California governor wants users to profit from online data
By DON THOMPSON
Thursday, February 14
SACRAMENTO, Calif. (AP) — California Gov. Gavin Newsom has set off a flurry of speculation after he said the state’s consumers should get a piece of the billions of dollars that technology companies make by capitalizing on personal data they collect.
The new governor has asked aides to develop a proposal for a “data dividend” for California residents but provided no hints about whether he might be suggesting a tax on tech companies, an individual refund to their customers or something else.
“Companies that make billions of dollars collecting, curating and monetizing our personal data have a duty to protect it,” the Democrat said in his first State of the State speech Tuesday. “California’s consumers should also be able to share in the wealth that is created from their data.”
Tech companies, for example, sell the data to outside businesses that target ads to users. The European Union and Spain’s socialist government last year each proposed taxing big internet companies like Google, Facebook and Amazon.
Common Sense Media, which helped pass California’s nation-leading digital privacy law last year, plans to propose legislation in coming weeks that would reflect Newsom’s proposal, founder and CEO James Steyer said, without providing details.
Starting next year, California’s European-style privacy law will require companies to tell customers upon request what personal data they have collected and why, which categories of third parties have received it, and allow consumers to delete their information and not sell it.
U.S. Sen. Mark Warner of Virginia, ranking Democrat on the Senate Intelligence Committee, predicted in November that California would consider legislation that would “send a shiver down the spine” of tech companies.
He described the proposal as returning 25 percent of the value of an individual’s data. It wasn’t clear how the calculation would be made.
Warner’s office said Wednesday that he made the comment after speaking with Steyer. Warner is considering federal legislation requiring companies like California-based Facebook and Google to provide users with annual estimates of what their data is worth.
Axios calculated that the average Facebook user is worth $7.37 to the company, while a Twitter user is worth $2.83, and a Reddit user, about 30 cents. The calculation basically divided the companies’ annual revenue by their monthly active users.
Steyer promised “landmark legislation” that will change the way consumers view the value and privacy of their online information. Most consumers don’t realize that companies “are taking your data at extremely detailed levels and selling it and monetizing it,” he said.
“You’re basically saying, ‘It’s my data,’” Steyer said. “And if you do use it, I would like a portion of that because you’re monetizing my personal information. That’s a big deal, and that will represent an enormous step forward for consumers in California and all across the country.”
California-based tech giants Facebook and Google did not immediately comment.
Newsom’s office would not say who is leading his review. Newsom “is open to constructive input” from national experts and lawmakers, spokesman Brian Ferguson said in a statement.
The governor’s office pointed to proposals elsewhere that would put a tax on data, including one that died in the Washington state Legislature in 2017. That measure would have taxed receipts from the sale of state residents’ personal data at a rate of 3.3 percent.
Mahsau Daee of the Internet Association said the industry will look forward to reviewing the governor’s eventual proposal but that “free and low-cost, data-driven online services offer Californians — and all Americans — enormous benefits.”
Jeffrey Chester, executive director of the Center for Digital Democracy, said Newsom “is off to the wrong start” on protecting consumer privacy.
“They shouldn’t be tricked into giving away their privacy for a small discount,” he said in an email. “Selling it for a few bucks isn’t the answer and will make the problem worse.”
Dan Goldstein, president the digital marketing agency Page 1 Solutions, said a tax might not benefit consumers, while some sort of profit-sharing plan would likely return a “pittance of a benefit” to individuals.
Facebook co-founder Chris Hughes last year suggested that users could band together to negotiate payments or a data tax could be administered, similar to a fund that annually shares oil profits with Alaska residents.
Consumer Federation of California executive director Richard Holober hailed the proposal while alluding to the vast financial divide between rich and poor, particularly in California, which is struggling to address homelessness and an affordable housing crisis.
The governor previously asked Silicon Valley companies to match $500 million in state funds with their own low-interest loans for developers to build homes for middle-income residents in some of the state’s costliest areas.
“We have such a disparity here with everyday Californians who are having trouble paying their rent or sending their kids to college,” Holober said. “California has created a very fertile land for these corporations to become fabulously wealthy, and they need to give back.”
Newsom’s announcement excited lawmakers who authored California’s privacy law, but they had no information about it.
Democratic Senate Majority Leader Bob Hertzberg called the proposal “the next frontier of the online data and privacy conversation.”
Democratic Assemblyman Ed Chau, who is chairman of the Assembly Committee on Privacy and Consumer Protection, said the proposal “highlights the value of data, which has often been described as the new oil in this technological data-driven economy.”
Opinion: The Billionaires Versus the Politicians
By Antony Davies and James R. Harrigan
Don’t look now, but there’s a bogeyman out there, and the Democrats are hot on the case. If Elizabeth Warren, Bernie Sanders and Alexandria Ocasio-Cortez get their way, billionaires will finally be forced to pay “their fair share.”
Ocasio-Cortez has called for increased taxes on their incomes, and Sanders their wealth in the form of increased death taxes. But Warren has proposed something new and unprecedented: She wants to tax their savings while they are still alive. At best, Warren’s proposal reveals a fundamental misunderstanding of basic economics. At worst, it’s a massive smoke screen.
First, the misunderstanding. Humans invented money to get around problems with barter. With money, you can save dollars over long periods of time to use whenever you want. This was a profound improvement over bartering, mostly because things like wheat, produce, meat and just about everything else humans grow and harvest go bad pretty quickly. Money is simply a placeholder for goods and services; it has no intrinsic value. It’s the goods and services money represents that have value.
Politicians always manage to miss this, perhaps because they typically provide neither. But money has become so integral to the things we do, that many of the rest of us miss this too.
When people think of billionaires, they think of Scrooge McDuck sitting on a pile of money that he more or less stole from other people, and that he simply hoards in his basement. What they should see, though, is a person who accumulated dollars by offering people things they wanted more than those same people wanted their money. A pile of money is just a bunch of IOUs a person holds until it’s time to buy something. Billionaires have more of them. Steve Jobs got his by selling us iPhones. Jeff Bezos got his by selling us damn near everything. But we sent them those dollars quite voluntarily. There is nothing evil about it.
And the smoke screen? The decades-old government debt problem about which economists have repeatedly warned politicians, and that politicians have repeatedly ignored, is now upon us. Trillion-dollar deficits are the new normal. The Social Security Administration says that, on its current course, the trust fund will be insolvent within 16 years. Irresponsibility is the order of the day, and there is no sign of that changing.
As a matter of fact, Congress is now exploring ways to make it easier to raise the debt ceiling, even though the ceiling is largely just for show anyway. What’s scary is that Congress cannot even maintain the pretense of self-control anymore. The federal government’s finances are speeding toward a mathematical brick wall, and politicians are desperately looking for someone to blame.
Elizabeth Warren and her friends in hope that voters will follow their lead and blame billionaires, or entrepreneurs, or bankers, or insurance companies, or literally anyone other than the people who caused the problem in the first place: the politicians themselves.
But here is the naked truth. The 584 (as of 2018) U.S. billionaires are worth a combined $3 trillion. In 2018 the federal government spent almost $4.2 trillion. Even if Elizabeth Warren could confiscate 100 percent of their wealth, it would only fund the federal government for about eight months.
So ask yourself, who represents the bigger threat? The 584 billionaires who offer us things in exchange for our money, and whom we can walk away from at any time by shopping elsewhere? Or the 535 representatives and senators who take our money by threat of force?
ABOUT THE WRITERS
Antony Davies is associate professor of economics at Duquesne University. James R. Harrigan teaches in the department of Political Economy and Moral Science at the University of Arizona. They host the weekly podcast Words & Numbers. They wrote this for InsideSources.com.
Why the $22 trillion national debt doesn’t matter – here’s what you should worry about instead
February 14, 2019
Author: William D. Lastrapes, William D. Lastrapes is a Friend of The Conversation and Professor of Economics, University of Georgia.
Disclosure statement: William D. Lastrapes does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.
The U.S. federal government’s debt load hit another milestone this month: It’s now a record US $22 trillion in nominal terms.
That’s $67,000 for every man, woman and child living in the U.S., and it’s up $2 trillion since President Donald Trump took office in 2017. For comparison, U.S. debt is more than the total size of the United States’ $20 trillion economy and equivalent to the gross domestic products of China, Japan and Germany combined.
This hefty sum is a reflection of the large annual budget deficits that the federal government has run, pretty much continuously, since 1931. Prior to that, surpluses were much more common, apart from the years following the Civil War.
With another round of anxiety-causing debt-ceiling debates likely to return in the coming months, like other economists, I believe it is worth asking whether we should even care about the size of government debt.
Default isn’t imminent
First of all, it’s important to note current U.S. debt levels do not indicate any risk of imminent default.
As long as the U.S. federal government remains an “ongoing concern” – fiscal institutions are strong and effective, taxing authority is maintained and the long-run productive capacity of the nation’s economy is secure – there is no economic reason to fear default on the nation’s debt. Political reasons, such as debt-ceiling mischief, are another matter.
To remain solvent and ultimately pay what it owes, the U.S. Treasury – which sells notes and bonds to investors to raise money to finance the budget deficit – needs only to balance its books over the long run, rather than over an arbitrary unit of time like a year.
Historically low interest rates on government debt suggest that bond market participants agree with this view and are not afraid of a sovereign debt default in the U.S. Indeed, with these low rates, sufficient economic growth can allow the government to borrow indefinitely.
Why it’s irrelevant
Although $22 trillion is a large number, it is essentially irrelevant to proper thinking about the economic role of the U.S. government or about responsible fiscal policy.
Government debt simply reflects the timing of taxes. Higher spending levels today require more borrowing – and a larger debt – as long as the taxes needed to pay for those expenditures are pushed into the future.
But regardless of when taxes are collected, what ultimately matters is the quantity of the economy’s scarce resources the federal government commands and controls, and how those resources are used, which essentially depend on the level and composition of government spending. To paraphrase Milton Friedman, spending is taxing.
In short, government debt can be a bad indicator of the stance of fiscal policy or its burden on the private sector. The government can be wildly intrusive in the economy and thus a hindrance to growth and welfare even if its debt is low. For example, Venezuela’s sovereign debt was only 23 percent of its GDP in 2017, yet its economy has been in turmoil for several years.
Or it can effectively manage spending to promote welfare even if its debt is high. In 1945, the U.S. debt-to-GDP ratio was 120 percent in 1945, immediately after the government mobilized the economy to win World War II.
High debt should not prevent the government from spending on worthwhile public endeavors. And low debt does not prove that the level or composition of government spending is appropriate.
The real burden to worry about
Yet, the $22 trillion “on-balance-sheet” debt is likely to woefully underestimate the federal government’s true liabilities and its potential demand on the economy’s resources.
The national debt is the government’s formal commitment to repay its creditors. But Uncle Sam has many other commitments for future spending that are not on the books, so-called “off-balance-sheet” liabilities. Such liabilities do not show up in standard debt measures.
While these commitments are different in nature from the promise to pay back previously borrowed funds, they are nonetheless a potentially large burden on taxpayers – and surely a governmental imposition on the economy.
These commitments arise from implicit and explicit federal loan guarantees that support housing and education policy, from deposit insurance and Federal Reserve actions that attempt to promote a stable financial system and from commitments to the elderly and poor through Social Security, pension guarantees and Medicare and Medicaid.
Economist Jim Hamilton has recently estimated that such off-balance-sheet liabilities could exceed $70 trillion, more than three times the the current value of outstanding Treasury securities. The biggest share of that, or about a third, is Medicare.
So OK, worry about the debt, but pick the right measure to worry about.
How to get a good night’s sleep
But if excessive government debt burdens on future generations keep you up at night, there’s a simple solution: buy Treasury securities with the money saved from low current taxes and bequeath those securities to your kids.
They can use the principal and interest to pay off high future taxes, with no ultimate effect on their net wealth or well-being.
In other words, taxpayers can use capital markets to offset transfers of their wealth – via taxes – to bondholders by becoming bondholders themselves. In aggregate, as long as private saving rises with government borrowing – and it is plausible to assume that it will if people feel the need to save to pay higher future taxes – the latter need not crowd out borrowing for productive activity by the private sector.
And then worrying about the federal debt won’t keep you from a good night’s sleep.
This is an updated version of an article originally published on March 19, 2015.
Humbug holidays: US retail sales drop 1.2 pct. in December
By PAUL WISEMAN and ANNE D’INNOCENZIO
AP Business Writers
Thursday, February 14
WASHINGTON (AP) — U.S. retail sales fell in December, posting the biggest drop since September 2009 and delivering more evidence that last year’s holiday sales fizzled unexpectedly. Even e-commerce suffered a big setback.
The Commerce Department said Thursday that December retail sales fell 1.2 percent from November. They were up 2.3 percent from December 2017. Total retail sales for 2018 rose 5 percent from the previous year.
Excluding gasoline station sales, which swing widely as pump prices rise and fall, retail sales dropped 0.9 percent in December.
The discouraging December report raises concern about whether the retail sales slowdown was just a blip or points to a more sustainable weakness in consumer spending.
“We caution against excessive pessimism,” the economists at Oxford Economics wrote in a report. Falling gasoline prices and a stock market rebound since Christmas should “strengthen sales in the coming months.”
The stock market recorded big drops in December. And a partial shutdown of the federal government began Dec. 22 at the end of the holiday shopping season.
“The shutdown came late in the month and likely had little impact on December sales, but consumer sentiment was weaker in the month amid stock market volatility,” analysts at Contingent Macro Research wrote in a research report.
Non-store retailers, which include mail-order and e-commerce vendors, saw sales tumble 3.9 percent. That’s the most since November 2008 in the midst of the Great Recession.
The National Retail Federation, the nation’s largest retail trade group, said earlier this month that annual retail sales should grow between 3.8 percent and 4.4 percent, to more than $3.8 trillion this year as employers continue to hire and the economy hums along.
But it did acknowledge that the ongoing trade war with China and volatile global markets are a threat to the growth. The group is expected to come out with final holiday results for the combined November and December sales on Thursday. It had forecast holiday sales to increase anywhere from 4.3 percent to 4.8 percent compared to the holiday season of 2017.
Opinion: Middle Class Gives Attainability of American Dream a B- Grade
By Robert N. Trunzo
In 1931, author James Truslow Adams conceived the phrase the “American Dream,” the idea that America is the land of upward mobility for the masses, instead of just the privileged few. As America’s housing markets boomed after World War II, the masses attained the American Dream, giving rise to a thriving middle class that remains the backbone of our economy.
In recent years, however, the American Dream has fallen out of reach for many. We’ve seen enough proof that shows the middle class is struggling to make ends meet, and its ranks plummeted from 61 percent of the U.S. population in 1971 to just 52 percent of the population in 2016, while wages are failing to keep up with a higher cost of living.
What’s interesting and more concerning is that new research shows the middle class itself doesn’t see its prospects as being so dim. A recent CUNA Mutual Group survey of the middle class found that, when asked to grade their ability to achieve the American Dream, the middle class gave themselves a B-minus, which suggests somewhat of a positive outlook.
The same study found that 62 percent of the middle class is confident about its finances, and close to half of respondents (46 percent) don’t anticipate missing any loan payments in the next two years.
Where this tepid optimism gets into highly problematic territory is that the study also found that members of the middle class haven’t built savings for the proverbial rainy day. The majority of the middle class says it has three months, at most, of emergency savings — leaving it unable to weather events such as the loss of a job or a severe medical issue.
This is important because the economy fluctuates, and while unemployment is currently under 4 percent after a record run of market milestones, when a downturn does inevitably arrive — and it will — the middle class will be severely exposed.
Along similar lines, even in today’s robust economy, the middle class is pessimistic about their prospects for retirement: the vast majority — 72 percent — don’t think they’ll be able to retire with confidence in their lifetime, and view more immediately achievable goals, such as car purchases and international travel, as more realistic uses of their money. Such uses of limited money hardly makes the situation better.
While the fact that the middle class finds itself in precarious shape no longer makes for front-page news, the finding that the middle class is living just well enough for now to feel optimistic is noteworthy and should make us think.
Sure, when times are good, modest day-to-day purchases don’t create extreme levels of anxiety, but the faulty assumption behind this positivity seems to be that times will remain good. This reveals a fundamental lack of preparedness and an absence of urgency that could cripple the middle class should another financial crisis hit.
Clearly, there is a disconnect between awareness and preparedness, and if there’s one thing members of the middle class should do heading into 2019, it’s financial planning. And if there’s one thing everyone should talk about more, it’s promoting financial planning. The aforementioned positive attitudes about the American Dream by the middle class show the discussion isn’t where it needs to be.
It’s critical we protect the progress we’ve made in the last decade since the Great Recession, and now is the time to put together a plan for members of the middle class.
ABOUT THE WRITER
Robert N. Trunzo is CEO of CUNA Mutual Group. He wrote this for InsideSources.com.