clouds of “uncertainty.”
But what if the laissez faire conception of the free market doesn’t hold up any better than did the Ptolemaic vision of an earth-centered solar system that very nearly got Galileo burned at the stake for contradicting?
What if private vice doesn’t produce public virtue at all, as Adam Smith surmised, but rather invites a heedless and reckless pursuit of private profit that leads inexorably to public catastrophe? That was the conclusion which the Chicago-school conservative Richard Posner reluctantly reached after sifting through the rubble following the collapse of capitalism in 2008.
In his 2009 diagnosis of the most recent financial crisis, The Failure of Capitalism, Posner concluded that the fundamental problem with free market capitalism is that behavior which is perfectly rational when pursued by individuals, and individual firms, is disastrous when that behavior is aggregated across the entire society.
The micro-economic laws of supply and demand that tell an economic participant how to use the price mechanism to maximize profits, in other words, are worse than worthless as a macro-economic guide for the national policymaker whose aim is, not profits, but the productivity and prosperity of the economy as a whole.
It makes perfect sense for the consumer to buy when the market is strong and save when it is weak, “but by doing this they make the downturn worse,” says Posner, since from the standpoint of the overall society “we want people to save when times are good and spend when times are bad.”
Likewise, it can be rational to ride one of the serial economic bubbles that have become all too commonplace since high finance replaced making things as America’s signature industry — even if you know it is a bubble — since the individual investor can never know when that bubble will burst. And until it does, says Posner, there are lots of profits to lose if one climbs off the bubble too soon.
As a former Citigroup CEO put it: “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing you got to get up and dance. And we’re still dancing.”
Because risk and return are positively correlated, Posner says a firm that plays it safe is, paradoxically, “courting failure because investors will turn elsewhere.”
Likewise, while a “cascade” of bank failures could bring the economy to a halt, Posner says “no individual bank has an incentive to take measures to avoid such a consequence.”
That is why, he says, it may be risky to follow the herd, but it is not irrational.
Since the 2008 collapse, the media has been on high alert (unlike the government) for the scoundrels and knaves who brought our economy to grief. But in apportioning blame, Posner says “there is no need to bring cognitive quirks, emotional forces, or character flaws into the causal analysis.”
The “rational maximization” of businessmen and consumers all legally pursuing their self-interest, together and intelligently, within a framework of property and contract rights, was all it took to “set the stage for economic catastrophe.”
It’s this “rational indifference” to the consequences of one’s own business and consumption behavior — an indifference baked into the very nature of the “free” market itself — that explains why government has a duty to do more than merely prevent fraud, theft and other infringements of property and contract rights, even though this “is the only duty that libertarians believe government has,” as Posner says.
Government also has an obligation to regulate financial behavior, says Posner, for without such regulation “the rational behavior of law abiding financiers and consumers can precipitate economic disaster.”
Given the structural deficiencies of the free market and the perverse, self-destructive incentives it creates, it was probably smart for conservatives to shift the focus of their cheerleading away from capitalism’s economic performance and towards laissez faire’s imagined moral underpinnings instead — freedom, liberty, individualism and all of that. That’s because, as an economic incentive that promises broad-based prosperity, greed, it turns out, has not been so good.
By: Ted Frier, Open Salon Blog, Salon, March 21, 2013
“Today’s Conventional Wisdom”: It’s Not The Left That’s Changed, It’s The Economy
Have American liberals moved too far to the left? That’s long been the contention of conservatives contemplating liberal positions on a host of social issues, such as gay marriage and the legalization of undocumented immigrants. But opinion polls on these issues show that yesterday’s far-out liberal positions are quickly becoming today’s conventional wisdom.
A more nuanced conservative critique focuses on liberals’ support for a greater government role in the economy. To be sure, New York Times columnist David Brooks argued in a recent column, liberals have traditionally urged government to take up the slack in economic activity during recessions, but now, as the budget proposal of the Congressional Progressive Caucus shows, liberals believe that “government is the source of growth, job creation and prosperity” even when the economy has righted itself. The progressives’ budget, Brooks complains, proposes spending $450 billion on public works and sending $179 billion to the states so they, too, can provide more services and pave more roads. All this and more would be financed by increases in progressive taxation — draining the private sector of the capital it needs to grow, hire and produce prosperity.
Not surprisingly, liberal economists have jumped on Brooks’s arguments. Lawrence Mishel of the Economic Policy Institute argues that the economy is still performing so under par — $985 billion below its potential output if all our factories were going full tilt — that it needs a major boost from government-financed economic activity to increase production, employment and consumption. Coincidentally, the day after Brooks’s column was published, Gallup released a poll showing that 72 percent of Americans, including a majority of Republicans, would support a major federally financed infrastructure repair program and a federal program creating 1 million jobs. Nearly 80 years after Franklin Roosevelt created the Works Progress Administration, it seems the American people would like the government to re-create it.
But there’s a bigger problem with the conservative contention that government stands athwart the private sector’s capacity to create jobs and prosperity: It fails to acknowledge that the private sector no longer creates jobs and prosperity like it used to, completely apart from whatever effects governmental policy may have on job creation. Entirely on their own and well before Obamacare was a gleam in anyone’s eye, employers began cutting back or altogether dropping health coverage and retirement benefits for employees. Nor have government regulations compelled employers to increase the share of company revenue going to profits (which is at its highest level in decades) and reduce the share going to wages (which is at its lowest level in decades).
The U.S. corporations that make up the Standard & Poor’s index of the 500 largest publicly traded companies get almost half their revenue from sales abroad, according to a 2011 S&P analysis, and, despite all the hoopla about bringing manufacturing back to the States, much of their production is going to remain abroad. The rise of machines has, we all know, taken its toll on employment too. U.S. corporations are sitting on $1.7 trillion in cash, with share values and profits that render most of these businesses’ leaders happy campers. Even if the U.S. economy continues to fall far short of full employment, and even if the rate of workforce participation continues to decline, these businesses can still sell their products all over the world. Unlike in the 1930s, the shortfall in domestic consumption does not present them with a crisis but with perhaps nothing worse than a missed opportunity.
In short, the economy is working for our economic elites. The massive changes they would have to make to investment strategies and the division of corporate revenue so that the economy worked for the majority of the American people are nowhere on the horizon. The great growth machine that once was the U.S. private sector ain’t what it used to be — which is one reason each recession since 1990 has been longer, deeper and more intractable than the last. That’s the new economic reality in this country, and that’s what the budget of the Congressional Progressive Caucus responds to. It’s not that liberals have been prompted to move leftward through the readings of ancient socialist gospels or by smoking some stash left over from the ’60s. It’s that the economy has reached a dismal stability far short of its full employment potential or renewing the promise of widespread prosperity, and government investment is required to make up the difference. If anyone is smoking something, it is conservatives who foresee a rebirth of prosperity if only the private sector is left alone.
By: Harold Meyerson, Opinion Writer, The Washington Post, March 21, 2013
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