What's On The 2024 Agenda? According to Jerome Powell, It May Not Gonna Be Rate-Cuts!

A report on April 16th from the Federal Reserve Chair Jerome Powell seems to backtrack on the possibility of interest rate cuts for Americans. After raising interest rates to combat inflation throughout 2023, Powell previously agreed to keep them steady throughout January of 2024 and foresaw (economy permitting) two rate cuts in the future. However, on Tuesday, when asked about when these rate cuts will be happening in 2024, Powell seemed hesitant to make any promises:

"The recent data have clearly not given us greater confidence and instead indicate that it's likely to take longer than expected to achieve that confidence," Powell told a forum in Washington. Powell seems to maintain that the interest rate increases need time to act, and that until they do, it's unwise to make any confident declarations about when the interest rate cut-backs will come. 

As many of us learned in class recently, in mid 2022 to early 2023, the Federal Reserve Chair Jerome Powell proposed hiking interest rates, with the Republican party backing him and consequently pressuring the U.S. Federal Reserve to do so. The cause of this proposition was the growing trend of inflation (caused by excessive federal government spending and the 2021 COVID-relief stimulus checks), and many Americans were concerned that this would cause unemployment rates to skyrocket. And even though these interest rate hikes catalyzed the "soft landing" that led to high praises of the Federal Reserve and Jerome Powell for their decision-making and recession prevention, the threat of these increases continuing into 2024 prompted a swift Democratic backlash. 

Early this year, Democratic senators Elizabeth Warren, John Hickenlooper, Jacky Rosen, and Sheldon Whitehouse penned a letter to Fed Chair Powell imploring him to cease the interest rate hikes, as they had resulted in higher costs for homebuyers and renters. According to the Democrats, the rate increases had sparked a cataclysmic event in the housing market and tanked housing affordability, which majority of lower to middle class Americans did not want on the 2024 Bingo Card. Though they acknowledged that Powell vowed to keep the rates steady for the foreseeable future, they still maintained that rate cuts are a necessity and need to come as soon as possible, as the effects of the interest rate hikes are being felt tremendously by the American public.

Like many of the issues plaguing our country, however, this issue isn't entirely a question of the betterment of the American people, but rather the potential political issue it may present for the highly anticipated 2024 election for Democrats. Democrats fear that the event of a continued bout of rate increases would harm a Biden reelection. As ABC News states, the most recent Democratic presidential candidate to lose the presidential nomination when it came time for his reelection was Jimmy Carter, and he lost the presidency because of rate hikes at the Federal Reserve. For Democrats, now is not the ideal time for economic unrest, and the interest rate cuts could not possibly come sooner. The interest rate cuts would further decrease unemployment rates, and these economic improvements could be instrumental to Biden retaining his presidency.

Naturally, this means that it is in the best interest of the Republican party to make sure that these rate cuts do not happen before election day. Hence, former President Donald Trump, who is currently undergoing a felony fraud court case, took Powell to case in a Fox Business Network interview, calling him “political” for entertaining the idea of rate cuts, which he believes would advocate for a Biden presidency in the 2024 to 2028 term. For context, Powell was first nominated to be Fed chair by Donald Trump in 2017, but has fallen out of grace with him for being too independent of politics; Trump vows that if he is elected president once again, he will replace Powell when his term as chair ends in 2026. Powell maintains that “this independence both enables and requires us to make our monetary policy decisions without consideration of short-term political matters,” so it appears as though he (for the moment) won't be cowed into submission by Trump or the supportive sector of the Republican party.

For now it remains to be seen what will become of the promised rate cuts and what they will mean for the 2024 election, but they are certain to make for a flamboyant declaration of economic policy, regardless of who wins the presidency.

Sources:

https://abcnews.go.com/Business/interest-rate-cuts-2024-election/story?id=105752108

https://abcnews.go.com/Business/interest-rate-cuts-2024-election/story?id=105752108

https://www.reuters.com/markets/us/feds-powell-jefferson-square-restrictive-policy-with-strong-data-2024-04-16/

https://thehill.com/business/4435570-democratic-senators-call-on-fed-to-cut-interest-rates-over-high-housing-costs/

https://thehill.com/business/4513519-fed-chief-caught-in-partisan-battle-over-rate-cuts-as-election-looms/

https://apnews.com/article/federal-reserve-powell-inflation-economy-rates-jobs-f9c65fb1b8116168f825657bc5f5c117

https://www.wsj.com/economy/central-banking/powell-dials-back-expectations-on-rate-cuts-00e3e5d0

https://www.investopedia.com/us-economy-news-today-housing-starts-and-permits-nosedived-in-march-8634124

Law And Order: Special Presidents Unit (aka The Beginning of Donald Trump's Criminal Hush Money Trial)

Today marks the beginning of former President Donald Trump's criminal hush money trial, the first of his four impending trials (and 34 felony counts), and a historic move by the courts. Never before has a former US President been indicted on account of criminal activity, and this particular piece of criminal activity is especially unbecoming. The charges involved in this trial, from Manhattan District Attorney Alvin Bragg, can be traced back to the $130,000 dollars former Trump lawyer Michael Cohen paid adult film actress Stormy Daniels to keep quiet about an alleged affair between her and the former president, around the end of the 2016 election. While this in itself is certainly an icky situation, the hush money aspect isn't necessarily illegal. The illegal portion happens to be that Trump repaid Cohen in installments that were marked as "legal fees" in his company's records, which is considered as fraud. Especially considering that these payments were made around the time of the 2016 election, it stands to reason that the DOJ would consider paying of Daniels to have been an attempt "to influence the 2016 presidential election" by concealing the potentially nasty secret of an affair. 

The former President didn't take this all lying down, of course, as he vehemently denied all of the allegations presented and maintained that he should have some level of immunity as a former president. This has been a common thread with many of his criminal proceedings, as he has consistently argued that his former position of power in the US exempts him from being indicted on account of his various criminal activities. This was especially true in terms of the felony counts of him obtaining classified government documents from his time in office and stowing them away in an unprotected location (i.e. a bathroom in Mar-a-Lago). Trump's lawyers' main argument was that the Presidential Records Act (PRA) allowed the president to have possession of these documents, but this has been highly contested by the public and the courts.

The trial kicked off today with the choosing of potential jurors and individual jury questioning. This was a rather contentious situation, as many jurors were excused right away for their admitted inability to be impartial in the proceedings. Judge Juan Merchan maintained that jurors should try their best to be impartial, regardless of their political affiliation, and urged jurors to consider whether they would act the same way if they were of the same political party of the president. Meanwhile, the Trump Media stock price has plummeted more than 18% after the company sold millions of additional shares, clearly gearing up for the plethora of fines they're about to incur from Trump's criminal endeavors. 

All in all, it is unclear as to whether this trial will really amount to much, but given the general scandalousness of this situation, it is safe to say that this may sway Trump's base a bit, as it would be controversial to be in support of a convicted felon (if it comes to that). However, the gravity of this situation in the long term is ambiguous for now, and whether this trial will effect his chances of snagging a second tenure of president remains to be seen. 

Sources:

https://www.usatoday.com/story/news/politics/elections/2024/04/15/donald-trump-trial-new-york-live-updates/73308381007/

https://www.axios.com/2024/03/25/trump-new-york-hush-money-criminal-trial

https://www.nbcnews.com/politics/donald-trump/live-blog/trump-hush-money-trial-stormy-daniels-michael-cohen-live-updates-rcna145934

https://www.washingtonpost.com/politics/2024/03/14/trump-documents-presidential-records-act/

Minimum Wage Increases for California's Fast Food Workers Take Effect

        Last September, Assembly Bill 1228 was approved by Governor Gavin Newsom. This law mandated restaurants with 60 or more establishments across the country to increase the wages of the workers at their California locations to $20 an hour starting April 1, 2024, among a few other provisions.

That day has arrived. 

        This new floor is 25% greater than the general minimum wage in the state ($16) and 176% greater than the federal minimum wage ($7.25). In anticipation of Assembly Bill 1228 becoming active, some franchisees (independent owners operating one or more locations of a chain) have already laid off (or announced their plan to) some of their staff in order to cut costs and retain profits, such as the 1,200+ delivery drivers across a couple of Pizza Hut franchises that were laid off at the tail end of 2023. This corroborates the sources we looked at last week in our lesson about minimum wage increases, and highlights how such policy is almost always a trade-off between equity and employment. However, there may also be an outcome to this law that does not just result in layoffs en masse. Similar to what followed Seattle’s minimum wage hike, workers may simply clock fewer hours (saving employers some money) while still making more in a day than before the increase due to how substantial the raise is for many. There will inevitably be some jobs lost in either outcome, but the latter is the lesser of two evils in my opinion. 

    Something mentioned less in last week’s sources was the effect of minimum wage increases on the price of goods at businesses affected by the raises. In order to be able to pay workers more, restaurant companies are planning to raise prices (as if California living wasn’t expensive enough) in order to pay their employees what is required by the bill. Some restaurants have left it up to the discretion of franchisees, while some companies are planning to increase prices universally. Nothing has been rolled out yet to my knowledge, but this illustrates another trade off of minimum wage increases being equity and affordability. 

        Although many of these effects sound rather bleak, the increase will affect over 500,000 workers in a sector relatively accessible to those below the poverty line looking for a job. I am also optimistic (perhaps naively) about the Fast Food Council created by this bill, intended to develop standards regarding wages and working conditions for California fast food restaurants, as I might start looking for a job this summer and have heard many horror stories from those who have worked at these establishments.

For any prospective commenters:

Will you be affected by this increase? If so, positively or negatively?
Do you agree with Assembly Bill 1228’s changes? 

Sources:

https://www.businessinsider.com/california-pizza-hut-lays-off-delivery-drivers-amid-new-wage-law-2023-12

https://www.latimes.com/business/story/2024-03-27/fast-food-minimum-wage

https://www.latimes.com/california/story/2024-03-28/fast-food-workers-minimum-wage-is-going-up-which-chains-will-up-their-prices

https://www.gov.ca.gov/2023/09/28/california-increases-minimum-wage-protections-for-fast-food-workers/

https://www.npr.org/2024/03/30/1241451631/california-fast-food-20-minimum-wage

Woman Sues Texas over Abortion Case

On 2022 in McAllen, Texas, a woman who had an abortion was "charged with murder in 'the death of an individual by self-induced abortion'”, and subsequently spent two days in prison until the charges were dropped. She would sue, arguing that her privacy and legal rights were undermined through her initial charges.

The woman was 19 weeks pregnant when she used Misoprostol to conduct an abortion. It was after that the following day that the developing fetus had no confirmed heartbeat where a caesarian section performed. The hospital would report the procedure to the district attorney office where they opened an investigation into the abortion.

On June 24, 2022, the Supreme Court ruled in the case Dobbs v. Jackson Women's Health the overturning of the Roe v. Wade. Texas lawmakers would enact abortions a few months later on August 25 of the same year. Although strict restrictions prohibit the dispensing or usage of abortion inducing methods (such as Misoprostol), women are protected from murder charges when conducting an abortion. Thus, women have found ways to conduct abortions through medications provided by non-profits or, in this case, self-induced abortions.

In the lawsuit, the woman would argue that she was wrongfully tried for a crime that she was legally exempted from, along with the argument of having her privacy rights violated with the hospital disclosing her procedure with the D.A office. The prosecutor who initially charged the woman agreed to a $1,250 fine along with a probation period of 12 months. 

This particular case brings to highlights the many complicated legal rules that are involved in controversial topics like abortion. This connects to different concepts learned in class (particularly government), such as the idea of right to privacy. With the individuals guaranteed the right to privacy from government intervention, it is interesting to see how legal action was taken against the woman, although for an illegal action, a cause that could be viewed as improbable for some.

https://abcnews.go.com/US/wireStory/texas-woman-sues-prosecutors-charged-murder-after-managed-108667815

https://www.texastribune.org/2023/10/11/texas-abortion-law-birth-control-what-you-need-to-know/

https://guides.sll.texas.gov/abortion-laws/history-of-abortion-laws#:~:text=A%20judgment%20in%20a%20Supreme,effect%20on%20August%2025%2C%202022.

The National Association of Realtors settles in a major lawsuit

The National Association of Realtors, the largest nationwide organization being essentially the face of the real estate industry, has agreed to pay $418 million dollars to settle numerous anti-trust lawsuits against the organization. 

The issues that were brought to light through these lawsuits focused on the exploits of inflating their agent service commissions as well as hiding potentially lower commissions from the buyers. Buyers were previously unable to negotiate agent commission, something that has been historically practiced since the 1990's.  

Prior to the lawsuit, a 5 to 6% "cooperative compensation" commission would've been paid by the seller to the agent working with both the seller and buyer of a certain property, which can translate to tens of  thousands of additional dollars needed to be payed when forgoing property sales. 

With this settlement, it is predicted that, with the individuals being able to negotiate lower commissions with agents, a decrease in house prices as a result, but with the case being settled very recently, the future implications are still unknown.

https://www.vox.com/money/24106230/nar-realtors-settlement-real-estate-house-prices

https://apnews.com/article/national-association-of-realtors-agent-commissions-lawsuits-d62a66cb80639be3c4c3b429053a22c5

 The Trump Media IPO

    The recent IPO of Trump Media & Technology Group, owner of Truth Social, on the stock market has been unlike what the public would expect. Trading started with a big jump, but started to cooled off by the end of the day, differing from what investors thought and the company's actual situation.

   Trump Media's stock went up a whopping 56% when trading began, causing a pause due to too much activity. But as the day went on, it had died down, and the company ended with a more modest 16% gain. Still, it's valued at nearly $11 billion, which seems really high given that Truth Social isn't doing well.  

    Truth Social has way fewer users compared to big social media platforms like X and Facebook. Additionally, its number of users has been dropping a lot, making people wonder if it can survive against the competition. Despite this, Trump Media is getting a lot of attention, similar to what happened with GameStop and AMC during the pandemic.

    Experts like Jay Ritter warn that Trump Media's value might not match reality, just like those other companies. The main reason for all this excitement is Donald Trump himself. His involvement in the company brings a lot of attention. I personally find the unwarrented demand of the stock slightly suspicious especially because Truth Social has been losing users. Relating supply and demand graphs, the taste of the public for Truth Social is declining yet the demand for their stock is relatively high. Could this be a result of the publicity that comes with Donald Trump or could it be indicative of something happening internally?

https://www.cnn.com/2024/03/26/markets/trump-media-stock-truth-social/index.html

Uber and Lyft's beef with Minneapolis

    

A couple of weeks ago, the Minneapolis City Council passed an ordinance to increase ride-share driver pay to $1.40  per mile, and despite Mayer Jacob Frey’s attempt to veto the measure, the council was quick to override the veto in an overwhelming 10-3 vote. 

The decision to increase the driver pay of Uber and Lyft drivers continues the long debate on minimum wage and how a government can influence decisions regarding the minimum wage. More specifically, the debates and struggles on balancing capital, labor, and the government and its intervention. Capital would like for labor costs to be as low as possible, while labor wants wages to be the highest it can be. And finally, politicians are always looking for ways to look as if they are doing the right things, to gain votes. Because of the long ongoing debates and government intervention, citizens not only in Minneapolis but in the entire country working minimum wage must choose between accepting the new wages proposed or finding a different job with different pay. 

In a shocking turn, what seemed to be a positive government impact and intervention soon turned out to be the opposite, as in response to the new plans from the council, Uber and Lyft announced that they would stop offering rides in the city starting May 1, 2024. This poses a huge issue as it will lead to over 10,000 drivers losing their jobs, along with the loss of a huge public transportation option for the millions living in the Twin Cities. 

The cause for this sudden change is simple, the wage plan that the council proposed is nothing near the actual minimum wage, which would be a point of concern for drivers. However, the primary issue stems from government involvement, and it's that neither the Minneapolis City Council nor the state should be the one setting the minimum wages. 

Class connections: In economics, we have recently been talking about the debate on whether or not minimum wage is good for the economy, and how beneficial is it to workers as well. I feel like after reading this article, I feel like a city council or state shouldn’t be the one deciding on the wages of ride-share companies. This is because it's a voluntary job, where drivers from the ride-share companies can benefit from a wage and customers can benefit from an affordable way of fast transportation. On top of that, nobody, let alone the city has any idea how much each driver is making. However, the balance of opportunity cost between drivers and customers as explained earlier would be destroyed if City Council members simply put a “just” and “fair” wage on the drivers. 

sources: 

https://www.aier.org/article/uber-and-lyft-drive-out-of-the-twin-cities/ https://www.cnn.com/2024/03/15/business/uber-lyft-minneapolis-minimum-wage/index.html 

 Closure of the Port of Baltimore causes delays

    The Dali, a cargo ship had planned to leave the Port of Baltimore to go to Sri Lanka. As the Cargo ship headed towards the direction of the Francis Scott Key Bridge, they experienced a blackout and lost power in the engine. The ships backup generators managed to turn on but the propulsion system were still offline. Once they realized that they had lost power, the crew had tried to turn the ship as much as possible while also dropped their anchor to slow down and steer away from the bridge. They also requested that the bridge be shut down to traffic. Despite the crew's efforts, the ship still collided with the bridge.

    Traffic in the Port of Baltimore has been shut down until it is safe for passage. Baltimore is one of the largest ports for vehicles and containers, which "ranks first among US ports for autos and light trucks, handling a record 850,00 vehicles last year." Most of the traffic can be rerouted to two tunnels likely causing delays. However some vehicles carrying hazardous items will need to be rerouted even further. Similarly cargo ships would have to dock either philadelphia, norfolk, or New York/New Jersey. On the other end, because of attacks on ships in the red sea, vessels are forced to take different paths around Africa to finally reach Asia.

    The congestion will increase costs of shipping due to the delays in transportation. Mark Zandi, chief economist at Moody's Analytics states that the disruptions to the shipping of the goods are unlikely to cause large problems for the US economy as a whole. But because the port had been shut down indefinetly, many people have temporarily lost their jobs and the cost of the closure can't be calculated. President Joe Biden has stated that he wanted the federal governemnt to pay for they rebuilding of the bridge with funds from the Federal Highway Administration, Bipartisan Infrastructure law, and fudning from congress if needed.

 

    In my opinion, not only should the bridge be funded, but the people left jobless and others effected should be subsidized. Do you guys think the federal governement should provide funds for people along with the bridge? If not, how should they be supported, if at all?

https://www.cnn.com/2024/03/26/business/baltimore-port-autos-cruises/index.html

https://www.nytimes.com/live/2024/03/26/us/baltimore-bridge-collapse

https://www.usatoday.com/story/news/nation/2024/03/26/inside-francis-scott-key-bridge-collapse-baltimore/73105201007/

https://www.cnn.com/us/live-news/baltimore-bridge-collapse-03-26-24-intl-hnk/index.html

Trump's commitment on tariffs if reelected

 

Ever since former President Trump announced his decision to run for a second term, he has been a big believer in tariffs and has indicated that he would “reinstitute duties on foreign goods” if he were to win back the white house. 

In an interview with CNBC, Trump mentions the economic and political benefits of the tariffs that he plans to reinstate. The former president claims that tariffs would not only benefit the economy but would also help give the U.S. the power and leverage to make deals with other foreign nations. This is something that Trump heavily wants, as he believes that the U.S. has long been the victim of being “taken advantage of by other countries.”  

Trump claims that he will institute tariffs on most foreign goods and that penalties would increase if the foreign nations that the U.S. is trading with manipulate currencies or engage in corrupt or unfair trading practices. On top of that, If reelected, he will urge Congress to pass a “Trump Reciprocal Trade Act”, which would give the president the power to impose a reciprocal tariff on any country that imposes the U.S. 

Proposed acts like the Trump Reciprocal Trade Act are mainly targeted at the U.S.’s “biggest rival” as claimed by Trump, China. According to Trump, “China was taking advantage of us on steel. They were destroying our entire steel industry, which was never doing very well over the last 25 years anyway ... because it’s been eaten alive by foreign competition.” Trump plans on putting a 50% tax on all of the steel coming in from China, and on top of that, With China producing about 30 million vehicles in 2023 which resulted in about a 50% year-over-year increase, Trump has claimed that he would impose tariffs in order to get China to manufacturer more of its cars in the U.S. With all this economic tension, Chinese US trade relations could further detrioriate with the election on the horizon.

With the election season coming, the polls are predicting a tight contest in November between Trump and incumbent President Joe Biden. With Trump dominating the republican primaries, his future goals regarding tariffs could play a huge role in whether or not he gets elected, as the economy will be a huge topic for millions of Americans looking to vote.  

Class connections: Trump’s intended tariff policies clearly show concerns about demand. For the last 20-30 years, foreign competition from rival nations such as China has resulted in the decline of US manufacturing as well as goods, such as steel and car manufacturing. In Trump's ideas, Tariffs would limit foreign competition and would give a greater market share to the US, which would increase demand over foreign competitors. An increase in demand would mean the demand graph would shift to the right. 

sources: 

https://www.cnbc.com/2024/03/11/trump-pledges-to-get-tough-with-tariffs-again-if-elected.html 

https://apnews.com/article/trump-policies-agenda-election-2024-second-term-d656d8f08629a8da14a65c4075545e0f 

UN Resolution for Cease-fire in Gaza Passes as the U.S. Abstains

    Today, the United Nations Security Council (UNSC) unanimously approved a resolution calling for a cease-fire in the Israel-Hamas war until the end of Ramadan, which concludes on April 9th. Additionally, the resolution called for Hamas to release all of the hostages taken during the surprise attack on October 7th of last year that kicked off the conflict that has already taken over 30,000 lives. However, Israel’s Foreign Minister Israel Katz quickly stated that they will not cease fire (this is coming from Twitter/X so we’ll have to wait to see if this is actually true).

 

 https://twitter.com/Israel_katz/status/1772299601770389510

    Interestingly, the UNSC consists of 15 member nations and yet the vote to pass the resolution was only 14 - 0. Who was missing? None other than the United States, who decided to abstain from the vote. In fact, the U.S. “vetoed” three past cease-fire resolutions brought to the UNSC, and the two resolutions our country’s delegation has put forth were vetoed by Russia and China. What made this most recent resolution different is that it met the U.S. delegation’s request for a ceasefire demand to be attached to a hostage deal. Simultaneously, it satisfied China and Russia by not outright condemning Hamas. This omission is one reason why the U.S. decided not to vote on the matter.

    For those interested in the process of a “veto” in the UNSC, it is similar, in ways, to that of the power held currently by Joe Biden. Any of the five permanent members of the council (China, France, Russia, the U.K., and the U.S.) can block the adoption of a proposed resolution outright, but there is a method to circumvent a veto: an emergency special session of the United Nations General Assembly. The UN General Assembly grants all 193 members a single vote (Senate-esque), and this specific scenario would arise from either a simple majority of UN Member States or at least nine UNSC members voting to convene. Although this may seem less demanding than having to gather a two-thirds vote from two house of stubborn politicians, it is even less common than the the latter as the emergency special session has only seen the light of day a total of 11 times (one of those being for the Israeli-Palestinian conflict in 1997, which has been subsequently reconvened multiple times, including in the weeks after the surprise attack last October).

    As for my thoughts, I am glad to see the powers of the world acknowledge the damage the ongoing violence has done to civilian populations on both sides, and that the fighting continuing on would be unlikely to produce a decent outcome. There are talks within the UN about extending this cease-fire past Eid and even making it a permanent truce, to which I doubt will come to fruition in the foreseeable future seeing Israel’s response to this preliminary pause. Regarding this response, I am somewhat disappointed in Israel's statement (could they not at least see if Hamas leaders carry through with the hostage release?) but also realize I am not fully aware of all of the nuances of the conflict playing out right now. 

For any prospective commenters: 

 

Do you think the ceasefire will be upheld? 

Do you agree with the United States abstaining from the vote? 

What are your thoughts on the veto system in the United Nations Security Council?

 

Sources:

https://www.aljazeera.com/news/2024/3/25/world-welcomes-unsc-resolution-calling-for-ceasefire-in-gaza#:~:text=Many%20officials%20around%20the%20world%20have%20welcomed%20the%20resolution.&text=Many%20world%20leaders%20have%20welcomed,Palestinian%20group%20Hamas%20in%20Gaza.

https://www.aljazeera.com/news/longform/2023/10/9/israel-hamas-war-in-maps-and-charts-live-tracker 

https://apnews.com/article/un-gaza-ceasefire-resolution-vote-ramadan-b7985fede65e5477aba2c8d2e62a6632

https://www.axios.com/2024/03/25/gaza-ceasefire-resolution-un-security-council-veto 

https://en.wikipedia.org/wiki/Emergency_special_session_of_the_United_Nations_General_Assembly 

https://en.wikipedia.org/wiki/United_Nations_Security_Council_veto_power#Bypassing_the_veto 

 

Quincy Teng  

Beeper Mini, Windows, and the DOJ’s New Apple Antitrust Lawsuit in Context

 

Image credit: Mike Segar, Reuters, via NYT

        22 years ago, Microsoft settled an antitrust lawsuit with the U.S. government, which had accused it of monopolizing the web browser market for Windows for its browser, Internet Explorer. The settlement stipulated that Microsoft would share its application programming interface (API) with third parties, allowing for greater third-party interoperability with Windows products and easing the monopoly Microsoft held over web browsers. 

The antitrust suit Apple faces today (which Katie introduced in the preceding post) isn’t identical (it targets the smartphone market as a whole, not primarily a market for software), the DOJ certainly sees a similarity, with “Microsoft” occurring 26 times in their complaint, according to the New York Times. Windows was criticized for providing access to Internet Explorer more easily than other browsers could be accessed; similarly, Apple has been criticized for favoring its own software (App Store, Apple Wallet) and forcing third parties to accept Apple’s solutions rather than developing competing software — though a piece from the New York Times is fair to point out that this case is more ambitious, given the idea that Apple ought to ease cross-platform communications, and that the iPhone’s market share is less than Windows’ back in 1998.

There are also concerns that Apple has a legitimate interest in building its monopolistic walled garden — Dave Lee, in an opinion piece for Bloomberg, opines that if Apple loses the lawsuit, it will result in a more complicated, insecure, and overall worse phone. Framing Apple’s role as a sort of natural monopoly, he describes how it uses “its maniacal control over the user experience on the iPhone to make it a vastly superior smartphone,” going on to explain that while Android phones are more open, they are also more complicated and less easy to use. Comparing the forced use of Apple Wallet for apps on the iPhone to physical wallets, Lee asks "How many physical wallets does the typical person carry?” While this is a fair point, it's also worth considering the fact that computers allow for passwords and payment information to be stored in different places — different browsers, password managers, and more — and yet this freedom of choice does not seem to confuse or negatively impact most users. 

Apple’s conduct isn’t only to improve or simplify its phones, though. Beeper Mini, an Android app, allowed for users to send texts to iPhones using the iMessage protocol, which allowed for end to end encryption, or E2EE (supported by the iMessage protocol but denied to Apple–Android communications), higher resolution photos and videos, and other perks. Yet Apple shut down Beeper by repeatedly making access to their iMessage protocol more difficult on grounds of it posing a “security and privacy risk.” Given that, without Beeper, the presence of a single Android device in a group chat would prevent any communications in the chat from being encrypted, the claim that Beeper posed a security risk seems odd. Moreover, users can use iMessage on Mac computers without need for an iPhone, an intended feature, yet when Beeper allowed for users with Android phones to communicate over iMessage via their Macs, Apple revoked their Mac computers’ access to iMessage — penalizing these users by disabling a feature available by default.

Dave Lee, for Bloomberg, argues that limited Apple-Android texting isn't inherently illegally anticompetitive — users can still use services like Signal and Whatsapp that allow for end to end encrypted messages to be sent between devices — though he does concede that arguments against the dreaded “green bubble” have some credibility. Yet, to echo the arguments against Microsoft two decades ago, a company can be anticompetitive even without fully blocking competition — thus, as Microsoft’s video showing the process of installing a rival web browser did not make up for the process being slow enough to be considered anticompetitive, and the fact that it is possible to install other E2EE messaging software may not excuse the hurdles that Apple puts along the way. 

But the changing political context around Big Tech antitrust suits is also worth considering — David McCabe, for the New York Times, describes the head of the DOJ’s antitrust division, Jonathan Kanter: “a lead architect of the most significant effort to fight the concentration of power in corporate America.” Along with antitrust suits against Google and suit to stop JetBlue from buying Spirit Airlines, this case is another effect of a growing willingness in the government to press antitrust law more heavily. This sentiment isn’t only in America — recently, the European Commission fined Apple $1.8 billion for unfair practices regarding its dominant App Store, and it’s due to the EU’s Digital Markets Act that Apple has to allow third party app marketplaces in the EU. 

We know from class that monopolies aren’t inherently illegal. Natural monopolies, in which a single producer can supply a good more efficiently or cheaply, make economic sense, and Apple’s control over the iPhone has made it, if restricted, a functional and easy to use device, especially given that the phone market serves as an economy of scale. But have anticompetitive practices imposed a cost on the users? Does the 30% share Apple takes from all App Store purchases — the only way for developers to distribute apps unless they’re in the EU — drive up prices for apps in a way a more competitive market wouldn’t? Do green bubbles, and their limitations, discourage people from moving to Android regardless of the iPhone’s merits? We’ll have to see what the courts decide, but I don’t think it’s too wrong to look at a few specific issues (i.e. the Beeper Mini saga) and the overall shift in political context with regards to Big Tech antitrust and predict that we might get some change. 

Sources:

https://www.nytimes.com/2024/03/23/business/dealbook/apple-microsoft-antitrust.html

https://www.nytimes.com/2024/03/22/business/dealbook/apple-justice-antitrust.html

https://www.nytimes.com/2024/03/22/technology/jonathan-kanter-apple-antitrust.html

https://bloomberg.com/opinion/articles/2024-03-21/apple-antitrust-suit-us-shouldn-t-force-company-to-make-a-worse-iphone

https://www.justice.gov/opa/speech/attorney-general-merrick-b-garland-delivers-remarks-lawsuit-against-apple-monopolizing

https://www.nytimes.com/2023/12/22/technology/apple-iphone-beeper-mini.html

https://www.nytimes.com/2024/03/21/technology/apple-regulators-world.html

https://www.nytimes.com/2024/01/26/technology/apple-messaging-crackdown-beeper.html

Is Apple a Monopoly?

Many know and love Apple, and can applaud the company for its major success and innovation throughout the years. Yet the almost $2.75 trillion company may be in trouble as upsets arise about a potential monopoly on its most popular item, the iPhone. The Federal Government has had rising concerns with the major tech companies and wants to include an antitrust lawsuit against Apple, claiming they are responsible for keeping customers reliant on their iPhones, not believing they could easily switch. 

The reason Apple has been accused of being a monopoly is how closely it controls the user experience, making it hard to duplicate on another phone. An example of this is ApplePay and the ability to have your iPhone and Macbook/Apple Watch be cohesive. The government in their lawsuit claims this only leads to higher prices and less innovation. Attorney General Merrick B. Garland passionately speaks on how Apple is doing more than just staying ahead of competition, instead they are violating the federal antitrust law and the consumers and developers are the ones suffering. He says that the company itself is relying on exclusionary, anticompetitive conduct. 

The Justice Department has been investigating Apple for a while now, building a large case on their entire existence as a company. They additionally have the right under the law to ask for a structural change in the company as the court decides its thoughts on the subject. However, some argue that all companies are allowed to promote and favor what they create, so the government will have to be extra specific for Apple. 

Apple is trying to fight back by saying that they have these practices to ensure security, yet many are skeptical. The lawsuit will ask the company to stop engaging in the current practices of blocking cloud-streaming apps, undermining messages across smartphone operating systems (creating the green bubbles when texting someone with an Android), and preventing digital wallet alternatives. Many fear that this may hinder Apple's reputation, and stop them from making what people expect them to. Apple is attempting to file a motion to dismiss the case in the next 60 days and continues to argue that people chose not to switch phones out of their loyalty. Additionally, Apple is trying to defend itself by highlighting how many new businesses were able to open from their App Store. 

In Econ, we have recently learned a lot about monopolies and the barriers of entry that come with them. I agree that many people do believe there is no comparable phone companies, which isn't true, especially with how advanced technology is. Also, with Apple creating the price points and making them so high, many consumers believe they have to pay for great quality. 

This isn't the first time this has happened, and in the past the government has felt the need to put government regulations on other big tech companies such as Microsoft, making sure they don’t have too much market power. So, what do you guys think is Apple creating a Monopoly?

Sources: 

https://www.nytimes.com/2024/03/21/technology/apple-doj-lawsuit-antitrust.html?ugrp=u&unlocked_article_code=1.eU0.QC5G.v0IcFUfnMIDz&smid=url-share

https://www.cnn.com/2024/03/21/tech/america-apple-monopoly/index.html

https://www.justice.gov/opa/pr/justice-department-sues-apple-monopolizing-smartphone-markets

Supreme Court to Hear Case About Abortion Drug Mifepristone on March 26

(image from Yahoo News)

Despite the overturn of Roe v. Wade and subsequent abortion bans in 14 states, more abortions were performed in 2023 than there have been since 2011. Abortions have risen in almost all states where it’s legal, and especially in states such as New Mexico that border those with bans. Medication abortions, which rely on the pills mifepristone and misoprostol that can be administered at home, are also rising. 

However,  the availability of mifepristone is threatened by the Supreme Court case FDA v. Alliance for Hippocratic Medicine, which is set to be heard on March 26. 

The case started in Trump-appointed judge Matthew Kacsmaryk’s Northern Texas district court, where a conservative legal group challenged FDA approval of mifepristone. Kacsmaryk issued a ruling to suspend FDA approval of the drug, relying on remarkably faulty reasoning, including retracted studies and anonymous blog posts from an anti-abortion website. The United States Court of Appeals for the Fifth Circuit (a mostly Republican court) allowed mifepristone to keep FDA approval, but supported Kacsmaryk’s challenges to changes the FDA made to the protocol for prescribing mifepristone. The actual changes seem minor: reducing the dose and allowing the drug to be used before 70 days of pregnancy instead of 49, but they would lead to several months where the drug could not be prescribed as its manufacturer scrambled to recertify and revise.

The Alliance for Hippocratic Medicine argues that the FDA’s changes to the mifepristone protocol should be overturned because the FDA conducted multiple studies of different changes to the drug’s use, instead of one study in which they examined the combined effects of all the changes they would eventually implement. It’s an utterly precedentless argument that many other FDA-approved drugs wouldn’t pass. 

The plaintiffs don’t even strictly have standing for their case. There has been no concrete injury to the Alliance for Hippocratic Medicine, other than the nebulous possibility that some of their members might “feel complicit” in an abortion if they had to provide care to someone who took mifepristone, according to Vox. It shows just how far our judicial system, a supposedly legal institution, has been abused for political ends. 

The Supreme Court passed an emergency stay on all restrictions of mifepristone and will probably strike down all of Kacsmaryk’s decision. Should they rule in favor of the Alliance of Hippocratic Medicine, they’ll be unleashing chaos where many medications currently in use can be challenged and restricted because they didn’t fulfill the Fifth Circuit’s criteria that the FDA conduct one all-encompassing study. Justices often argue that they shouldn’t be concerned about the consequences of their rulings, but undermining the FDA’s authority is probably going too far even for our current conservative court. Moreover, given how much the Democrats will use abortion to rally their supporters, it’s probably politically smart to keep the drug. 

Sources:

https://www.nbcnews.com/health/womens-health/map-pills-medication-abortions-are-legal-rcna70490

https://www.nytimes.com/interactive/2022/us/abortion-laws-roe-v-wade.html

https://abcnews.go.com/538/ivf-abortion-access-shape-2024-election/story?id=108301112
https://vox.com/scotus/2024/3/21/24105984/supreme-court-mifepristone-abortion-pills-fda-alliance-hippocratic-medicine 

https://www.vox.com/2024/3/20/24106109/dobbs-roe-abortion-reproductive-rights

https://www.thecut.com/article/how-many-abortions-in-us-2023.html

Biden Announces $8.5 Billion Grant to Intel, Advocating Expansion of Domestic Computer Chip Industry

 

 

(image credit: AP News)

This Wednesday, President Biden announced a grant of up to $8.5 billion to Intel in order to invest in domestic semiconductor production. 

The U.S. used to be a leader in semiconductor chip production, but has fallen behind Asian countries — Taiwan and South Korea, for instance — in recent years, with the flaws of a reliance on chip imports seen in the shortage over the pandemic. With COVID-19 interfering with industries and logistics and introducing uncertainty into the market and supply chain for chips, products dependent on semiconductors suffered from a shortage in chips. In late March of 2021, near the start of the shortage, Bloomberg reported on an “unprecedented global shortage” — noting increased demand and supply chain uncertainties due to the pandemic as well as the effect of increased wait times for chip orders and losses in industries like automobile manufacturing, later estimated to be a lost $210 billion in automobile revenue as reported by Reuters. 

Biden, announcing the new Intel grant, cited this issue as a cause for the expensive investment in the domestic industry. “When the pandemic shut down chip factories overseas, prices went up, and for the first time Americans began to realize how important they were,” Biden explained. “Unlike my predecessor, I was determined to turn things around to invest in America, in all Americans — and that’s what we’ve been doing.” 

As explained by CNN, this measure, in addition to its economic effect, serves as a way for President Biden to appeal to voters, particularly those in battleground states like Arizona, host to one of the planned Intel projects. In Chandler, Arizona, a suburb of Phoenix, the funding is expected to create 7,000 construction jobs and over 3,000 manufacturing jobs, “among the largest private sector investments in the state’s history,” according to the White House. While Arizona voted Democrat in the 2020 election, the state has voted Republican in most other recent presidential elections, and thus investment in the state, creating new job openings, may win more undecided voters to Biden’s favor. The prospect of securing a better chance for a Democrat in Arizona would explain why Biden chose to announce the grant there — while the White House predicts roughly equal numbers of jobs provided in Ohio, Ohio strongly backed Trump in 2020, and so appealing to Arizona voters seems more likely to have an effect. 

David E. Sanger, however, writing for the New York Times, suggests another reason for Biden’s proud rhetoric about this grant: that it might be to draw less attention to the fact that federal grants to chip manufacturers may not go much further. Sanger describes that there is a “significant risk it could be the high point of the effort,” citing Congress’s unwillingness to spend billions of dollars that were authorized to be used for the industry but never properly allocated. Seeing as how the proud rhetoric around this investment is tailored for its political gain despite Intel’s own acknowledgement to CNN that the company won’t meet its “aggressive 2025 production goal,” the economic effect of this grant does not seem prioritized as much as the political one. Money is certainly needed to establish the plants and infrastructure for chip production, but there’s also a cost to training the skilled workforce necessary that may not be adequately addressed with this investment. Morris Chang, head of Taiwanese chip manufacturer TSMC, has critiqued the skills of American workers — albeit from a biased perspective — at matching the productivity of Taiwanese factories even when spurred on by money. Given Business Insider’s report on employee experiences at TSMC — “unmanageable workload,” “12-hour working is normal,” and “workers were discouraged from applying for overtime pay” — it seems reasonable to assume domestic labor costs may be higher than those in countries like Taiwan. Whether it be due to the expensive training required for the new workers or to a difference in work ethic (or labor standards), a truly significant increase in domestic chip production may take a larger investment than Congress may be willing to provide, making the long term efficacy of this plan unclear. 

In class, we’ve learned about the factors that can shift supply and demand, and we’ve seen that when the government steps into the market, the typical purpose is to add regulations that often raise input prices and lower supply. Here, however, we have an instance in which the government is investing in an industry to reduce input prices, shift domestic supply to be greater — and if successful investment in the domestic chip market lowers prices in the long run, this may even reduce the demand for a substitute good (imported chips) in favor of a greater quantity of domestic chips. That said, a properly trained skilled workforce is an inelastic quantity in the short term (it takes time to train new workers, even if there is money for it), and while it can be simple to predict the direction of shifts in supply, the actual numerical values of these changes are more complex and variable, so the extent of this investment's effect — as well as the future of the U.S. chip industry — remains to be seen.

Sources: 

https://www.cnn.com/2024/03/20/politics/chips-act-intel-funding-biden/index.html

https://www.nytimes.com/2024/03/20/us/politics/chips-act-grant-intel.html

https://www.bloomberg.com/graphics/2021-semiconductors-chips-shortage/

https://www.whitehouse.gov/briefing-room/statements-releases/2024/03/20/fact-sheet-president-biden-announces-up-to-8-5-billion-preliminary-agreement-with-intel-under-the-chips-science-act/

https://www.reuters.com/business/autos-transportation/automakers-chip-firms-differ-when-semiconductor-shortage-will-abate-2022-02-04/

https://www.nytimes.com/2024/03/20/us/politics/biden-chip-manufacturing.html

https://www.businessinsider.com/tsmc-jobs-taiwan-semiconductor-chip-worker-skills-work-ethic-2023-8